Achieving the goal. Coal phase-out in the Polish power sector.

According to the Instrat Foundation’s modelling of the Polish power sector, the share of coal-generated electricity in Poland may decrease from the current 70% to just 13% in 2030, without compromising the country’s energy security. This means that CO2 emissions from the energy sector would fall by 59% between 2015 and 2030. This volume is still below the 70% required in the EU as a whole, but shows a realistic pathway respecting the EU’s updated 2030 GHG reduction targets blatantly ignored by the government in the recently disclosed energy strategy.  

Although the scenario published today does not entail a full coal exit by 2030, it does allow for limiting emissions from the Polish power sector at twice the rate stipulated in the official Polish Energy Policy until 2040 (PEP2040). “We have taken into account both the current technical and economic realities of energy production, and the fact that some of the potential locations of the large RES installation may face opposition from the public and will not materialise as a consequence. What is more, we have adopted a very prudent assumption – that renewable energy in the decades to come will grow not faster than historically in Poland. In reality, this rate may be even faster,” comments Paweł Czyżak, co-author of the analysis.

The end date of burning coal in power plants is set at 2035. After 2030, selected coal-fired units will form part of the system’s reserve capacities, working only 300-400 hours a year – a fraction of the current rate. Yet these few reserve plants, on stand-by until 2040*, will be enough to safeguard the country’s energy security without leading to excess CO2 emissions. This scenario also makes it possible to lower energy imports, which have been growing steadily in recent years. “Given the current circumstances, this slight extension of the life cycle of some declining coal plants is more beneficial than mass investments in new gas-fired plants, which would cease to be profitable in a couple of years. However, we propose selecting just some of the coal plants for the reserve capacity rather than prolonging the life of the entire sector at the expense of investing in renewable sources,” explains Adrianna Wrona, co-author of the report.

According to Instrat, creating a cold coal reserve on the basis of power market auctions would cost PLN 14 billion (€ 3 bn) until 2040. This amount is four times smaller than the cost of the National Energy Security Agency (NABE) considered by energy companies and the government as the preferred solution, combined with the Early Decommissioning Mechanism (EDM). Back in November 2020, the Instrat team assessed that NABE and EDM would cost taxpayers PLN 63 billion (€ 13.6 bn).

Instrat analysts estimate that the currently negotiated by Polish government plans of maintaining coal mining until 2049 are unrealistic. According to Instrat’s scenario, the use of steam coal would fall from the current 32 to just 10 million tonnes already in 2030. This means that all hard coal mines apart from Bogdanka will most likely be closed down by 2030. Expensive Polish coal will not find buyers in the 2030s and 40s. 

What is needed to implement the scenario of phasing out most of coal capacity from the power sector by 2030? According to Instrat experts, investments in onshore wind farms should be unblocked immediately – the current restrictions in the onshore wind act have to be amended, the volume of RES auctions increased, and new editions of the ‘My Electricity’ programme introduced. Moreover, offshore projects have to be rolled out in a timely manner and grid infrastructure has to be modernised. Still, these actions may easily be financed from EU and private funds, contrary to subsidies for the mining and burning of coal – which, according to the government’s strategy, would still account for as much as 56% of Poland’s energy production in 2030. In line with the Instrat scenario, 76% of the electricity demand in 2030 would be covered by renewable energy sources. The only completed investments in CCGT gas-fired plants are Dolna Odra and Ostrołęka. The scenario assumes Poland does not have any nuclear capacity online before 2040, as these projects are not mature enough.

“The government is blatantly ignoring the EU’s updated greenhouse gas emission reduction targets adopted in 2020. At the same time, Poland is demanding the largest share of energy transition funds. Yet implementing the PEP2040 scenario would effectively mean that other Member States would have to pay for Poland being Europe’s main climate laggard,” adds co-author of the publication Adrianna Wrona.

“The European Commission will not allow Poland to subsidise the coal sector unless we propose a solution that would be in line with the EU’s climate goals. Emission reductions contained in our scenario are still slightly lower than the reduction required in the EU as a whole. Therefore, we are taking into account Poland’s specific starting point , often invoked by the government. Yet contrary to other solutions being analysed at the moment by the officials and energy companies, the one proposed by us does not require breaking EU law. It is also many times cheaper than the discussed alternatives,” sums up Paweł Czyżak.

Instrat also urges that the debate on Poland’s energy sector, so far mostly fuelled by social media leaks, should be fully transparent. Together with the report, Instrat published a detailed database of power plants and CHP plants. Further on, Instrat will also publish the entire energy model used in the analysis.

* Units in reserve could generate a maximum of 350 kgCO2/kW per year to comply with the EU’s Internal Electricity Market Regulation

Contact:

  • Paweł Czyżak, economist at Instrat Foundation, pawel.czyzak@instrat.pl
  • Adrianna Wrona, economist at Instrat Foundation, adrianna.wrona@instrat.pl

Recommended citation:

Czyżak, P., Wrona, A. (2021). Achieving the goal. Coal phase-out in Polish power sector. Instrat Policy Paper 01/2021.

Annex:

Power plant database, with Polish thermal generators and key parameters, including proposed phase-out dates: Google Sheet

Complementary publications:

The publication is the first in a series on the Polish energy transition. The complementary publications are:

  • What’s next after coal? RES potential in Poland.
  • The missing element. Energy security considerations.
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