Showing posts from 2015

Renewable Energy Production in Europe is Driving Prices to End-users Down, Not Up

The Poles often get caught saying that Poland cannot afford renewable energy development like our rich neighbors. Like so many things in Poland, this is a sentiment locked in a time warp. The days of 30-50 Euro cent subsidies for renewable energy in Europe are over. In recent years, the actual cost of renewable energy has dropped dramatically and in some places it is already cheaper than conventional energy. See "Analyzing the True Cost of Renewable Energy,"  Mott's Blog, October 20, 2014.  That post details comparative costs of RES with other technologies, but is virtually outdated as are all published figures since the changes are happening so fast.

Now a new Bloomberg report notes that electricity and energy prices are falling in Europe in 2015-2016 due a a major part to wind and PV energy. German electricity indeed threatens Poland's producers as it is frequently cheaper and the cross-border connections are expanding.[1]

But to listen to Polish politicians, you w…

New Year: SOS?

The year is ending with the new Polish Government trying to re-arrange the deck chairs on the Titanic which is Polish energy policy. The Law and Justice party seems confused between its election campaign rhetoric and the realities of the situation it now faces. As the deck is vanishing under the encroaching sea, the politicians gather on the fantail making speeches about the ship's seaworthiness.

Almost all elements of the proposed path to energy security are fraught with bogus assumptions, bad information and a special kind of Polish naiivity.

Shale gas- when there is a major rise in  oil and gas prices worldwide and the government gets out of the way, this might be possible. Until then, it is a dead-end street in Poland. The type of policies it would take to really jump start shale gas here (where it is in deep formations and quite expensive to develop) seem implausible in the context of Polish politics. Now more than ever.....  This day, if it ever comes, also depends on global…

Merry Chrtistmas

Merry Christmas to my readers throughout the world.

Special note: The European Commission decision will be in late January or early February on Polish green certificates. The Commission made a communication to Poland in December that signaled their intentions. So the New Year will be merry and busy for renewable energy in Poland!

Re-Writing the Polish RES Law

It will be necessary to re-write the Polish Renewable Energy Law that was adopted in April 2015 to meet the objections of the European Commission. Major provisions that will have to be changed to meet the Commission's consistent position in approving other certificate schemes include the following:

1. Prevention of Over-Accumulation:  This will require that certificates be used in a fixed time period. This could theoretically wipe out almost all of the accumulated certificates now being held. Note: the old hydro certificates will be null and void in any event under the depreciation rule. The co-firing certificates will otherwise likely be valued at 50% or less, even if they are allowed to accumulate.

2. Correction coefficients: The value of the certificates will have to be adjusted by the cost of production of electricity for each technology. The adjustment must assure that there is no over-compensation of technologies such as co-firing. Arguably, only the technologies in the Nati…

European Commission Readies to Hit Poland Hard on Green Certificates and Market Distortion

The European Commission's Directorate General for Competition is about to announce a decision on the Polish Green Certificate matter, SA.37224 (2013/CP). The complaint to the Commission alleged that the certificates were state aid and had to be notified and approved as such under the European Treaty, Articles 107 and 108. This same viewpoint was internally expressed to the Minister of Economy in 2013 by the head of the Office of Competition and Consumer Protection in Poland. The Commission has apparently told UOKiK that it contends that the certificates are state aid. [An obvious point since every certificate program since 2001 has been classified as state aid by the Commission]. See references in "Why Poland Urgently Needs a New Green Certificate Law," [PL]. [English version]. The Commission has the authority to declare state aid unlawful and is required to do so if it is not notified. The failure to notify means that the certificates are null and void …

Minister of Energy Backs Off Commitment to Force Electricity Companies to Adopt Bankrupt Mines

Now with the stock value of Polish energy companies that have government ownership plunging, the new Minister of Energy says that the plans to force electricity companies to buy or invest in mining companies are still not firm.

Eventually almost everything that Law and Justice said in the election will be contradicted by the economic realities on the ground or by European Union rules and treaty obligations. So let's go to Emily Litella for a comment (click her name to hear).

New Government Continues Politicization of State Owned Firms in the Energy Sector

As new management boards are appointed in the big energy companies owned by the state in Poland, the new Law and Justice Government seems bent on accelerating the politicization of these companies.  The agenda is to continue and accelerate investment in new coal based energy plants and to use the cash flow of the electricity producers to under-write the bankrupt state-owned mines (15 billion PLN in debt with an annual rate that is growing).

The policy is to force the state-owned firms or firms where the state has the biggest block of shares to make decisions that are contrary to the economic interests of the company's shareholders and supportive of the politicians; agenda. This is, of course, highly illegal.

The immediate impact of PO and PiS manipulating the Government's ownership of energy company shares has been to destroy the value of the equity of the companies.

Polish state-owned energy companies are losing value much faster than the sector globally or the private conce…

European Commission Finally Enters the Polish RES Debate

Ninety-nine percent of the Polish Government has been lying to us or is so uninformed that they do not know the difference. Poland's state support of renewable energy from 2005 to date (old law and new law) are state aid under the European Treaty. No doubts and no qualifications. The only Polish leader who was honest and professional in their opinion on this was Malgorzata Krasnodebska-Tomkiel, head of the Office of Competition and Consumer Protection (UOKiK), for several years.[1] Before the Prime Minister fired her and replaced her with an English teacher, she also was clear that elements of the new law were also state aid. Tomkiel was fired on a Monday that followed the Friday on which the Prime Minister's office received notice of the complaint about the green certificate system from the Commission.

This does not mean that the aid under the old law or new law is wrong,, only that it has to be reviewed for consistency with state aid rules designed to minimize the distortion…

No Climate Aid Can Go to Polish Coal - the Inevitable Has Happened

Poland's politicians have kept up a myth that the EU would allow special assistance arising from the climate and emissions trading scheme to go into modernizing Polish coal-fired power. This - as well as a diversion to general revenue - was the model from the last climate deal (whereby Poland abused the EU funding in ways that were not unnoticed in Brussels).

Now the new deal has a big coffer, but the projects must go through the Environmental Investment Bank for approval. Note: EIB gave up on generally supporting coal projects more than a year ago.

Thus, we have the situation - entirely expected - where the EIB will not allow this sizable fund to be used to continue projects that emit more than a small amount of CO2.

"...the EIB does not intend to recommend funding any projects whose emissions are greater than 550gCO2 / kWh, which in practice excludes all coal projects. [An EIB representative] added that the emission limit can only be made more stringent. ..."  CIRE.PL


Polish "Exceptionalism": Retroactive Exemption from European Energy Obligations?

The core message in the current Parliamentary elections for Law and Justice (PiS) on energy issues is to repeal Poland's commitment to participation in the European Emissions Trading Directive and other environmental requirements that limit the unfettered use of coal in Poland. Their argument is that Poland is so dependent on coal that it is unfair to require the same things of Poland that other EU Member States have not only committed to, but are doing.

The assumption of this argument is that, but for the emission charge on CO2, that coal energy would be profitable. This is a fundamental fallacy for several reasons. First, the current system grants free allowances for coal emissions and coal-fired power is still not profitable.[1] The current electricity rates make it difficult for the power companies to invest in new facilities, but simultaneously those rates are higher than Germany next door. The profitability of the coal-fired electricity sector is already very weak without any…

Black-outs On the Horizon in Poland

Aging coal-fired power plants are, of course, problematic for the reliability of the Polish electricity supply. A single outage in one or two huge coal plants can cause major problems in the grid supply of electricity, as we saw this summer. However, the strategy of building large new coal-fired power blocks is also problematic for many of the same reasons. Poland is the only country in Europe pursuing this strategy and it makes no sense.

A new report from a Polish expert argues that shortages could become critical in three to four years. The aging power plants are closing (many this year due to the end of their exemption period under the EU rules for major combustion plants). Others will simply close because they are falling apart in the next few years.

The only sources of electricity that can fill this void and create a more reliable and diversified electricity supply (critical to continued economic growth and energy security) are renewable energy sources (which could theoretically …

Excellent Analysis of Inevitable Bankruptcies in the Polish Coal Sector

The politicians cannot face the truth. But every good analyst already knows the outcome of the faltering coal sector in Poland. Less coal needed every year, higher priced domestic coal-fired electricity than our neighbors energy prices, most mining of coal cost more per ton than the market value, massive negative cash flows from the state-owned mines..... the end will not be pretty.

This latest detailed article in "High Voltage" lays out the numbers.

By connecting the electricity utilities owned by the state to the mines going bankrupt the Government has basically used the financial resources of the utilities to achieve a political goal which will have a bigger economic price tag every year, before it hits bottom. The state-owned utilities have already signaled the same inevitable problem with their aging coal blocks as we have seen in Western Europe - a write-down of unprofitable assets. This occurs in the face of the Polish energy sector needing over 100 billion PLN to re-…

Poland's Reliable Coal Plants are NOT......

Apparently the problem of getting enough cooling water for the coal-fired power plants in Poland is not going away this winter. The likelihood is that residential users as well as industrial ones will be hit with restrictions on energy usage.

Low water levels which will now freeze up in January will make it impossible to get enough cooling water to the coal-fired plants.

Of course, our neighbors will diversified electricity providers have not reported any problems. They rely on more renewable energy which is not related to the need for massive amounts of cooling water. In fact, the PV solar element is counter-cyclical to low water levels: more sunshine/less water.

Every politician in Poland has been too busy pushing the hopeless coal sector here is see the inevitable problems of 90% dependency on one type of electricity production.

The Hand Writing in on the Wall: Nuclear and Shale Gas in Poland are Going Nowhere

I wrote in a blog post some months ago that Polish energy policy is hitting reality. The plans for a nuclear plant have been naive and overlooked the simple fact that it will cost a lot of money and provide electricity as expensive as any other source. It is also likely to be illegal aid under EU competition rules [see pending European court challenge). The shale gas potential of Poland has been lost on the legal problem of no ownership of mineral rights, excessive government demands for payments, taxes, and red tape.

Coal is...well, coal. It is dying everywhere else and the economics in Poland are especially unfavorable (deep mining, high sulfur content and high ash content). It cost more to mine generally than it can be sold for for the foreseeable future. The power plants that burn it are aging dinosaurs that are inefficient, enormously polluting, and threatened with near-term extinction by the carbon emission penalties.

Now the shale gas wells are clearly an illusion at best. The n…

Comments of the Polish Biogas Association on the Ministry's Proposed Biogas Auction Reference Prices

POLISH BIOGAS ASSOCIATION COMMENTS ON SUGGESTED REFERENCE PRICES September 2015      The proposed reference prices released by the Ministry of Economy for the first auctions under the new law significantly understate the support necessary for anaerobic digestion plants. The numbers proposed are as follows: 1) agricultural biogas plants with a capacity of 1 MW - 450 zł / MWh 2) agricultural biogas plants with a capacity exceeding 1 MW - 435 zł / MWh 3) biogas plants using biogas from landfills - 210 zł / MWh 4) biogas plants using biogas from wastewater treatment plants - 400 zł / MWh 5) biogas plants using biogas other than in paragraphs 3 and 4 - 340 zł / MWh
     There is no data from any source that we are aware of to support the price set in the proposal for agricultural biogas under items 1 and 2. Basic biogas costs for agricultural plants of various sizes were set out by the European Biogas Association in 2010. See graphic below.  Recent studies show that these costs have not…