Mott's Blog

POLISH BIOGAS ASSOCIATION COMMENTS ON SUGGESTED REFERENCE PRICES September 2015      The proposed reference prices released by the Ministry of Economy for the first auctions under the new law significantly understate the support necessary for anaerobic digestion plants. The numbers proposed are as follows: 1) agricultural biogas plants with a capacity of 1 MW - 450 zł / MWh 2) agricultural biogas plants with a capacity exceeding 1 MW - 435 zł / MWh 3) biogas plants using biogas from landfills - 210 zł / MWh 4) biogas plants using biogas from wastewater treatment plants - 400 zł / MWh 5) biogas plants using biogas other than in paragraphs 3 and 4 - 340 zł / MWh Analysis      There is no data from any source that we are aware of to support the price set in the proposal for agricultural biogas under items 1 and 2. Basic biogas costs for agricultural plants of various sizes were set out by the European Biogas Association in 2...

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There are rumors in Warsaw that the Polish Treasury Ministry thinks that the small auction for renewable energy support (below 1 MW) will be waste of time and resources. Because 25% of all of the support provided from 2016 and beyond must go to small sources, and small sources will not be sufficient to meet the target, anyone who bids in an auction within the maximum price will win. At the same time, the cost of setting up the auction is pretty much the same whether 250 kW a project are being bid or 150 MW. The Ministry of Economy conceded in the Parliamentary debate on the RES bill that there will be more support offered small sources than there will be projects. This means that there will really be no competition for support and no real pressure on the prices sought. All bids will win.... causing us to ask earlier why have an auction at all? Apparently the Treasury thinks the same thing. The European Commission must accept the "GBER notification" from the Polish Governm...

The party leading the polls to take charge of the Polish Parliament (Law and Justice) has a campaign to fight wind farms in Poland. They complain about their aesthetics and possible noise issues for immediate neighbors. Law and Justice wants to ban wind farms in most of Poland by placing restrictions on their siting. This is an amazingly hypocritical viewpoint all things considered. Wind energy is gradually replacing coal in most of Europe. It could reduce coal burning in Poland as well. Even the Pope has weighed in on the need for a "rapid transition" away fro coal energy. The observed effects of burning coal in Poland are not in dispute: The World Health Organization (WHO) estimates that poor air quality resulting from low emissions in Poland is the reason why an average of 48 thousand. premature deaths a year and shorten life by an average of 10 months. Link. Law and Justice proclaims that it is the Christian party and is comprised of many devote Catholics. I...

The verdict is still undecided, but the initial view is not encouraging. The Treasury Ministry is using its leverage as the major shareholder to put in new directors who are more friendly toward the idea of bailing out a bankrupt state-owned coal mine. The initial Tauron proposal based on a real business case was dismissed by the unions and the government. The Polish Government wants to use Tauron's economic muscle to bail out a mining company that is not economical to operate. Why would private investors have any confidence that such companies manipulated by the government are actually operating in a manner designed to benefit their other shareholders? See source, August 13, 2015. Note: August 26, 2015: All the state-owned electricity companies have been hit hard by falling stock prices. The Government has also pushed the other company boards to use their company resources to bail out coal (on very unrealistic terms due to union pressure). If successful, the Governme...

Poland is stumbling over a cliff on its energy future. Poland's energy future has been the subject of hundreds of ages of "plans" written by out of touch bureaucrats beholden  to the invested interest of the state in its coal-fired utilities. Not surprisingly, these plans have little to do with reality. See "Hitting Reality: Polish Energy Policy Meets the Facts, " May 2014. Now electricity shortages and threatened brown-outs may compel Polish politicians to start at least trying to consider technological and economic realities. Alone in Europe, Poland is building new coal-fired capacity while its coal and lignite fired current plants are relics of a past age. New coal plants will cost more than wind energy and during their useful life they will also be more expensive than PV. But they will only be profitable if they can operate at high rates of utilization. On average, Poland uses about 55% of its electricity capacity and renewable energy gets a priority in...

While the Commission communicated to the Polish Government in 2013  that it considered the Polish Green Certificates to be state aid, requiring notification of the Commission and approval under the 2008 guidelines, the Polish Government has repeatedly denied this fact. Now in the new law on RES, Article 39.2 requires that certificates and other forms of support be added together to determine if the state aid limits on support for an individual project would be exceeded. This reflects the fact that the Polish Government has known for years that the Green Certificates are state aid. The Commission has decided that green certificates are state aid in every case before it (earlier based on the substitution fees in various Member State laws and later on the certificate as a valuable asset itself). See  DOUBLING DOWN ON A JUNK POKER HAND: THE POLISH GOVERNMENT APPARENTLY INTENDS TO IGNORE ITS TREATY OBLIGATIONS ON STATE AID , Mott's Blog, June 7, 2014 (detailed references and...

Losing the ability to sell electricity much of the time to renewables, the coal-based energy sector has come up with a new mantra: capacity markets. This requires that consumers and/or taxpayers pay to have the old fossil fuel plants sit there and "be available" for peak needs. This will cost the German dearly, annually over ten billion more than assumed. Using coal plants as "peakers" to meet the highest part of the demand cycle is very, very inefficient. As costly as energy storage is now according to its skeptics, it is still more cost effective than using fossil-fuel peaker plants! The Edison Electric Power Research Institute reported a benefit to cost ratio over one for nearly every technological scenario.  “ Cost-Effectiveness of Energy Storage in California,”  Application of the EPRI EnergyStorage Valuation Tool to Inform the California Public Utility Commission  Proceeding R. 10-12-007  3002001162  (2014). One has to speculate that the state aid gui...

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 i...

Now another company has made a business decision based on an objective view of the European energy market...... ENGI elected not to go forward  with plans for a coal-fired electricity plant in Lublin, Polish politicians try to sell their commitment to coal as an energy security issue. At least Poland has coal, so it goes. But if it is not economically feasible to use coal, especially most Polish coal, then how is this argument any different than saying that Poland has tides for wave power? ["... current demonstration projects suggest the levelised cost of energy (LCOE) [for tidal power]to be in the range of EUR 0.25-0.47/kWh ."]. If an energy resource is not economically feasible, it ceases to be a realistic major part of energy security. __________________________________ Note: For the price of 0.17-0.23 EURO/kWh, Poland can have biogas that produces roughly twice the green energy accounting the heat utilization. Source: European Biogas Association 2011: Polish Bi...

While throughout Europe, the sun is setting on coal-fired power plants, Poland's likely new governing party seems eager to double down on "black" at the energy table. The Katowice convention of Law and Justice saw their key people repeat the plan to replace the coal-fired plants closing in Poland in the next few years with newer versions of the same thing. Of course, a pulverized coal plant meeting EU requirements on emissions has a levelized cost of production higher than onshore wind mills. See U.S. Energy Information Agency "Levelized Cost and Levelized Avoided Cost of New Generation Technologies,in the Annual Energy Outlook 2015. By the time all of these coal-induced dreams could actually be built, solar PV will also likely be near the same cost as well. In the same vein, the coal that will be burnt in Poland in ten years is far more likely to be foreign than Polish. Polish coal production is half of what is was in 1990 and is dropping every year. The sta...

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. Vi...

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 c...

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 renewa...

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 procee...

In the opinion of many, Civic Platform (PO) has grown a bit arrogant and very non-transparent in its model of governing. Pundits will have a dozen explanations for the election of Andrzej Duda yesterday, but wide-spread support for his party, Law and Justice (PiS), is not one of them. Voters signaled their concern about PO and wanted something else....just about anything else. If this trend continues into the Parliamentary elections, as I think it will to a lesser degree, expect PiS gains but no majority. A weaker coalition government with PO, PSL and possibly SLD is the most likely outcome. It is important to remember that all of the political parties are publicly pro-coal and none of them have a real program to address the growing economic and technological challenge in Polish energy to shift to the "next thing."  PiS is more likely to make foreign energy investors nervous, however, with their more xenophobic rhetoric. PiS is widely described as anti-wind energy and w...