Poland′s coal-phaseout plans: Fact or fiction? | Business | Economy and finance news from a German perspective | DW | 30.09.2020

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Business

Poland's coal-phaseout plans: Fact or fiction?

Poland has moved closer to ending reliance on coal after the government, the country's largest mining firm and unions agreed to phase out all coal mines by 2049. But not all are convinced the timetable is fast enough.

After updating its 2040 energy plan in early September, Warsaw moved last week towards ending its dependence on coal after the Polish government, miners' unions and the state-owned coal firm, Polish Mining Group (PGG), agreed a plan to phase out mines by 2049.

It was the first time Poland has put a timeline on ending coal and puts the country in line to meet the EU's climate targets of net-zero carbon emissions by 2050, which had previously been rejected by Warsaw as unrealistic. But some industry observers doubt the plan will survive the harsh rigors of hardening EU climate policy, alongside financial constraints.

"There is a general agreement between experts on energy and coal mines that the plan of coal mine phaseout is a fiction," Ilona Jedrasik, energy team lead at ClientEarth Poland, told DW.

All governments since 1989 have promised to deal with the uncompetitive, environmentally damaging and politically sensitive coal industry and most have failed to see through long-needed restructuring.

But the Law and Justice (PiS)-led government has been forced to shift its position due to the rising costs of emissions permits required within the EU's cap-and-trade system and the effects of the Covid-19 pandemic, which has reduced demand for electricity and exacerbated a long-term structural decline in prices.

One of the largest European coal companies, state-run PGG reported losses of 400 million zlotys (€107 million; $120 million) last year. 

View of the Belchatow power plant covered in the exhaust of coal burning.

Poland's largest coal-fired power plant in Belchatow received almost 500 million zlotys in subsidies in 2019

The deal 

After the deal was announced last Friday, Dominik Kolorz, the head of the Solidarity union told his members — some 200 of whom were still at the time staging a protest below ground — that it guaranteed miners' employment until retirement and promised severance packages in the case of earlier layoffs.

Warsaw said it would ease the transformation by allocating 60 billion zlotys to mining regions from the EU's Just Transition funds. This, it said, would enable a shift to a cleaner economy and protect coal regions' labor markets.

Poland wants to reduce coal's share in the country's energy mix to between 37% and 56% in 2030 and to between 11% and 28% in 2040. In the previous version of the plan, coal's share in electricity generation would fall to 56%-60% by 2030 and to 28% by 2040.

The country generates about 75% of its electricity from coal — second only to Germany in Europe and making Poland the ninth-largest coal producer in the world. 

Renewables and nuclear offer alternatives 

The new plan foresees renewable energy sources accounting for at least 32% of electricity by 2030. Warsaw aims to have between 8 and 11 gigawatts (GW) in offshore wind farms operating in the Baltic Sea by 2040, with the first capacity online in 2025 and reaching 5.9 GW by 2030. Under investment plans, 130 billion zlotys would be earmarked for boosting the offshore wind capacity by 2040.

Onshore wind capacity is targeted to reach 10 GW by 2030, up from 6.25 GW today. Solar PV capacity is seen rising up to 7 GW in 2030 and 16 GW in 2040, from 2.2 GW now.

The strategy also assumes development of 6-9 GW of nuclear power. In the updated energy strategy, the Climate Ministry said Poland plans to invest 150 billion zlotys to build its first nuclear power plants. The first one could be up and running by 2033.

The development of renewable and nuclear energy facilities will create 300,000 jobs, the government said.

Asked if nuclear power and renewable energy would be able to fill the hole left by coal, Jedrasik says this will depend on the level of investment and the development of the legal framework, especially the support scheme for offshore wind, and unblocking onshore wind.

"We are not able to cover the electricity gap without wind. This is clear. Nuclear power plant development is not considered a realistic alternative to coal. There is not enough capacity, experience and financial resources in the country to risk drowning money in such a project," she says.

Aleksandra Gawlikowska-Fyk, head of the Power Project at Forum Energii in Warsaw, also expects a "coal gap coming," and told DW: "We need to fill this gap as soon as possible, and for that reason we will add new renewable capacities and possibly some gas-fired units. Nuclear energy is planned for 2033 at the earliest, but it will be too late to solve the current adequacy issues."

Picture showing the ruins of the nuclear power plant in Zarnowiec

Poland's plan to build its first nuclear power plant at Zarnowiec was stopped in 1990 due to protests and lack of funds

EU plays key role

The Polish government has promised to seek consent from the European Commission to provide state aid "for financing current production, in order to ensure the stability of the hard coal mining companies." But the Commission is expected to consider raising the carbon dioxide emissions reduction target for 2030 from 40% to at least 55%.

"Meeting EU rules on state subsidies is a key condition for the agreement to enter into force, and the most controversial one," says Gawlikowska-Fyk, adding that it is "very doubtful under what conditions the Commission could agree to subsidization of production."

Between 2013 and 2018, the country spent 30 billion zlotys on bailouts for coal-powered electricity. Support for coal mining between 1990 and 2016 is estimated at 81 billion zlotys, according to Jedrasik.

"Since last year, the state aid for coal mines has been forbidden in the EU and I don't believe the EU will approve this support," Jedrasik says. "It doesn't have any economic or environmental sense. It has little sense from the social point of view as well."

Too little, too late

Jedrasik thinks the Polish government has two options: First, trying to push the EU to change its coal-support regulations, which is "extremely difficult to imagine" given any such agreement "wouldn't be in line with EU climate policy and the image of Poland of a climate lagger [laggard]."

Second, the government believes that "winning time is also winning," because it would have more time to "think up a serious strategy or hope the problem will somehow be solved from the 'Just Transition' funds."

Gawlikowska-Fyk shares the view, saying the agreement between the government and unions is "an attempt not so much to solve the crisis as to postpone it."

"The pace of phasing out coal is too slow; the agreement does not include all mining companies, and it is conditional upon the Commission's consent on new state aid," she concludes.