Showing posts from June, 2015

The Pope's Message and Poland: The Irresistible Force Means the Immovable Object?

The Pope's new encyclical "Laudato Si" contains a unmistakable repudiation of Polish energy policy devoted to long-term reliance on coal as a major source of electricity and heat in the country.[1]  The reference to reliance on coal could not be more explicit: ""We know that technology based on the use of highly polluting fossil fuels – especially coal, but also oil and, to a lesser degree, gas – needs to be progressively replaced without delay."

The irony of this message is that Poland is at once the most devout Catholic nation and the most reliant on coal for energy. 
This new theological mandate to change the Polish system comes in the wake of many major economic and technological pressures in the same direction.  The huge Norwegian investment fund just announced an end to investment in coal-based assets. The large German utility companies have suffered enormous losses in the operation of their coal-fired plants and are divesting them. Virtually all of …

Another Study Demonstrates the Futility of Polish Policy on Coal Mining

Every year less and less of the Polish demand for coal is met by domestic production. Only about half of the amount of coal mined in 1990 in Poland is mined today. The cost of mining Polish coal from the state-owned companies is much more than the market value of the product. Successive "bail outs" have failed because the money has always been used to perpetuate the old mining system and not to truly restructure it.

Now another report, this one from the Warsaw Institute for economic studies, looks an the reality of the economics of Polish coal and finds that it will continue to decline in the future. Without radical restructuring and closing unprofitable mines, the whole sector might collapse by 2020.

The fight to keep economically unjustified coal mines operating has cost the Polish taxpayer a lot of money and offered no great benefits to the Polish economy. See WISE report.

One problem that will not go away, even with restructuring, is the inherently higher cost of underg…

EC State Aid Guidelines Bias in Favor of Big Conventional Utilities?

My speech at PowerGen 2015 in Amsterdam has gotten some substantial press here and here.

My thesis is that the large conventional utilities prevailed on the Commission to restrict renewable and distributed energy in important ways that favor their interests. This includes the requirement that everything above 500 kW be connected to the grid (restricting distributed energy on many types). The requirement that every project over 1 MW compete in an auction, where large utilities have shown historical dominance and market power (replacing guaranteed support systems that have nurtured a decentralized power model in Europe). And finally an incomprehensible provision that takes away the renewable energy classification for green energy that is stored and used later (potentially devastating to efforts to encourage the critical development of energy storage in Europe).

The auction system is proven to be a "box of lose gears" that does not produce a predictable amount of renewable ene…

More Unintended Consequences from the Auction Scheme

Some really bad things will start to happen as the auction in Poland for renewable energy support gets closer. Despite the long discussion over the new law and the guidelines from Brussels (which were relatively rushed through without full consideration of their consequences), there are some real problems looming.

First, the auctions to be competitive under EC policy should have at least as many losers as winners. This allegedly allows for competition in the bids for support. The reality is that the small auction (below 1 MW) will have much larger support offered than will be covered by bids. There will be no serious competition and the reference prices will set the limits. That, of course, could be done without an auction and would achieve a much higher rate of quality projects.

But the large auction (over 1 MW) is likely to have many more bids than awards. Thus, the EC rule of thumb of 50% losers may occur. That means that 50% of the projects ready to go in Poland will not proceed. …