Mott's Blog

The new government announced plans to compel other state-owned companies to kick in funding to bankrupt coal-mines also owned by the government. Since it costs more to mine the coal than its market value (and Polish coal is notoriously poor in quality), this is the classic maxim of throwing good money after bad. Or maybe the black hole of Poland? Animation here.

The new government in Poland has announced its intention to much more actively promote and support biogas development. We are excited by this change in attitude and are trying to provide them with accurate information and policy suggestions to make it happen. The details have been provided today by the Polish Biogas Association. We basically argue against using auctions for biogas and other smaller RES projects (citing a lot of studies and data). PBA also asks that the current system be fixed by providing a weighted certificate value based on the cost of production of the various technologies (as will be required by the European Commission in their review of the certificate program). We think that program should be continued for several years, even to 2020, to assure that there is a continuous construction of new facilities of all types.  The new auctions will not occur this year at this point and if they go ahead next year with two to four years to wait before new projects tha...

The big move Poland made in the climate talks and that it is pushing in further policy discussions may well be meaningless. The option of using re-forestation as a carbon sink to reduce or offset CO2 emissions was one of the big plays by the Polish Government. " A  carbon sink  is anything that absorbs more carbon that it releases..."   [sinkwatch.com]. The Kyoto agreement allowed forests to be considered carbon sinks and encouraged the planting of new forests as a means of CO2 control. There was some of abuse of this mechanism as with other Kyoto projects, but it is a recognized means of CO2 reduction. Allowing the same means to be used under the European Union Emissions Trading Directive (the main instrument for EU climate policy) was a bit controversial. But Poland and others got this option recognized. The difficulty - as always - is in the details. One 1000 MW coal-fired plant requires over 100,000 hectares of forest to offset its emissions. The standard appli...

Any day now we expect the European Commission, DG Competition, to announce its decision of the Polish green certificate system as state aid.  Several issues will be addressed and possibly some complex cost recovery issues raised but not entirely answered. The thrust of the complaint in SA 37244 was that support of co-firing was too much and was out of line with the cost of production via that technology. This fact was admitted by the Ministry of Economy and even the former Prime Minister's website. In addition, the support for old hydro plants that were built many years ago was attacked as illegal or incompatible with the rules, since the law precludes providing operating support for projects already fully depreciated.  Much of the law is set out in earlier posts on this blog. Taking the incontrovertible facts about co-firing and old hydro, it appears that co-firing might get a 50% retroactive*  reduction (maybe more?) of aid already provided in line with the adjust...

At this point, there is a real shortage of organizations and people who want to discuss the European Commission enforcement case on green certificates and their review of the new law in Poland. Due to lack of sponsors and reluctance of folks to even agree to discuss the topics, the planned event to publicly explore all this stuff has to be cancelled. I am, however, able to discuss the issues and review what the decision means with individual clients willing to retain me for this purpose.  The consequences of the EC action will be sweeping and complex. I am sure that the professional conference companies will schedule something on these issues in the coming months, but they will likely have speakers without much in-depth knowledge of the subject and/or speakers not willing to honestly discuss the implications and issues.  

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 ...

Big news. This date was supposed to be far off in the future. It is happening much quicker than people expected a decade ago. States will good sunlight have reached the "sweet spot" where PV is as cheap as any other electricity. This is one of the realities that escapes Polish politicians and the advocates of coal. "Parity" in Poland is also a higher price than most markets in the United States (easier to reach).

No comment................... Source: EuroStat. Note: China just announced closure of coal mines and layoff of one million miners . The decision is a direct result of the shift to other energy technologies in China.

Investment in the transmission of energy is one of the most expensive items facing utilities. It is also a long and involved process of permitting and approvals. By increasing distributed energy, the theory was that less energy would have to be transmitted over power lines, since more could be produced and used at the point of generation. Now a new study in German y predicts very significant savings on grid modernization by virtue of the growing use of energy storage batteries. This will also, of course, reduce variability in the availability of electricity, allowing production and storage combined to meet the demand as necessary. Since about 40% of generation capacity in Germany, as in Poland, is normally sitting there idle except for some peak periods, the savings to the cost of maintaining the national power system will also be major. Studies have already demonstrated that energy storage is more cost-effective than "peaker plants." The next generation of utility wi...

Bloomberg in October 2015 posted some numbers on the levelized cost of energy production by technology from calendar year 2015. These numbers refute the myth that folks cannot afford renewable energy. The LCOE for onshore wind is now 83 USD/MWhr and coal in Europe is 105USD/MWhr. The European Commission figures for 2014 were 80 Eur/MWhr for onshore wind, coal at 75 Euro/MWhr, and nuclear energy at 90 Euro/MWhr. Natural gas was 100 Euro/MWhr in the EC data. See Gramwzielony, January 18, 2016. The cost of renewable energy continues to significantly fall. Increased environmental concerns are mostly raising the price of traditional energy at the same time.  Another point missed by just looking at LCOE figures is that renewable energy is dispersed, often closer to the end-user and generally carries lower cost of transmission (which is about 40%  of the end-users cost). You do not need to be an environmentalist or global warming advocate to believe that the future...

On March 16, 2016, a conference on the meaning of the European Commission's new decision on Polish green certificates as state aid and the prospects for its decision on the new RES law will be held in Warsaw. Readers of this blog already know the issues and the possible consequences. The conference will feature the leaders in the RES sector, the complainant in the case before the Commission, the Polish Government (invited), and the major utilities in Poland (invited). THE IMPACT OF STATE AID ENFORCEMENT ON POLISH RENEWABLE ENERGY ___________________________ An In-Depth Seminar on the Legal and Practical Problems Facing Polish Energy March 16, 2016   Hilton Hotel Warsaw The lack of notification and approval of the existing Green Certificate program has caused the European Commission to investigate its lawfulness and compatibility with the EU Treaty. See Case SA 37244. Major parts of the support system (co-firing ...

I have argued strongly that the move by the DG Competition in Brussels to push support for renewable energy into auctions will have very negative effects on the amount of investment in new technologies. Auctions create uncertainty over support, award support to many projects that will never be built, and crowd out some technologies that cannot compete head-to-head (although they may have substantial benefits other than a low price per MWhr). The data from 2015 in Europe tend to show that my fears have been realized. Just as the EU raises its RES targets for 2030 with many Member States having very ambitious targets, the total investment in Europe is declining. Some of this is the lower price of PV solar per MWhr, but most of it is lower investment. Bloomberg New Energy Finance  reports a decline in German RES investments year-to-year of 42% and a French decline of 53%. This is hardly good news if you were expecting RES to meet the bold policy announcements out of Brussels and nat...

The Poles often get caught saying that Poland cannot afford renewable energy development like our rich neighbors. Like so many things in Poland, this is a sentiment locked in a time warp. The days of 30-50 Euro cent subsidies for renewable energy in Europe are over. In recent years, the actual cost of renewable energy has dropped dramatically and in some places it is already cheaper than conventional energy. See " Analyzing the True Cost of Renewable Energy ,"  Mott's Blog, October 20, 2014.  That post details comparative costs of RES with other technologies, but is virtually outdated as are all published figures since the changes are happening so fast. Now a new Bloomberg report notes that electricity and energy prices are falling in Europe in 2015-2016 due a a major part to wind and PV energy. German electricity indeed threatens Poland's producers as it is frequently cheaper and the cross-border connections are expanding.[1] But to listen to Polish politician...

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 depen...

Merry Christmas to my readers throughout the world. Special note: The European Commission decision will be in late January or early February on Polish green certificates. The Commission made a communication to Poland in December that signaled their intentions. So the New Year will be merry and busy for renewable energy in Poland!

It will be necessary to re-write the Polish Renewable Energy Law that was adopted in April 2015 to meet the objections of the European Commission. Major provisions that will have to be changed to meet the Commission's consistent position in approving other certificate schemes include the following: 1. Prevention of Over-Accumulation :  This will require that certificates be used in a fixed time period. This could theoretically wipe out almost all of the accumulated certificates now being held. Note: the old hydro certificates will be null and void in any event under the depreciation rule. The co-firing certificates will otherwise likely be valued at 50% or less, even if they are allowed to accumulate. 2. Correction coefficients : The value of the certificates will have to be adjusted by the cost of production of electricity for each technology. The adjustment must assure that there is no over-compensation of technologies such as co-firing. Arguably, only the technologies in...

The European Commission's Directorate General for Competition is about to announce a decision on the Polish Green Certificate matter, SA.37224 (2013/CP). The complaint to the Commission alleged that the certificates were state aid and had to be notified and approved as such under the European Treaty, Articles 107 and 108. This same viewpoint was internally expressed to the Minister of Economy in 2013 by the head of the Office of Competition and Consumer Protection in Poland. The Commission has apparently told UOKiK that it contends that the certificates are state aid. [An obvious point since every certificate program since 2001 has been classified as state aid by the Commission]. See references in " Why Poland Urgently Needs a New Green Certificate Law," gramwzielone.com [PL]. [ English version] . The Commission has the authority to declare state aid unlawful and is required to do so if it is not notified. The failure to notify means that the certificates are null a...

Now with the stock value of Polish energy companies that have government ownership plunging, the new Minister of Energy says that the plans to force electricity companies to buy or invest in mining companies are still not firm. Eventually almost everything that Law and Justice said in the election will be contradicted by the economic realities on the ground or by European Union rules and treaty obligations. So let's go to Emily Litella for a comment (click her name to hear).

As new management boards are appointed in the big energy companies owned by the state in Poland, the new Law and Justice Government seems bent on accelerating the politicization of these companies.  The agenda is to continue and accelerate investment in new coal based energy plants and to use the cash flow of the electricity producers to under-write the bankrupt state-owned mines (15 billion PLN in debt with an annual rate that is growing). The policy is to force the state-owned firms or firms where the state has the biggest block of shares to make decisions that are contrary to the economic interests of the company's shareholders and supportive of the politicians; agenda. This is, of course, highly illegal. The immediate impact of PO and PiS manipulating the Government's ownership of energy company shares has been to destroy the value of the equity of the companies. Polish state-owned energy companies are losing value much faster than the sector globally or the private c...

Ninety-nine percent of the Polish Government has been lying to us or is so uninformed that they do not know the difference. Poland's state support of renewable energy from 2005 to date (old law and new law) are state aid under the European Treaty. No doubts and no qualifications. The only Polish leader who was honest and professional in their opinion on this was Malgorzata Krasnodebska-Tomkiel, head of the Office of Competition and Consumer Protection (UOKiK), for several years.[1] Before the Prime Minister fired her and replaced her with an English teacher, she also was clear that elements of the new law were also state aid. Tomkiel was fired on a Monday that followed the Friday on which the Prime Minister's office received notice of the complaint about the green certificate system from the Commission. This does not mean that the aid under the old law or new law is wrong,, only that it has to be reviewed for consistency with state aid rules designed to minimize the distort...