Poland Misuses EU Money for Energy Transition to Maintain Coal

There are no real surprises in the latest Bankwatch/Friends of the Earth report on Central European Governments use of EU climate change and environmental funds. "... Polish energy policies and strategies continue to follow a path which centres almost entirely on sustaining the existing energy system...." CLIMATE’S ENFANTS TERRIBLE SHOW NEW MEMBER STATES’ MISGUIDEDUSE OF EU FUNDS IS HOLDING BACK EUROPE’S CLEAN ENERGY TRANSITION (January 2016) p. 24.

"77% of heat energy comes from burning coal, with other fossil fuels such as gas and oil adding up to cover almost 90% of heat production. The energy system is an oligopoly, with four out of five coal mining companies fully or partially state-owned and the production market mostly shared between four companies where the state is a majority stakeholder. A workforce of 100,000 hard-coal miners, 240 trade unions with significant political power as well as many interconnections between the government and the energy sector play a key role in maintaining the status quo and impeding the transition to a low-carbon economy." Bankwatch/FOE Report, p.25

As consistently  pointed out in this blog, this lock-step commitment to the past in Polish energy makes no economic or technical sense. No other country in Europe is still committed to the energy system of the 1950s. China just announced the lay-offs and coal mine closures as did the Czech Republic. Western European utilities are walking away from coal. Every cost trend favors other technology at this point. This is true without regard to the external cost of burning coal.

While we are constantly told by Polish politicians that renewable energy is too expensive for Poland, the data now shows that the levelized internal cost of coal makes in more expensive now than wind and - within ten years - PV solar. "Public support of coal mining and coal-based energy production, including subsidies, debt cancellations, free emissions allowances and social benefits for miners amounts to approximately EUR 34 billion in the period 1990-2012." Bankwatch/FOE Report, p. 25.

"Against this backdrop of the Polish energy market and climate policies, it is no surprise that the European funds are missing crucial strategic direction and the programming documents resemble more of a business-as-usual shopping list based on the existing needs of a carbon-intensive economy, rather than any real effort to create a new reality with the billions of euros of EU money." p.26.

Only a small fraction of EU funding is being used to make the transition away from a coal/lignite based energy system. When these EU funds are used up, Poland will be left to its own resources to replace the aging, inefficient and environmentally unfriendly energy system set by here by the Russians. Poland's energy sector is on life-support using resources stolen from the funds set up to provide for a transplant for the patient. When the funds run out, the patient will die without the transplant.


Unknown said…
Assuming the EU is committed to moving away from coal, why don't they mandate uses for the funds and exclude anything that does not shift away?
Randy Mott said…
The EU is trying to encourage the transition by a tax on CO2 emissions. But to get it passed politically, they have been forced to provide free allowances and long transition periods. Those are running out now and that is part of the move in Western Europe away from coal plants.

The European Treaty does not allow them to mandate one type of energy for Member States. Technically, you can still burn coal but just have to keep paying an escalating price. Countries also have to meet EU renewable energy targets and toughening emission standards.
Unknown said…
Thanks - it will be interesting to see how Poland in particular handles this. Guess is that they will act blindsided, be well behind the curve and will try to get further dispensation from hitting targets and paying more. Will try to use it as leverage in votes for or against things in the EU until they get their way or longer periods to conform.
Edward's space said…
They are trying hard to block Wind and PV. are you still positive about Biogas in auction?
Edward's space said…
They are trying hard to block wind and PV, are you still positive about biogas in auction system?
Randy Mott said…
1. The new government is restricting wind farms and is not wild about PV.
2. However, they have said on several occasions that they are interested in increasing biogas development. They have even acknowledged that the proposed auction reference price may not be adequate for that development. They want to do 1000 biogas plants by 2030 (we have 60 now).
3. I doubt, however, that the biogas projects will face the auction. My guess is that the European Commission that is reviewing the law under the state aid requirements will determine that the auction for small projects is anti-competitive. That would mean a feed-in tariff or contract for the difference somewhere over 500 PLN/MWhr.
4. The European Commission is also about to announce a decision on the Polish green certificates as state aid and has always require that support be levelized to reflect production costs. It also will move to correct the distortion of the market for certificates that drove the value down. I think that the certificate program will have to be amended to increase support for biogas to meet their requirements. The certificate value is also expected to double. My other guess is that this program will have to be extended to cover the gap between the old system and the planned auctions (which will not result in very many projects from the auctions being builty by 2020 at this point).

I am happy to privately discuss biogas prospects with interested parties.

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