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 underground mining versus surface mining. Surface mined coal is much more competitively priced and with global transportation costs now much lower, it is impossible for Polish deep mined coal to compete even in the domestic market. No Polish politicians seem inclined to be truthful about the reality of Polish coal.
So a sort of collective delusion will likely be inevitable until the sector simply collapses of its own dead-weight.

The problem is amplified by the aging Polish lignite and coal-fired power plant infrastructure. As old plants must close, the Polish Government is using its clout as a shareholder to push construction of new coal blocks. This effort is quite remarkable, since Poland is alone in the world in pursuing this approach. See plenary panel discussion, POWER GEN Europe 2015, Amsterdam, June 11, 2015. Certainly in the EU, with the coming of higher CO2 prices, this plan is foolish and extremely ill-advised. In the not to distant future, even if these new Polish coal plants can keep operating, unlike modern coal plants in Western Europe which are closing, it is likely that they will not be mainly burning Polish coal.

Adding to this dilemma, the emerging Polish political party on top in the polls (PiS), of course, maintains its unqualified support for all things coal as well as proposing to obstruct Polish wind farm development.  As cross-border grid interconnections grow in Poland, this will mean that German imported wind energy will receive the "green preference" in the order of merit in Poland, further shutting out the market for Polish coal and lignite supplied electricity. There does not seem to be a rational Polish politician on these issues with any hope of even causing an open dialogue about the subject.

The best that can be said is that the inevitable and harsh consequences of  vacuous policies will create a new situation in which the issues cannot be avoided.                


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