New legislation could derail wind power in Poland

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The governing Law and Justice (PiS) is weighing up legislation that could swing Poland’s energy mix in the direction of coal, shale and possibly biomass.

About 11% of Poland’s energy mix is generated from renewable sources – about half the EU 28’s average of 20%. The “green energy” sector employs up to 40,000 people, most in wind.

The proposed legislation would reportedly create new fees and impose possible jail terms for wind farm operators that could undermine the nascent industry. The new rules would make it illegal for new wind turbines to be located near homes, schools and natural reserves and be at a distance of more than 10-times their height, that is about 1.5 kilometres. Existing wind farms would also face audits every two years and could raise annual wind farm costs by PLN150m.

PiS says new installations are creating conflict between communities and investors and is seeking to lower subsidies for renewables and support its ailing coal industry.

Poland was one of 195 nations that backed the Paris deal on climate change last December, but sought special status for coal. The country should adopt a strategy of renewables competing with coal-fired plants without subsidies and change the current merit system that gives wind power priority over coal generation, Piotr Naimski, the Polish government official in charge of supervising gas and power grids, told Biznesalert.pl.

Wind farms were popular

Poland had the EU’s second-highest number of wind-power installations in 2015, with developers installing 1.26 gigawatts of new capacity before changes were made in government subsidies requiring developers to bid in auctions for support. It was the largest installation of wind power in Europe after Germany – according to data from the European Wind Energy Agency (EWEA).

The most active foreign investors in the Polish renewable energy sector are RWE, E.ON, EDF, EDP Renewables, GDF Suez (wind farms), Dalkia (biomass combustion), Axzon (biogas plants). The Polish players are also investing in renewables e.g. Enea, Energa, Tauron, PGE.

The country now has 5.1 gigawatts of installed wind capacity, equivalent to about 9% of the installed base in Germany.

“We saw strong performance in Poland in 2015,” Oliver Joy, spokesperson for the EWEA, told CNBC. Joy also told Bloomberg that the draft law is a “clear statement of intent and should not be allowed to stand.” 2015 saw annual investments in wind energy reach EUR26.4bn, a 40 per cent increase on the previous year.

Many global players are here, for example Gamesa, a global technology leader in wind energy, selling a 24 MW wind farm built under turnkey project modality, to Windflower, from the Israeli Sunflower group. The Suchań wind farm – developed and promoted by Gamesa – is located in West Pomerania Province, in northwestern Poland, and comprises 12 Gamesa G97-2.0 MW wind turbines. The wind farm was commissioned during the last quarter of 2015.

Biomass – a new big thing?

But now biomass – a source of energy reportedly close to many rural members of PiS – may now become the “next big thing”. PiS now has a majority in the parliament meaning it can be less restrained in implementing its policies. “The new government will oppose EU climate policy, but without unqualified actions or aggressive rhetoric for fear of losing European funds,” said Zbigniew Karaczun, senior adviser to the Polish Climate Coalition, an NGO group.

Poland is ranked 5th in the EU in terms of production of primary energy from solid biomass. Poland is also leading among new EU member states in terms of total installed wind power capacity. About 47 per cent of the land area of Poland, about 14 million hectares, consists of arable and agricultural lands. Nearly 9 million hectares (28 per cent) is forested. It is estimated that the total forest cover in Poland will reach 32 per cent in the next 15 years. Biomass technologies and supply sources are relatively mature, and the investment costs are lower than for other maturing renewable energy technologies.

Coal remains king

PiS, in its election manifesto, said it wanted to make “maximum effective use of coal as a basic energy source for Poland”. It also wants to revive shale gas exploration. But coal looks to remain king. Poland is the ninth largest producer of coal in the world and the first in the EU. But the Polish coal industry’s profitability has shrunk dramatically over the last few years.

Aleksander Sniegocki, an energy market and climate expert from the Warsaw Institute for Economic Studies (WISE), told the V4 Revue that the high cost of domestic coal production is the culprit.

“Poland’s state-owned mines are unprofitable and unproductive. Labour costs soared during the coal market boom, and now during the downturn have made the mines uncompetitive. Transport costs give Polish mines some advantage on the domestic market, but not when coal is exported.”

The current productivity of Polish mines however is extremely low, especially when compared with their competitors abroad: Polish miners produce about 670 tons of coal per year; while American or Australian miners’ average individual production is between six and tenfold more.

New PM Beata Szydło’s strategy is not new and bears a striking resemblance to what former PM Ewa Kopacz had in mind in 2015 when she began building a large fuel-energy group by transferring Kompania Węglowa to TF Silesia, a state-controlled fund.

Because of the shale gas bubble and the postponement of plans to open Poland’s first nuclear power plant until 2025-2030, some Poles often see solid fossil fuel as the one and only way.

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