The Notion of Cheaper Fossil Fuels Has a Shelve Life

The arguments advanced in Poland in favor of the continued public investment in coal and lignite all center on their availability (which is an empty argument) and their relatively lower price.  The lower price of fossil fuels is a near-term fact in some ways (depending on where you are on-shore wind may already be cheaper than new coal plants). See U.S. EIA (2014). But the cost advantage of fossil fuel has a shelve life, It is a transitional notion that will disappear in the coming years.

Even China, which was rapidly expanding coal-fired capacity has slowed down now, and the future will belong to renewables.

                                                  Source: Bloomberg 2015.  

 Generally in China, the "cross-over" point for on-shore wind is 2022 and the point for PV is 2027. In some other places it has already been hit. This is pretty dramatic stuff since the financial life for energy projects is 15-20 years. So a facility that goes into planning this year and is built, say in 2017-2018, will operate for half or more of its financial life in a market where RES will be cheaper.

This fact explains a lot of the market for new coal projects which have faced the proverbial brick wall. Older coal plants in operation are being closed at an increasing rate in Europe and the United States.

None of this is appreciated in the public discussion in Poland, where superficial platitudes and slogans substitute for real energy policy.[1] But eventually things have to land and when they do it is unlikely that the sight will be pretty.    

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[1] Even in today's news, ""The situation of Polish is special. Poland's economy is based on coal, the Polish energy sector is based on coal, coal plus blood is the Polish economy. Coal gives Poland the raw material for independence in power." Kazimierz Marcinkiewicz and Jaroslaw Kaczynski from PiS. I recommend the article for a long diatribe of delusional thinking that is so far out of the political and economic reality zone that you might think these guys are on another planet or in another century.


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