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 events that no government really controls. My personal bet is that the only shale-derived gas on the Polish market in ten years will be from the United States.

Nuclear plants - the schedule keeps slipping, the costs keep going up, and the publicly-owned companies being forced to consider the investment seem less and less likely to have the financial muscle to pull it off. An adverse decision on the Hinkley Point case before the European Court will kill the project in its tracks: the Austria Government and others challenge the idea of using inflated electricity tariffs to promote nuclear energy which is not entitled to any preference under EU law. Even without this decision, this large and complex project seems beyond the competence of the Polish institutions promoting it.

New coal power blocks - these are proceeding, albeit with difficulties in the financing suggesting that all is not well. Many of the private and government sources of debt funding have been foreclosed. The major ones listed by Polenergia for their Polnoc plant (the EBRD and the EIB) no longer fund coal projects. Relatively low electricity prices and rising CO2 emission fees have generally doomed coal-fired power plants in Europe. The UBS study last year showed about 70 GW of fossil fuel plants closed in the last five years (some of them quite modern). Nearly half of the 260 GW in operating plants are losing money. Id. My own theory is that existing cal-fired plants in Poland have mainly been profitable in recent years due to their subversion of the RES support system and receipt of an undue number of Green Certificates for co-firing of biomass with coal. Reduce their profits by this ten billion PLN or so and they look pretty damn anaemic.  New coal-fired blocks will increasing have to burn foreign coal and will be less profitable every year. By 2025, not only onshore wind but PV solar is likely to provide cheaper electricity, so the prospects will go from bad to worse.

Declining Polish Coal Production, Coal Age magazine Jan 2014

Renewable energy- Law and Justice (PiS) has a naive and ideological position on renewable energy. They claim to like small producers but do not like high levels of support. This is the first basic problem: the smaller the RES producer, the higher the cost of production. PiS hates large wind farms, but thinks it is okay to have a wind mill in every back yard. If the effects of wind mills are undesirable, how does dispersing them cure the problem? It only raises the cost of necessary support to a level which the government will not agree to. PiS talks about micro-biogas production of electricity and it is hard to see where on earth their information could come from. Micro-biogas is used in Asia to produce methane for cooking, not electricity production. It is hardly a model that does anything for Poland. Newer technology for micro-biogas electricity production is inefficient and generally uses a huge percent of the energy produced for internal operation of the system. Hopefully, new officials will get educated on the facts and start dealing with the RES sector as it really is, not as they imagine it.

Typical Asian Home Biogas Digester for Methane Use in  Heating

So we roll into 2016 looking at the same impasse that has existed for the last five years under the old government. There is no significant political party in Poland advocating a realistic energy policy that recognized the need to create a smooth transition from coal and lignite to the next generation of electricity production. The process is mired further by the temptation of appointing hundreds of politically connected cronies to the state-owned energy companies, which remain predominantly coal-based while they often only privately acknowledge that something else has to happen.

The two major factors mitigating this gloomy picture are the European ?Commission actions and the major electricity outages just now starting. The Commission will be weighing in on the RES program in the next couple of months and the effects should be far-reaching, as I have written here. The outages occurred last summer and are expected to get more serious. This has been interpreted by the politicians as a signal to hurry up and build more coal plants (but that approach is unlikely to have sufficient impact to alleviate the situation).

Maybe 2016 will be different?


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