Why Poland still clings to coal

Energy producers invest billions to build new plants and modernize older ones.

WARSAW — As EU member countries begin jockeying for position in the debate about the shape of the energy union, Poland is defiantly insisting that it must be allowed to keep coal as the central fuel in its energy mix.

“Polish energy security is based on coal, and that is our priority,” Prime Minister Ewa Kopacz told journalists at the beginning of October.

That makes the idea of building an energy union a bit of a mixed bag for the Poles. They’re very keen on the parts that would help erode Russia’s market dominance in gas by better connecting Poland to the rest of the EU, but Warsaw is wary of attacks on its dependence on coal and isn’t enthusiastic about EU pledges to slash emissions.

That was why the Juncker Commission came up with a very broad energy union package, allowing most countries to find at least some elements they liked, despite being opposed to others.

Poland generates 85 percent of its electricity from coal. With UN climate negotiations in Paris coming up in December and the EU committing to cut greenhouse gas emissions by 40 percent on 1990 levels by 2030, Warsaw has been under significant pressure to reduce that figure.

But coal is the only fuel that Poland has large reserves of, and coal mining has a long and storied history here. Coal miners are a politically powerful group, as well. As Poland heads for parliamentary elections on October 25, the country’s main parties have ratcheted up their rhetoric about the primacy of the fuel. Accepting any compromise on the issue is a vote-killer.

Kopacz’s main opponent, Beata Szydło of the opposition Law and Justice party, has taken a similar view, in a rare area of agreement between the two politicians.

“For me there is no doubt that the Polish economy has no future without Polish coal,” said Szydło earlier this month.  She has said that if elected, her government would work to modernize the sector with new technologies that would make it cleaner and more efficient.

Whoever wins the elections will therefore be determined to make sure any EU-wide agreements on the energy union will allow Poland to keep its prerogatives when it comes to which fuels it uses to produce its energy.

“The biggest issue is whether the framework will be flexible enough so that member states can decide on what fuel can be used without limits,” says Michał Koczalski, an energy expert at lobbying firm CEC Government Relations. “Here, it’s all about coal.”

While many European power companies look for ways to reduce their investment in coal-fired generation, Polish energy producers are moving in the opposite direction, investing billions in modernizing their coal-fired plants or in building new, more efficient ones. At least four new coal-fired power plants are expected to come on line by 2019.

Along with the political reasons for the focus on coal, there are practical considerations at play as well. Even if Poland could generate large amounts of renewable energy, its outdated grid is in no shape to handle the fluctuations in supply that go with it. Modernizing the grid is long and expensive work.

Many had put their hopes in the potential for shale gas, which would at least provide a somewhat cleaner alternative to coal. But with all of the global majors pulling out of Poland after unsuccessful drilling campaigns, that dream has all but died.

Nuclear energy is also out of the picture, at least for the time being. Poland has plans to build a nuclear power plant, but it is at least 15 years away from coming online. A location for the plant has not even been chosen yet.

Reliance on Russia

If Poland can keep its reliance on coal on the table, then it is likely to support the energy union project. The idea is, after all, the brainchild of European Council President Donald Tusk, who when he was prime minister of Poland, proposed it in 2014 as a solution to the country’s reliance on Russian oil and gas.

Poland gets around 60 percent of its gas and 90 percent of its oil from Russia, with no real alternative for other suppliers. While a liquefied natural gas terminal in the northwest corner of the country would, ostensibly, allow Poland to replace around 80 percent of Russian supplies after it comes online next year, importing from overseas still remains too expensive.

When it comes to oil, importing from anywhere other than Russia also proves problematic, not least because Poland’s refineries are connected to Russian pipeline networks.

The country’s dependence on Russian oil and gas gives Moscow considerable leverage when negotiating supply contracts. Poland would like individual gas contracts between Russia and member states to be reviewed by the European Commission, or even bargained collectively, to make sure the Russians can’t unreasonably jack up prices for the most vulnerable — something that the energy union may help with.

But it’s not just supplies of gas and oil that Poland needs to be worried about. Despite its abundance of coal for electricity generation, the country faces a deficit of around 8 gigawatts of capacity starting in 2020, once the EU’s Industrial Emissions Directive  kicks in. The regulations will force several of Poland’s old, dirty generation units to shut down, and the country currently has no alternative to replace them. Conceivably, it could source the power it needs from countries with extra capacity.

The question is whether Poland would be willing to do that. Depending on Denmark, for example, to provide the electricity Poland needs could be perceived by Poles as yet another energy-related shackle to go with its Russian gas ball and chain.

“Better interconnections with other countries, especially those with an electricity surplus to share with neighbors, will help increase security of supply and lower the overall power system costs,” says Joanna Maćkowiak-Pandera, head of the Forum for Energy Analysis, a Warsaw-based think tank. “But currently Poland is not very keen to go in the direction of deeper electricity markets integration.”

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