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Opinion of the Chief Expert on Energy of the Union of Entrepreneurs and Employers: EU’s Renewable Energy Directive RED III vs the possibilities of the Polish energy sector

Warsaw, 30th October 2023

 

Opinion of the Chief Expert on Energy of the Union of Entrepreneurs and Employers:
EU’s Renewable Energy Directive RED III vs the possibilities of the Polish energy sector

 

  • The European Renewable Energy Directive (RED III) was adopted at the beginning of October this year by the Council of the European Union.
  • The document introduces both indicative and binding targets, some of which may turn out to be unrealistic in Polish conditions.
  • Poland has 1.5 years to transpose RED III. It is worth using this time to conduct a detailed feasibility study of the document in national conditions and further possible negotiations with the EU in this regard.

Energy transformation comes down to a systemic reconstruction that involves basing the entire energy sector in Europe on renewables. This is the target that the European Commission is pursuing: a global economic process that will revolutionise European industry. It means a metamorphosis of the lifestyle of the citizens of countries where the efficiency of energy use increases along with the progress of electrification. Of course, this mainly applies to countries that are highly developed in terms of technology and possess the ability to finance extensive modernisation and innovate in the area of consumption of energy resources, meaning energy and heat generation.

After the outbreak of the war in Ukraine and following the observed energy problems in almost every European country, it seemed as if the European Commission would slightly revise the transformation pace to enhance the energy security of the continent. On the one hand, this could mean an increase in RES investments. On the other, it might translate into the use of European fossil fuel resources, as well as the return in some countries to nuclear energy. Such an energy mix also seems to be the most rational way to guarantee Europe’s energy security.

Meanwhile, the recently adopted by the Council of the European Union directive known as RED III clearly defines the direction of development of the European energy sector as preferably based on renewable sources. Increasing the obligatory share of green energy in the European energy balance to 42.5% with the option to increase this level to 45% by 2030 is a realistic scenario only for some EU member states, such as Denmark. The entire Polish energy sector produces 175 terawatt hours of electricity per year – green energy accounts for less than 30 TWh, the equivalent of approx. 21% of the country’s energy balance. While we are observing a very promising share of renewable energy generation this year in Poland and the year might end with a new record in this respect, the Polish energy sector under the current regulations is unable to double its installed green capacity by 2030. And this relates to sectoral law and regulations defining general investment requirements alike. Presently, we have approx. 26 GW of renewable generation capacity installed in wind farms, photovoltaics, hydropower, and biomass installations.

By 2030, offshore wind farms with an installed capacity of 5-6 GW can be expected to be launched, which should translate into the production of approximately 15-20 terawatt hours of green energy. With favourable legislation facilitating RES investments (onshore wind energy and large-scale photovoltaics), we can count on an additional production of approx. 10 TWh of energy from these sources by 2030.

Thus, in 2030, with a favourable investment policy towards renewables, the Polish state can expect to produce 60-65 TWh a year. Considering the expected consumption of ca. 180-200 TWh, will constitute only 25-28% of the country’s overall energy balance. This in no way implies a lack of faith in the RED III having sense – on the contrary. Nevertheless, this does not directly impact the enforceability of its provisions within the expected time limit.

To meet the assumptions of RED III, Poland should have roughly 60 GW of renewable generation capacity installed by 2030, which is more than the entire Polish energy sector currently. Such power, counting on average 1,500 hours of full operation (a large part of which are going to be photovoltaic sources with lower efficiency) translates into 90 TWh of energy produced. And only in such a scenario will we be able to fulfil the assumptions of the Directive.

Assuming an average production of onshore wind farms at the level of 2,000 hours of full power (due to the anti-windfarm law, we do not have high-efficiency installations of this kind in Poland, with a capacity of over 3,000 hours of full power, and operating farms often do not even achieve 2,000 hours of full power) and a total of 10-12 GW of generating capacity, we should achieve ca. 20 TWh of production from this source by 2030. Offshore wind farms will produce 18-20 TWh by 2030 according to the 3,500-hour model, multiplied by an installed capacity of 5-6 GW. By then, photovoltaic installations should reach the level of 20-25 GW of installed power, which, with an average production of 700-800 hours of full power, will result in 17-20 TWh of energy produced. Constantly operating sources such as hydroelectric power plants, biomass or biogas power plants, even with significant investment facilitations, will not produce more than 8-10 TWh of green energy annually by 2030.

To sum up energy generation, with a legislative “fast track” for the necessary RES investment laws, Poland might can count on reaching the ceiling of 40-45 GW of installed capacity by 2030-2032, which may translate into energy production of approx. 60-70 TWh a year. At the same time, one must not forget that Poland has a large share of industry in its revenue structure, and Polish industry produces many goods for export, mainly to developed countries, including fellow EU member states. Therefore, with the obligatory use of green energy only in production processes (ESG goals), our industry will require over 50 TWh of green energy for its own needs. RED III assumes a 1.6% annual increase in the use of green energy, which is realistic, but would happen in our domestic conditions at the expense of other sectors of the economy.

Challenges that electric transport as well as heat and power face

Thus far, Poland is not a producer of green hydrogen, although in the future it may constitute a principal element of the national economy. In this context, the target of a 42% share of green hydrogen in the industry by 2030, which is assumed by RED III, seems to be completely unattainable. Moreover, the indicative target of 49% of renewable energy used in buildings provided for in RED III is unattainable for us even in 2035, due to the specificity of our energy sector. Even with a significant increase in green energy production, we must direct it first to industry and transport. Power supply for buildings and households will still be based on coal-fired energy in the longest term. Energy from natural gas will in turn be needed as a stabilising factor for the operation of weather-related renewables. And although, of course, a lot of transformational investments in the Polish heating sector are currently planned and implemented, both the financial condition of the sector and several types of administrative and legal barriers mean that for now low-emission installations are heralds of change instead of a commonplace phenomenon.

If, through the development of the prosumer sector, it is possible to achieve to power 15% of households with green energy by 2030 as a result of self-generation and utilisation, it will be a remarkable success for the Polish economy. Let us remember, however, that from 2024 a dynamic tariff will enter into force. As a consequence, without investing in an energy storage facility, PV panels alone, or worse a heat pump, will become a project of questionable profitability. Support systems will therefore play a huge role here and for that we naturally need funding.

In terms of transport electrification, RED III offers a choice. Either a binding target of 14.5% reduction in greenhouse gas intensity in transport (due to renewable energy use by 2030), or a binding target of at least 29% renewable energy in final energy consumption in the transport sector by 2030. In the context of the great significance of the automotive, transport, and logistics industries in Poland, it seems necessary to confirm that these sectors evaluate these “binding goals” as realistic.

Acceleration of investments in renewable energy is indisputable, but other provisions may need to be adapted to local specificities.

The strengthening of criteria regarding the use of biomass as a source of renewable energy in RED III should be evaluated positively. This is important for the Polish economy not only due to environmental criteria, but also due to the share of the furniture sector in exports and the country’s economy.

The emphasis in REDIII on simplifying the process of issuing necessary investment decisions for RES also seems necessary. The concept of “overriding public interest” best suits the interests of the entire Polish economy in this respect, but also of the EU economy in the understanding of the common energy market.

In my opinion, RED III is a positive and necessary document that indicates quite precisely the direction of development of European economies. As a guiding document, it should be adopted without undue delay by decision-makers in the Polish energy sector (Poland has 1.5 years to transpose it into national legislation). It should be subject, however, to verification of individual partial goals and then adapted them to the capabilities of the Polish economy. It seems that it should now be of key importance to reach consensus regarding local specificities in the transposition of the Directive by individual EU member states.

For example, Belgium raised concerns about whether the sectoral partial targets assumed in RED III guarantee the implementation of climate goals in an economically justified way. Ireland recognised the importance of ambitious 2030 renewable energy targets, but stressed the need to comprehensively consider their implications – noting that impacts may be underestimated. Latvia reported the need to consider the country’s economic and social conditions, energy balance and starting point when setting renewable energy requirements. The aim here would be to ensure that the objectives of RED III are both attainable and beneficial for each EU member state. Therefore, it seems that Poland has a chance to not be alone in its observations and dilemmas regarding the assumptions of RED III, which gives hope for a constructive dialogue at the EU forum.

Włodzimierz Ehrenhalt
Chief Energy Expert of the Union of Entrepreneurs and Employers

 

See more: 30.10.2023 Opinion of the Chief Expert on Energy of the Union of Entrepreneurs and Employers: EU’s Renewable Energy Directive RED III vs the possibilities of the Polish energy sector

Report by the Union of Entrepreneurs and Employers and Symfonia 
on the 2023 SME digitisation level “Digitisation of the SME sector in Poland”

Warsaw, 2nd November 2023

 

Report by the Union of Entrepreneurs and Employers and Symfonia
on the 2023 SME digitisation level “Digitisation of the SME sector in Poland”

 

According to a study conducted by Union of Entrepreneurs and Employers, 10 months before the obligation to use the National e-Invoice System KSeF enters into force, only 60% of Polish companies see the need for deeper digitisation, while 38% of them use only basic tools in business. The group that declares the lowest level of digitisation are micro-entrepreneurs, almost 40% of whom claim that they do not use any digital tools.

Mere moments before the introduction of the mandatory use of the National e-Invoice System (Krajowy System e-Faktur – KSeF), the Union of Entrepreneurs and Employers, in cooperation with Symfonia, published a report “Digitisation of the SME sector in Poland”. The aim of the study was to investigate both the awareness and level of digitisation of economic entities in 2023.

Piotr Ciski, President of the Board at Symfonia: “We focused on SMEs in our study, because they are the backbone of the Polish economy. The upcoming mandatory full digitisation of invoices will also cover other market segments. We are the sole EU member state to introduce KSeF for all fiscal documents, without any limits on amounts or settlement areas. This is a massive challenge for Polish entrepreneurs, which impacts not only IT systems, but also internal processes related to, among others, the circulation and acceptance of cost invoices. We at Symfonia have many years of experience in the field of electronic invoicing. It was us who introduced the first structured invoice on the Polish market, which is why we share our knowledge. We have been conducting an extensive educational campaign in cooperation with the Accountants Association in Poland and the Union of Entrepreneurs and Employers. We have launched a free KSeF hotline and implemented a series of training courses as part of the Symfonia Academy, which are used on a daily basis by our clients as well as people who work on our competitors’ systems.”

The introduction of KSeF will allow public administration to have real-time insight into each economic transaction, because they will be processed in a central e-invoicing system. This requires entrepreneurs to change processes and adapt tools to new requirements. The National e-Invoice System is a fully cloud-based solution, which means that the entire market will naturally transfer some of its business processes to the cloud.

Meanwhile, as the new report shows, only 14% of surveyed SMEs declare the use of cloud computing, and 13% use of process management systems, including ERP (enterprise resource planning) – in neither category, does the share of micro-enterprises exceed 10%. Only 3% of respondents declare the use of AI-powered solutions in everyday business operations.

The study shows that 44% of respondents indicate increased work efficiency as the main benefit of digitisation. As many as 33% have observed a reduction of the harmful impact on the environment. Only 19% of respondents perceive digitisation as a tool with potential to increase company revenues.

Nevertheless, almost half of respondents (46%) are afraid of the costs related to digitisation. Moreover, there are also concerns of a purely human nature: 16% of employees declare reluctance to change.

 

Full version of the report available for download right HERE.

Memorandum of the Union of Entrepreneurs and Employers: Making use of the potential of Ukrainian and Polish digitalisation in the healthcare sector

Warsaw, 9th October 2023

 

Memorandum of the Union of Entrepreneurs and Employers:
Making use of the potential of Ukrainian and Polish digitalisation in the healthcare sector

 

  • Cooperation between Poland and Ukraine can bring mutual benefits in the field of healthcare digitalisation.
  • Regarding this cooperation, there are opportunities and threats alike. Both countries can exchange knowledge and experience, which will contribute to an increased healthcare efficiency and quality.
  • Varying degrees of advancement and differences in infrastructure may create challenges for a harmonious partnership. It is essential to focus on overcoming these obstacles and making use of both countries’ potential in the field of health digitalisation.
  • Advanced public-private partnerships guarantee the development of digital services in Ukraine.
  • Lack of sufficient know-how may become an obstacle to further development of the digitalisation of the Ukrainian state.

Objectives of a Polish-Ukrainian healthcare cooperation

One of the most important objectives of Polish-Ukrainian cooperation should be, above all, a partnership at the educational level in order to support future entrepreneurs from Ukraine by equipping them with adequate knowledge. In the face of the ongoing armed conflict, prewar conditions for development do not exist any longer. The pace of progress in creating innovative solutions related to data transmission technology along with the knowledge that there is no possibility of returning to the pre-war world conceive the potential in Ukraine to build a modern healthcare system based largely or completely on digitalisation. Ukraine can and may become a country of experiments in the field of digitalisation of the health sector, and Poland is able to aid Ukraine in endeavour.

Where does Ukraine presently stand in terms of its healthcare system?

Ukrainian healthcare is a system that for many years had suffered from inadequate financing. To make matters worse, current budgets do not allow its restoration. We are dealing with a quite significant outflow of citizens – medical staff, the youth, and wealthy people in particular. This situation affects in turn not only the condition of medical care, but also the country’s economic potential. Ukraine’s population is aging and access to healthcare varies greatly, especially in scattered rural areas. Private health insurance has low penetration. The ongoing war leads to economic instability yet attracts at the same time new patients with health problems, both of a physical and mental nature. We are observing a lacking transparency in certain aspects of the health system. Although apparently there are no fees for anything, there are reports of cases in which patients must provide their own surgical tools or wound dressings. Citizens are very open to adopting digital solutions. We also see that the war, although a tragic event, contributed to the acceleration of services’ digitisation. Healthcare in Ukraine, while slightly lagging, is gradually following other industries. It is important to understand that those industries shape consumer habits, for example modern digital banks that offer different payment channels and systems. Worthy of a mention is the Ukrainian online bank Monobank, which is more modern and advanced than many banks in Poland. This is an institution considering expansion to Western Europe. Furthermore, during the war in Ukraine, applications emerged to make life easier in other areas, for example the Ukrainian Railways app, which offers not only ticket sales, but also access to various information. Due to the numerous events surrounding the war, citizens find this information extremely useful. Interestingly, if we look at the scope of functionality of the Ukrainian equivalent of the Polish mObywatel app, we will notice that the Ukrainian state portal offers at least the same, and sometimes even greater possibilities than its Polish counterpart. There is also a mobile app on the private market that integrates medical care with access to pharmacies. Such a modern solution is on par with certain European innovations, and ahead of others. All this shows that Ukraine has the potential to further digitally develop its healthcare and can draw inspiration from other sectors of the economy as well as from foreign solutions. As for the public healthcare market, the level of digitalisation in Ukraine is still relatively low. However, if we look at the private market, we will observe the creation of applications that come close to the standards offered by companies such as LUX MED, Medicover or Enel-Med. In spite of this fact, the share of private medical care in Ukraine comes up to only about 5%, which is a relatively small value. If we compare certain indicators, for example teleconsultations, in Poland they constitute over 30% of the share, while in Ukraine a mere 10%, albeit growing. Now, when it comes to opportunities to improve the situation in Ukraine and to make better use of existing apps, it all boils down to data and digital standards of information exchange in medical environments, as well as standards of working with patients. Currently, there are no uniform standards, which leads to the lack of standardisation, within Ukraine and in international exchange alike. Ukrainians saw the benefits of standardisation during the COVID-19 pandemic, as Ukrainian certificates were recognised in the European Union and vice versa. Therefore, Ukraine should strive to adopt standards applicable in other countries, as this creates the potential for various forms of cross-border healthcare. We can envision a policy that would allow treatment both in Poland and Ukraine. There is a large community of Ukrainians living in Poland, who are professionally active and travel frequently. Having a service that would work not only in Ukraine but also in Poland and other countries would be incredibly attractive. However, the key issue is collecting consistent medical data. From the point of view of Ukrainian society, but also of societies in which Ukrainians live, this would be highly beneficial as it would affect the effectiveness of treatment and patient safety.

Due to favourable legislation, Ukraine is becoming a leader in international IT

Ukraine has the potential necessary to become a leading force in digital transformation of healthcare, as everything is being built virtually from scratch. The market for IT and digital services in Ukraine is large and growing, accounting for approximately 5% of the country’s GDP. Moreover, services sector exports constitute about 50% of the country’s total exports. This is a dynamically developing sector that includes over 2,300 companies that employ over 360,000 specialists. It is an important part of the Ukrainian economy making it an important player on the international market. Importantly, the current legislation in Ukraine favours IT sector development. However, to achieve its full potential, it is important that the private sector operates both domestically and abroad. Public-private cooperation (between private companies and state institutions) is also important. The partnership between Poland and Ukraine in the field of digitalisation can bring mutual benefits, especially if both sides use their experience and potential in the field of digital technologies and jointly face the challenges related to the development of the sector. The role of the Ministry of Digitisation in managing the digitisation process is crucial, and its coordinated approach to various areas of government activities can bring positive results. What is important is that this Ministry can help other ministries in developing digital competences and creating favourable conditions for innovation. When it comes to cooperation between Poland and Ukraine in the area of digitalisation, such relations can bring many benefits. Both sides can learn from each other and jointly solve problems related to the development of the digital sector. It is also worth paying attention to how many Polish companies operate in Ukraine and cooperate with Ukrainian companies. This can be an important source of exchange of both knowledge and experience. The important thing is that the digitisation process can be implemented in diverse ways, and each country can choose the solutions that best suit its own needs and conditions. It is also worth remembering that digitisation is a dynamic process that is constantly evolving. There are many areas with room for improvement to achieve better results. Regarding cybersecurity, this is a globally key area that requires constant attention. International cybersec-cooperation is critical, because threats are often of an international character and require a common approach to properly address them. Poland and Ukraine can also use technological solutions in the area of cybersecurity, such as platforms for attack detection and prevention. Indeed, developing digital technologies in the military area can also find numerous applications in civilian areas. Ukraine, due to the vastness of its territory and particular challenges, has the potential to give birth to solutions that can be adapted to various civilian needs. Companies that identify and monitor threats in military situations can transform their technologies for the needs of the post-war civilian market. Mental health and psychological support are also pivotal, in particular for those suffering from war-related PTSD. Companies offering psychological support can develop their services and help not only veterans, but also others who experience mental difficulties. AI-powered technologies have wide applications in civil fields such as healthcare and industry too. Their development may contribute to improving the efficiency and quality of medical care along with other aspects of life. Developing technologies related to prostheses and support for injured people are another example of how technologies developed for the military can be used in civilian areas, such as healthcare or rehabilitation.

Digitalisation as a way to combat logistics problems and communication exclusion

The availability of medical services, especially in large countries with dispersed populations, is an important aspect. Using medical data to better diagnose and refer patients to the right specialists can improve the healthcare quality. Moreover, an aging population and deficiencies in the health system are challenges that can be solved through digitalisation. However, the key is to ensure that patients experience the benefits of these changes, such as better access to medical care and a more personalised approach to treatment. Clinical trials, health data analysis, and tracking health trends in the population are areas that can also be beneficially used in the process of digitalising healthcare. It is important to use these tools effectively to prevent diseases and improve patients’ quality of life. Another issue to take into consideration is what should be done after diagnosing patients and identifying problems at the population level. We focus on delivering medicines and services, which in turn brings challenges related to logistics and ensuring availability. In Europe, including Ukraine, there are major problems in this area. Digital tools allow for a more effective management of these processes, which is extremely important. The problem is the lack of coherence in health systems. Patients use different healthcare facilities and medical devices, which makes data scattered and inconsistent. Our goal is to enable data to move with the patient, but communication between different devices and systems can be problematic. An example of this is the individual patient account, which has worked well for vaccinations, but we still have many challenges to face in terms of data access and processing. Another important aspect includes data analysis and subsequent conclusions from this data. Having diagnosed patients, it is necessary to adjust appropriate therapies, exclude ineffective solutions, and implement self-help.

Visions of a Polish-Ukrainian cooperation

It is important to understand the processes and systems on both the Polish and Ukrainian side – and to educate about them. Each side has tried different solutions, and the mistakes of others can become valuable lessons. Education at the level of relations between countries is crucial. Furthermore, there are issues related to regulations and standards. Poland can learn from Ukraine in terms of implementation and operationality, while Ukraine has much to gain from Poland’s experience in dealing with different standards and regulations, especially in the context of Ukraine’s aspirations to join the EU. It is worth emphasising that both sides can also benefit from the exchange of know-how in the field of cybersecurity and adapting regulations to European standards, while ensuring flexibility of the country’s development. One must remember that adaptation to new regulatory standards as well as introduction of systemic changes are operational challenges. Poland and Ukraine can exchange experiences and best practices in these areas to achieve consistency with European standards while maintaining flexibility in the development process. Poland and Ukraine can benefit from mutual support, especially since they are each other’s closest neighbours. Apart from education, regulation, and knowledge exchange, there is also potential for medical and other services. Both countries can provide services in both mental health and other medical areas. Cooperation and opening the market can both benefit patients and stimulate competition. Qualified medical and IT staff are vital, because both parties have different competences in these areas. Creating joint projects and working groups at various levels, including government, business, health system participants, physicians, and app users, can accelerate the implementation of digital solutions. Successful examples of cooperation and the effectiveness of the implemented solutions should also be actively promoted. As we continue to do this, there is a huge opportunity to help rebuild the healthcare system and transform it into a moderner and more effective version of itself that meets future challenges.

 

See more: 09.10.2023 Memorandum of the Union of Entrepreneurs and Employers: Making use of the potential of Ukrainian and Polish digitalisation in the healthcare sector

Open letter from the President of the Union of Entrepreneurs and Employers to political leaders

Warsaw, 17th October 2023

 

Open letter from the President of the Union of Entrepreneurs and Employers to political leaders

 

Krzysztof Bosak
Włodzimierz Czarzasty
Szymon Hołownia
Jarosław Kaczyński
Władysław Kosiniak-Kamysz
Sławomir Mentzen
Donald Tusk
Adrian Zandberg
Zbigniew Ziobro

 

Gentlemen,

If I may, I would like to interest you in the discriminatory challenges that small Polish companies have been facing in their very own country for the past 30 years.

Micro-enterprises, unlike large companies, cannot afford lawyers, accountants, lobbyists or PR specialists. No foreign ambassador will call the prime minister or any of the cabinet ministers when provisions of the law or administrative decisions limit the opportunities for microbusinesses to thrive. Regulations that for a large company may only mean hiring another lawyer or accountant, for smaller companies may mean their end. Small companies cannot afford yearlong battles in courts of law against civil servants. They do not a team of lobbyists and PR companies at their disposal to defend their image or gain direct access to decision-makers.

At the same time, micro-enterprises constitute a significant share of the Polish economy and play an essential social role. They generate more GDP and create more jobs than large companies do! Alas, both in state policies and the reality shaped by scientists and the media, micro-entrepreneurs are placed in a secondary position and are presented as obstacles on the road to growth. Micro- and small enterprises have played, do play, and will continue to play a considerable role in the development of Poland. The Polish people should be made aware of this role, and decision-makers ought to appreciate it.

In 2019 (the last year for which there is data available as of October 2023), the share of micro-entrepreneurs (companies employing no more than 10 people) in GDP was 30.6%, while for large enterprises (employing 250 people or more) the share in GDP generation was much lower: 22.7%. Microbusinesses are also the place where most jobs are in Poland! At the end of 2020, nearly 10 million people worked in the enterprise sector, including as many as 4.2 million in micro-enterprises. And only 3.2 million people worked in large companies.

There is insufficient data available on micro-companies in public statistics. And available data is published with a significant delay. The paucity of data suggests that state decision-makers are not invested in micro-entrepreneurs’ condition or potential for growth, which means that politicians and public authorities make decisions about microbusiness without necessary knowledge. When a body of key data on microcompanies describes the state of affairs from two years ago, and state policies often need up to two years to work in full effect, the period between the authorities’ decision and the assessment of that decision’s impact on micro-entrepreneurship lasts up to 4-5 years!!!

The Ministry of Finance has tools in the form of Uniform Control Files, which demonstrate the financial flows of enterprises. Based on this, one can create analyses, determine the economic situation in individual industries, exclude IT specialists from statistics (who are most often B2B contractors), and also recognise the real effects of the enforced economic changes and regulations. However, they are not made use of, and we basically have no idea why this is the case.

Polish scientists, politicians, and media frequently suggest that too many micro- and small enterprises hinder Poland’s development. In the media and social media alike, small business owners are usually portrayed as stupid, simpletons, exploiters, and fraudsters. Political leaders claim that if micro-entrepreneurs are unable to run a business in the conditions created by politicians, they are not suitable for business and should do something else!

What has been created is a business-unfriendly state where chaos rules supreme. Its main features include the lack of legal stability and economic mismanagement of assets owned. Businesses are up to their necks in chaos and regulatory roulette. One can never say what any given minister will come up with out of the blue or how a law will be enforced.

The legislator can wreck an entire industry with one legal act. And then the political class is surprised that micro- and small entrepreneurs are afraid to invest. There is no other way to increase domestic investment than legal stability and a sense of security of economic transactions.

It indeed is true that smaller companies are on average less efficient than larger ones – both in Poland and globally. According to Eurostat, in the case of entrepreneurs employing 0 to 9 people, the average annual turnover per employee amounted EUR 74,000. While in companies employing 250 people or more, the average turnover per employee came up to EUR 181,000. So yes, larger companies are more efficient. But if all florists in Poland merged into one corporation, their turnover per employee would not increase like that!

A kind of socio-economic experiment is underway, which involves forcing micro- and small companies to consolidate through significantly rising labour costs, eccentric games related to raising the minimum wage disproportionately to the average salary or tightening the tax screws in the form of the inability to deduct health insurance contributions. The political class openly despises micro- and small companies, and economists from the Ministry of Finance want to force them to merge with the use of brutal fiscal incentives.

Moreover, we have in Poland slightly more smaller entrepreneurs than is the EU average, and these smaller entrepreneurs employ on average slightly more people than they do in the EU. At the end of 2020, entrepreneurs employing less than 10 people constituted 94.6% of all entrepreneurs in the EU, while in Poland they constituted 95.2%. However, individual European economies vary significantly in terms of the share of small entrepreneurs in the total number of entrepreneurs. And there is no general pattern here. For example, in Germany in 2020, the share of entrepreneurs employing less than 10 people in the total number of entrepreneurs was 87.4% – that’s less than in Poland. But the same share in Italy was higher than in Poland and amounted to 95.4%.

Same goes for the share of smaller entrepreneurs in employment. In Poland, smaller entrepreneurs employ a larger proportion of people than on average in the EU. But EU member states differ greatly. At the end of 2020, the share of entrepreneurs employing fewer than 10 people in total employment in the EU was 32.9%, while in Poland – 34.5%. In Germany, smaller entrepreneurs employed a significantly smaller proportion of employees than in Poland, only 20.1%. But in Italy, smaller entrepreneurs employed a much larger share of employees than in Poland, as much as 44.1%.

Therefore, the frequently repeated conclusion that there are too many small companies in Poland compared to the most developed economies, and that this high share inhibits our country’s development is simply untrue. The relatively high number of micro-entrepreneurs is an adaptation to Poland’s economic conditions.

The large number of microbusinesses in Poland is probably an adaptation of Poles to, among other things:

  • a significant dispersion of the population on the territory of Poland,
  • decades necessary to accumulate the capital needed for development,
  • underdevelopment of the financial sector in Poland,
  • lack of large domestic companies based in Poland.

Compared to developed countries, Poland has a disproportionate number of people living in small towns and villages. The degree of urbanisation in Poland amounts to is 60% and 75% in the EU. We also have fewer multinationals with large resources of capital, machinery, patents and organisational knowhow. And there are many more similar factors that may cause Polish entrepreneurs to be more dispersed and smaller.

But what actually is dangerous for Poland’s development is the conviction that there will be more investment, higher efficiency, and better growth when the number of smaller companies is curbed. Limiting the number of small businesses will not lead to more growth! Micro-enterprises are a necessary complement to large companies, foreign and domestic alike. They provide work in smaller towns to people who do not plan to move to large cities. They provide work to people whose careers began all the way back in the Polish People’s Republic prior to economic transformation, and who cannot or do not want to acquire the knowledge and skills necessary to be employed in highly paid positions in large enterprises.

Socialist modernisers viewed small private farms as inefficient and believed that Poland would develop by limiting the number and ultimately getting rid of family farms. But large farms that were truly efficient only began to be established in Poland when favourable economic conditions appeared with the introduction of the free market and democracy after 1989.

Many politicians and scientists as well as the media share nowadays similar views when it comes to the role of micro-entrepreneurs. Yes, the size structure of enterprises in Poland differs from that in the most developed countries. We have a little more micro-enterprises than is the average in developed economies. However, the relatively large number of microbusinesses is not the source of the backwardness of our economy. It is the optimal adaptation to the operating conditions in Poland.

By interfering in the size structure of enterprises in Poland through administrative means, taxes, labour law etc., Polish authorities will achieve any more development potential. On the contrary, they will limit the growth we can have. Further subsidies for large foreign investors and increasing regulatory burdens on small entrepreneurs will slow down Poland’s development – not accelerate it!

Poland’s development is dependent on the creation of optimal conditions for earning, saving, and investing for all entrepreneurs. To achieve this, it is necessary to adhere to the following rules and fulfil the following requirements in particular:

  • The public statistics system should provide more information about micro-entrepreneurs, and much faster. With the current digitisation of life and economic transactions, greater availability and timeliness of information does not require imposing further reporting obligations on microbusinesses. In fact, more information about microcompanies can and should be made available with reduced reporting obligations.
  • When analysing existing and creating new regulations, one should consider the asymmetry in costs incurred to meet said regulations by large companies and micro-enterprises. The same regulations are often much more burdensome for smaller entities.
  • When creating and enforcing socially beneficial regulations, their broad costs should be taken into account, including whether further enforcement of certain regulations will result in such a widespread agony of micro-entrepreneurship that we will incur new and significant economic, social, and budgetary costs.

For over 20 years, we have been conducting actions with the aim to advocate and promote knowledge about the Polish “economic anthill” and its significance for the socio-economic development of Poland. We will continue to do so. Our fight is not against corporations – we need them too. We wage war against discrimination of small Polish companies, whose importance for the economy I have tried to describe above.

Kindest regards,

Cezary Kaźmierczak
President of the Union of Entrepreneurs and Employers

The Union of Entrepreneurs and Employers presented the 2023 Economic Awards!

Warsaw, September 27, 2023

 

The Union of Entrepreneurs and Employers presented the 2023 Economic Awards!

 

The 2023 Economic Awards of the Union of Entrepreneurs and Employers were awarded at a gala evening on Wednesday, 27th September this year. During the ceremony, the Union honoured businesspeople and companies that achieved considerable successes in the field of entrepreneurship or actively supported Polish entrepreneurs. Awards were presented to the best journalist, economist, an organisation for a project, as well as to selected companies.

Among the invited guests, there were representatives of the media, the business world, central government and local authorities. Friends and members of the Union of Entrepreneurs and Employers also attended the gala.

During this event, the Union presented special awards to outstanding public figures. The winners included:

  • Public Sector Manager of the year 2023: Beata Daszyńska-Muzyczka. She received the award for effectively managing an institution that supports and finances a significant number of major development projects in Poland. She heads the bank that played an important role in Poland’s battle with the crisis related to the COVID-19 pandemic – Bank Gospodarstwa Krajowego.
  • Journalist of the year 2023: Krzysztof Jedlak. Prize PLN 25,000. For years, “Dziennik Gazeta Prawna” has remained a key opinion-forming specialist media title for people interested in law, economics and current political events. The laureate runs a newspaper providing data and knowledge to decision-makers, opinion leaders, and business representatives.
  • Organisation for a Project of the year 2023: Fundacja Forum Konsumentów (Consumer Forum Foundation) – for the project “Żyj oryginalnie” (“Live originally”). Prize PLN 25,000. Protection of intellectual property rights is one of the key elements of a market economy. The laureate’s project disseminates knowledge about risks arising from purchasing counterfeit products and provides information how to distinguish fakes from original items.
  • Economist of the year 2023: Professor Marcin Piątkowski. Prize PLN 25,000. This year’s laureate in the category was recognised for his constant and substantive advocacy of Polish economic success stories worldwide.

ECONOMIC AWARDS

During the gala, awards in the following categories were also presented to leading representatives of the Polish business community:

  • Dynamic Development of the year 2023: Symfonia Sp. z o. o. Digitising a company is one of the best ways to boost efficiency. Symfonia has been offering modern ERP systems for years, consistently maintaining a double-digit annual revenue growth rate.
  • Innovative Company of the year 2023: Uber Polska. The emergence of innovative applications enabling passengers to order a ride revolutionised the market and introduced real competition. Being a pioneer, the company remains the market leader and continues to develop its portfolio of services.
  • Employer of the year 2023: EWL. The laureate in this category is the EU’s largest global mobility platform specialising in hiring employees from abroad, present on the market for over 16 years. Over the years, the company has supported more than 1,600 employers in Europe connecting them with over 150,000 employees. It actively participates in labour market research in cooperation with the University of Warsaw – thus far, the partnership bore fruit in the form of 16 reports on European labour markets and employee mobility.
  • SME of the year 2023: Zakłady Mięsne Karol. The meat-processing company is a family-owned business striving for perfection and looking for novel solutions. Their unique approach to employees and ability to innovate sets an example for other companies to follow, inspiring them to create products and services of the highest quality.
  • Socially Responsible Company of the year 2023: Totalizator Sportowy Foundation. The Foundation runs a number of programmes that address crucial social challenges, such as “Polska dziś i jutro” (“Poland Today and Tomorrow”) aimed at supporting Polish national culture, or “Odpowiedzialni społecznie” (“Socially Responsible”) focused on providing humanitarian support. The Foundation is also one of the partners of the Union of Entrepreneurs and Employers in the “Business for Ukraine Center” programme supporting Ukrainian companies planning to develop their operations within the EU as well as Polish companies looking for business partners from Ukraine.
  • Startup Company of the year 2023: Infermedica. This startup introduces AI-powered solutions in healthcare to improve efficiency and address certain systemic problems.
  • Exporter of the year 2023: Kompania Piwowarska S.A. Even though the domestic beer market has been going through a difficult period for the past several years, Polish beer is still a valued export product, and Polish brands enjoy recognition and popularity in many European countries. The company is one of the largest beer producers in Poland and a leader in beer exports.

Furthermore, we awarded two Special Prizes this year. The first one was awarded to Ogólnopolski Związek Pracodawców Transportu Drogowego (OZPTD – National Association of Road Transport Employers) on the occasion of their jubilee: 25th anniversary of the association’s establishment. Polish road transport has the largest share in the European Union market and has a high share in Poland’s trade in the area of services. It is responsible for PLN 10 billion out of the PLN 30 billion surplus in the services balance.

The second Special Prize was awarded to Servier Polska Sp. z o. o., which has been present for over 30 years on the Poland market. Nearly 100% of drug packaging intended for the Polish market is produced at their Production Plant in Warsaw which is of paramount importance in today’s geopolitical situation.

***

The ZPP Economic Awards 2023 were organised by the Union of Entrepreneurs and Employers (ZPP). The Union is the fastest growing and one of the most active employers’ organisations in Poland. ZPP was founded in 2010 and brings together 17 regional and 19 industry organisations. Apart from publishing official positions on all key issues present in the Polish public debate, the Union conducts a number of special activities as part of the Digital, Work, Energy and Climate, Agricultural and Health Forums. ZPP organizes approximately 40 original events a year.

ZPP is an apolitical organisation that supports the free market, fair competition, legal stability and transparency, beyond political divisions.

It is a representative organisation of employers and a member of the Social Dialogue Council in Poland. Moreover, ZPP is present in Brussels through its Representative Office, participates in the European Enterprise Alliance, and is a member of SME Connect. The Union also has two representatives on the European Economic and Social Committee. In July 2022, ZPP opened an office in Kyiv actively supporting the development of economic cooperation between Poland and Ukraine.

 

Main partners of the event: Agencja Rozwoju Przemysłu SA, Edenred, Google Polska, ORLEN SA, PKO Bank Polski

Supporting partners of the event: Browary Polskie, Polska Federacja Producentów Żywności Związek Pracodawców, Stowarzyszenie Dystrybutorów i Producentów Części Motoryzacyjnych, Związek Cyfrowa Polska

Content partner: InfoCredit

Memorandum of the Union of Entrepreneurs and Employers: pro-demographic policy should not be abandoned, but without economic immigration, Poland will not maintain the pace of development

Warsaw, 25th August 2023

 

Memorandum of the Union of Entrepreneurs and Employers: pro-demographic policy should not be abandoned, but without economic immigration, Poland will not maintain the pace of development

 

  • Poland is one of the countries with the lowest fertility rate not only in Europe but also in the world. Demographic problems lead to problems on the labour market and with the social security system.
  • Currently, migrants from Ukraine are helping Poland in its fight against labour market problems. However, many of them choose other Western European countries and Canada. Moreover, one should be aware that after the end of the war in Ukraine, many of them will return to their homes.
  • Poland must pursue a prudent migration policy, open to foreigners from various parts of the world, especially from areas that are culturally close to us.
  • It is also necessary to ensure safety. Foreigners who commit crimes and people who entered our country illegally should be deprived of the right to reside in Poland.

Introduction

Poland is currently facing one of the greatest challenges in terms of society, the labour market, social security, and the economy as a whole. This problem concerns the country’s constantly and significantly worsening demographic prospects. The fertility rate among Polish women in 2022, according to the latest Statistics Poland report “Poland in numbers 2023”, amounted to 1,261. To achieve simple generation replacement, this ratio would have to come up to 2.1. This report indicates that the Polish birthrate last year was already -3.8 per 1,000 inhabitants[1]. This is the worst result in the post-war history of our country and puts us not only among the countries with the greatest demographic problems in Europe, but also in the entire world.

Demography directly affects the labour market. As the ManpowerGroup report “Talent Shortage 2023” shows, as many as 72% of organisations in Poland have problems with filling job positions with new employees with required skills and competences[2]. In practice, this translates into hundreds of thousands of job vacancies that could contribute to economic growth in our country. Staff shortages therefore translate into lost benefits for all of us.

So how shall we counteract demographic problems? A reasonable pro-family policy is certainly necessary, which will provide real support and encouragement for Polish families in decision-making with regard to children. However, even with a particularly good policy in this field, its effects will be noticeable on the labour market in 20 years at the earliest. Another way is to use one’s own resources, i.e. increasing the professional activity of, for example, women who often stay off the labour market for a long time due to caring for children and the elderly. Finally, labour shortages on the market can be filled very quickly and effectively thanks to migration policy. As indicated by the Polish Economic Institute, the total impact of labour migration in 2022 contributed to a one percentage point growth of the Polish GDP[3], and the labour market was able to handle migrants from Ukraine very well. According to the Ministry of Labour and Social Policy, there are approximately 1.4 million of them in total in our country (mainly women and children)[4].

Migration today

Current unemployment in Poland is at a record low. According to Eurostat, it amounted to 2.7% in April 2023 and was the lowest in the entire European Union (the Czech Republic achieved the same level of unemployment). It may seem that this is great news, because usually only high unemployment is associated with problems. Unfortunately, such a low level of unemployment means for the economy that there are problems with unfilled positions. This is what is happening in Poland.

More than 30 years have passed since the Polish transformation. Our country has put those three decades to effective use and has become one of the largest economies in the European Union. Just as Poles once emigrated en masse to Western European countries, today our country has become a place where foreigners come to look for work. In many industries (such as transportation or construction), foreigners make up a significant share of employees, and they form the vast majority of staff in many companies. Moreover, despite the influx of migrants, the unemployment rate has not been increasing for a long time and remains relatively stable and very low. This means that our labour market is still very receptive, and migrants are usually employed in positions that cannot be filled by employees from Poland.

The Russian invasion of Ukraine was certainly an opportunity to supply our labour market with refugees who are culturally close to us and want to integrate with our society. Unfortunately, they are increasingly choosing other Western European countries, mainly Germany and Canada. These countries accepted hundreds of thousands of migrants, offering them very favourable social programs, training and language courses. Furthermore, they largely attract specialists, people with the highest competences, who are very much in demand on the labour market of these countries.

Poland certainly benefits from the good image we have managed to create in connection with helping refugees since the beginning of the war in Ukraine. Cultural and geographical proximity and similarity of languages also work to our advantage. However, in the long term, this is not enough.

Migration tomorrow

If there are no migrants on our market, who currently constitute a huge added value for our economy, Poland will have to consider profoundly grave consequences. Already two years ago, the Statistics Poland did forecast that with current demographic trends, the population in Poland will decrease by 4.4 million[5]. Unfortunately, the latest data shows that it may be even worse. In April 2023, only 21,000 children were born in Poland[6]. This is an inglorious record in the history of the central statistical office’s measurements. Today, such a difficult demographic situation translates not only into problems on the labour market, but also in the entire social security system. The migration of Ukrainian citizens has been a kind of lifeline.

Nevertheless, one should be aware that when the war in Ukraine is over, many of the country’s citizens will return to their homes. Moreover, many countries have already noticed an opportunity to attract Ukrainians to their labour market and offer them much better conditions than Poland (Germany and Canada mentioned earlier). To prevent the very serious consequences of the depopulation of our country and the aging of our society, we must act today to introduce a long-term and systematised migration policy.

Sensible migration policy

Today, the main sources of migration to Poland are our closest eastern neighbours – Ukraine and Belarus. These are people who are culturally close to us, perfectly assimilate into society, and are willing to work. That is why other countries tempt them with increasingly attractive offers. Taking into account the risk of a decrease in the number of migrants from beyond our eastern border, we should look for other directions today. We cannot view every migrant as a potential threat. However, we should focus on attracting people who will add value to our economy and society. People who want to work, learn, integrate and start families. People who see going to Poland as a chance for a better life.

Poland should be open to migrants from various parts of the world, although of course it should not forget about security. Therefore, illegal migration should be firmly prevented, as it could result in people arriving in our country whose activation on the labour market would be extremely difficult and who could constitute a significant burden on the social system.

Certainly, with refugees from Ukraine increasingly choosing Western Europe or other Western countries such as Canada, Poland must focus on attracting citizens of other countries that are culturally closest to us. Therefore, greater openness to Belarusian citizens seems to be a logical solution. Many of them have Polish roots, and a significant part of society is against the policy of the Belarusian authorities and is looking for a chance for a better life. Migration to Poland, a culturally close country with a similar language, but a lot better economically developed, may certainly be such an opportunity. Belarusian citizens currently do not have the freedom to move within the European Union and take up employment like Ukrainians, so it may be easier for Poland to keep such migrants on the market and encourage them to settle permanently. Poland should therefore consider introducing mechanisms to ease obtaining the right of residence and work permits, similar to those introduced for Ukrainian citizens. The simplified method of reporting the employment of a Ukrainian citizen works particularly well in practice and can be successfully used in the case of Belarusian citizens. Of course, we must take into account matters related to security arising from the fact that the Belarusian authorities are not favourably disposed towards our country. Therefore, certain security considerations must be kept regarding migration from this country.

These issues should be reflected in migration regulations, which should provide a chance for foreigners to start working easily, without many of the existing complicated procedures. Although it should be emphasised that Poland has made noteworthy progress in this area in recent years, many entrepreneurs and foreign workers still stress the fact that obtaining a work permit is excessively burdensome.

It should be highlighted that migrants who are culturally close to us are certainly of the greatest value to our society and the labour market. The experience Poland has had in recent years clearly shows that people from Ukraine and Belarus find their place in our society and on the labour market very well. Taking them in does not add significant social costs, and at the same time allows us to effectively combat labour market and demographic problems.

Nevertheless, as shown in the earlier point, it is necessary to be open to other directions of migration. However, this may create certain social and security risks that must be counteracted. Certainly, every person wishing to move to Poland should undergo a thorough verification, including their criminal record. Moreover, if such a person, while already in Poland, breaks the law (commits either a crime or a misdemeanour in accordance with the provisions of the Penal Code), in particular any crime against life and health or a crime of a hooligan nature and as part of recidivism, they should be deported without any possibility of return to Poland.

Another issue is allowing only legal migrants into our society. Any person who crosses our border illegally should be at once turned back and deprived of the opportunity to return to Poland, also legally.

Many countries currently offer very extensive social programmes for migrants, which are intended to encourage foreigners to settle in this country. This approach makes it possible to attract both people who want to work and settle in a given country, but it also encourages people who only care about obtaining social benefits. Therefore, any social incentives should focus on providing a chance for development on the market and quick assimilation, and not on offering an extensive social system – according to the principle of giving a fishing rod instead of a fish.

It is also important that migrants have easy access to language courses and vocational training. For the vast majority of them, their first job involves performing so-called “simple jobs”, but in order for them to be motivated to stay in Poland, they should have the opportunity to develop professional competences to have a chance for a better job in the future.

Finally, it is important to focus on attracting and keeping highly skilled professionals. For this to happen, it is necessary to ensure their qualifications obtained in their country of origin are easily recognized in Poland. Many industries in Poland urgently need to fill staff shortages with such specialists. Health care is but one example of an industry that has been struggling with personnel shortages: doctors, nurses, paramedics etc. for years.

Summary

The demographic problems of our country translate into many aspects of life of our society, especially the labour market and the social security system. One of the ways to counteract the effects of depopulation is to shape a prudent and effective migration policy. A policy that, on the one hand, will be open to migrants and give them a chance for professional development, and on the other hand, will ensure the security of our borders and citizens.

 

[1] https://stat.gov.pl/obszary-tematyczne/inne-opracowania/inne-opracowania-zbiorcze/polska-w-liczbach-2023,14,16.html

[2] https://raportyhr.manpowergroup.pl/niedobor-talentow-2023

[3] https://pie.net.pl/wp-content/uploads/2022/08/Miesiecznik-Makro_8-22.pdf

[4] https://www.gov.pl/web/udsc/obywatele-ukrainy-w-polsce–aktualne-dane-migracyjne

[5] https://stat.gov.pl/obszary-tematyczne/ludnosc/ludnosc/sytuacja-demograficzna-polski-do-roku-2021,40,2.html

[6] https://stat.gov.pl/obszary-tematyczne/inne-opracowania/informacje-o-sytuacji-spoleczno-gospodarczej/biuletyn-statystyczny-nr-52023,4,138.html

 

Find out more: 2023.08.25 Memorandum of the Union of Entrepreneurs and Employers: pro-demographic policy should not be abandoned, but without economic immigration, Poland will not maintain the pace of development

Commentary of the Union of Entrepreneurs and Employers: Transport infrastructure to be expanded

Warsaw, 4th September 2023

 

Commentary of the Union of Entrepreneurs and Employers:
Transport infrastructure to be expanded

 

  • According to forecasts, the grain harvest in Poland will amount to approximately 34 million tonnes, which will translate into the need to export approx. ten million tonnes of surplus and use almost five million tonnes that remained in the country after last year’s season.
  • According to USDA data, the production of wheat alone in Ukraine will amount to approx. twenty-one million tonnes – 3.5 million tonnes more than expected in the previous forecast.
  • Due to Russia’s termination of the grain agreement, which guaranteed safe transport of goods from Ukrainian ports on the Black Sea as well as above usual grain stocks in Polish warehouses and harvests exceeding forecast values, an intensification of the transit of Ukrainian products using Polish infrastructure should be expected.
  • The increase in the volume of Ukrainian grain crossing the EU border into Poland since the beginning of the war is not a temporary situation, but a change that will reshape the national agricultural system for years to come. Therefore, it is necessary to conclude long-term agreements between Polish and Ukrainian companies that would secure the stability of investments in transit infrastructure.
  • Polish authorities face the necessity to draw up a long-term plan to increase the capacity of borders, railway lines, roads, and harbour infrastructure, which is essential to conduct an effective transit policy and start implementing the inevitable investments, which – due to their nature – should be co-financed from EU funds.
  • Increasing the volume of transit of Ukrainian products across Poland, while implementing infrastructure investments, is a real development opportunity for domestic enterprises and actual help for Ukraine, which is at risk of war.

Forecasts regarding the grain harvest in Poland indicate quite clearly that over thirty-four million tonnes of grain will reach the domestic market this year. This means the need to export a surplus of ten million tonnes and ca. 4-5 million tonnes (twice as much as on average in recent years) which remained in the country after last year’s season. For years, Polish grain exports have been coping harmoniously with the proper management of foods, delivering them to recipients on foreign markets – member states and non-EU markets alike.

The situation changed with the Russian invasion of Ukraine. Without deciding on the mistakes made in recent months with regard to the policy shaping the import of Ukrainian goods to Poland, we should bear in mind the changes that the current geopolitical situation may bring in the future. Russia has terminated the grain agreement that was in force since August 2022, which basically prevents the export of Ukrainian grain from ports on the coast of the Black Sea. Safety guarantees for ships – regardless of flag – that transport Ukrainian products through a safe corridor have also been abolished. Insurers refuse to send ships to areas of conflict. Missile attacks destroyed grain and oil terminals in Ukrainian ports. This created pressure to intensify the search for new export directions for Ukrainian products. In this context, it was also necessary to establish new transit corridors for goods from Ukraine. Poland turned out to be one of the most important destinations.

We must not forget that, despite the ongoing hostilities, harvests were also taking place beyond our eastern border. As a result of the closure of the Black Sea routes, we should take into account the intensification of shipments of Ukrainian goods also via Polish routes. Due to the possibility of transit of these products across Poland, it is expected that a significant part of them will reach final recipients using Polish border, road, railway, transshipment and finally port infrastructure. Meanwhile, their capacity remains far from sufficient.

Furthermore, it is naïve to think that the issue of Ukrainian grain (but also other product categories) is temporary. Even if the corridors on the Black Sea are unblocked, Poland may prove to be a promising destination in the long term for countless Ukrainian enterprises. The wrong narrative here is to demonise Ukrainian goods, which are vital for Poland both in the context of transit and – in many cases – import. An issue that requires consideration and detailed consultation with business environments is to determine target quotas for the import of Ukrainian products to the Polish market. Regardless of this, the volume of goods transiting across Poland will be much higher than before the war.

For Poland, this is a chance to become a major transit country, but also a trader of Ukrainian grain. Already nowadays, for example, the Port of Gdańsk has significant storage and transshipment capabilities. Last year, at the Port of Gdańsk, grain transshipment amounted to approx. two million tonnes, which was the port’s previous record. It was also 19% more than last year. The first six months of 2023 will see another significant increase in agricultural transshipment. As a country, we can annually purchase and transit more or less 6-8 million tonnes of Ukrainian grain. This will allow us to use the transport and port infrastructure and other resources in Poland, which translates into nearly 20-30 thousand additional jobs for Poles and control over transit.

Trading should be carried out by entities representing domestic capital under strict control of the authorities or by the authorities themselves, which is necessary to maintain a strict separation of transit and imports. We have everything to establish our position on the market, but it still remains latent potential. Meanwhile, in the years to come, our transport infrastructure will be burdened to an extent significantly exceeding that until February 2022. This requires efficient actions on part of the Polish authorities, which must immediately make decisions aimed at increasing the capacity of border crossings with Ukraine, expanding railway and storage infrastructure at the borders or in ports, including by starting actual works on the construction of an agricultural port in Gdańsk and – as planned – in Świnoujście. All these investments should be undertaken considering the potential benefits for the European Union, thus completed with EU funds. However, before that happens, companies operating under Polish law must sign long-term contracts with the Ukrainian side, which will secure the stability of their investments in the long term.

Currently, it is necessary to improve the T-1 transit documentation so that recipients can also accept part (not only the entirety) of the goods, to reduce the bureaucracy of the procedures for issuing decisions by regional Inspectorates of Agricultural and Food Quality Inspection, to increase the staff of both these Inspectorates and Sanitary and Epidemiological Inspectorates at railway crossings, to open additional border points of both institutions, for example at Werchrata/Rawa Ruska crossing, expansion of the Dorohusk/Jagodzin railway crossing by adding railway tracks, enabling temporary storage of goods in Polish customs warehouses for goods in transit, simplifying customs clearance procedures on the Ukrainian side and a number of other solutions proposed by entrepreneurs.

Meanwhile, we still lack strategic decisions that would prevent Poland from having to implement further expensive spontaneous aid programs. Ukrainian grain will cross the Polish border – either in transit or import. The sooner we accept this state of affairs, the sooner Polish enterprises dealing in universally understood transport and trade will benefit from these decisions. It is also a chance for the entire national economy, as well as real help for war-torn Ukraine.

The price situation on the grain market is still unclear. This is particularly important in the context of Russia’s dumping prices, which are even USD 30 per tonne lower than in the case of EU countries. Grain prices fell on the markets this week, which was the result of a forecast indicating higher harvests in Ukraine. According to USDA data, wheat production in Ukraine will amount to approximately 21 million tonnes which is 3.5 million tonnes more than expected in the previous forecast. Theoretically, Polish farmers can refrain from selling grain, again counting on higher prices. If this situation does not happen this year, it cannot be ruled out that it will happen in the following years. Poland’s current infrastructure capabilities may then be insufficient, and domestic producers will be left with their grain in warehouses. Domestic consumption has been fluctuating in the range of 24-26 million tonnes for years, and the surpluses must be utilised. This year’s harvest in Poland and Ukraine may contribute to the return of the demons of recent months.

In September, we must take into account that EU’s preventive measures regarding the import of grain from Ukraine will not be extended. This gives Poland a mandate to negotiate dedicated EU funds for storing Ukrainian grain and to develop other infrastructure (such as terminals) necessary to accept the increased volume of products.

 

See more: 04.09.2023 Commentary of the Union of Entrepreneurs and Employers: Transport infrastructure to be expanded

Opinion of the President of the Union of Entrepreneurs and Employers: I defend micro-enterprises because nobody else does!

Warsaw, 23rd August 2023

 

Opinion of the President of the Union of Entrepreneurs and Employers:
I defend micro-enterprises because nobody else does!

 

Micro-enterprises will neither unionise (they are struggling for survival) nor will they raise funds for lobbying and representation (they have no money and do not trust anyone). In other words, there is no money or prestige in microbusiness. As it happens, I don’t care about either, so I can deal with this issue simply for the good of humanity.

Defending micro-enterprises: it does not translate into waging war against corporations (unless we consider the postulate that they pay honest taxes… fighting them). Corporations are essential and necessary in any country’s economy (unlike monopolies which should be prohibited by law). Corporations have contributed a lot to the reconstruction of Poland over the last three decades. They should not, however, be favoured – for example by means of voluntary income tax, as is the case with CIT in Poland.

State aid for corporations is a complex issue – for instance: the recent case with Intel. I would be against it… if other countries didn’t do it. In any case, such aid ought to be conditional, depending on the future benefits and proceeds from such an investment. If we are to pay extra for this in the foreseeable future, let them build their factories in Hungary, the Czech Republic or on the Moon – it doesn’t have to be here.

In any case, I did not and do not advocate restricting the freedoms or battling corporations (except monopolies). Let them prosper for the good of the Republic of Poland!

Nonetheless, what I do call for is for the government to stop fighting micro-enterprises in Poland, which based on shoddy slogans and propaganda has been happening for 30 years owing to insufficient knowledge or understanding. The frontlines of these hostilities against the Polish “economic anthill” are vast – from the Ministry of Finance and the Ministry of Development, through the government-owned Polish Economic Institute, the Foundation for Civic Development, Leszek Balcerowicz and prof. Jerzy Hausner. They all believe that microbusiness should be repelled, because it hinders economic development, micro-companies are non-innovative, create little to no added value, have low productivity, and are even responsible for most of the tax gap and tax fraud.

At the same time, none of them can give an example of how a dough puncher baking traditional baker or a tailor sewing classic suits and dresses should be innovative. Some of the sillier politicians want to give them the so-called “small ZUS”, that is preferential social security, for the period of 4 years. Because – according to them – after 4 years, they should transform into a large company. The stupidest slogan in this domain, repeated by politicians, is: “We want micro-enterprises to become small, small to become medium-sized, and medium-sizes to become large companies.”

Without any doubt this can be true in some cases. After all, both Amazon and Google were founded in a garage – but there are exceptions. There is no reason or need for a florist, baker or plumber to expand, be innovative, and transform into a big companies or corporation. The economy and society alike need them at the exact size they are. Naturally, a small percentage of these microbusinesses will one day become large companies, but these are exceptions. For every unicorn, there are a million failed projects. One must realise that running a business is a bit more difficult than distributing election pamphlets, which then get one elected to the position of deputy minister, so that one can give talk rubbish about the economy, without the faintest idea about it. Out of ten newly established companies, five will survive the first year, and only one will make it past a decade.

This madness and obsession with “development and innovation” is vividly reminiscent of another lunacy dating back to the times of Leszek Miller’s government, when this preeminent statesman and Krystyna Łybacka decided to starve and destroy vocational education in the name of “universality of teaching”. Everyone was to have a “higher education”, and Poland paid an exceedingly high price for this delusion. More than 15 years ago, politicians realised what had happened, and the first reconstruction of vocational education in Poland was undertaken by Joanna Kluzik-Rostkowska. After her, regardless of party affiliation, every subsequent minister has been trying to manage it, but despite their efforts, it has still not been possible to restore it the state from before Miller and Łybacka’s folly.

The very same threat now looms over bakeries, flower shops, tailors, small finishing and construction services, and all other micro- and small businesses. If you destroy these small companies with mindless tax burdens, it will take decades to rebuild them. It is worth stopping when there is still time – the number of towns where there is nothing but just one office, a gas station, and a supermarket is growing rapidly.

The role of micro-enterprises is not only social, but also of great economic importance: micro-enterprises employ more people than corporations, they contribute more to the GDP than corporations, and only thanks to them we have a positive trade balance with foreign countries. But that’s a whole other story and I will publish data related to it regularly.

The second edition of the “Europe – Poland – Ukraine. Rebuild Together” conference in a nutshell: Business cooperation between Poland and Ukraine in the context of reconstruction and development

Warsaw, 7th August 2023

 

The second edition of the “Europe – Poland – Ukraine. Rebuild Together” conference in a nutshell:
Business cooperation between Poland and Ukraine in the context of reconstruction and development

 

In the second part of July 2023, the 2nd edition of “Europe – Poland – Ukraine. Rebuild Together” took place, organised jointly by the Union of Entrepreneurs and Employers and the Warsaw Enterprise Institute. In spite of the peak holiday date, the event at the Hilton Hotel in Warsaw was attended by approx. 1,000 guests from Poland and abroad. This record attendance is testament to the high demand for meeting platforms dedicated to the development of Polish-Ukrainian business.

Politicians and experts from Poland, Brussels, Ukraine and Moldova took part in five plenary and four industry sessions as part of the conference. Cezary Kaźmierczak, the President of Union of Entrepreneurs and Employers ZPP, opened the event on a high note, stating that in case of the willingness to enter the Ukrainian market, “it is better to be first than best”. Foreign companies with large capital have already undertaken expansion operations in Ukraine and the ongoing war has thus far failed to prevent them from gaining a strategic foothold for their interests. Other guests, among them heads and secretaries of state from Polish and Ukrainian ministries, representatives of Polish and international financial institutions, or CEOs and presidents of associations, discussed the prospects of reconstruction, based on such factors as immense financial resources allocated for this purpose by international organisations. There were also separate sessions for specific industry sectors: energy, pharmaceutical, and digital, as well as for the labour market, attended by experts and decision makers from Poland and Ukraine.

The conference was summarised in the speech by Marcin Przydacz, Secretary of State and Head of the Office of International Policy in the Chancellery of the President of the Republic of Poland, who presented three advantages Polish companies have over other countries in reconstruction efforts of Ukraine:

  1. in geographical terms, Poland is Ukraine’s closest partner with an infrastructure ready at its neighbour’s disposal,
  2. both countries boast the best relations ever in history,
  3. the two nations are culturally and linguistically close, and Ukrainians make up the largest minority in Poland.

ZPP President Cezary Kaźmierczak then added, “Whoever is first on the Ukrainian market, they will have the most time to dominate it”.

Such events as “Europe – Poland – Ukraine. Rebuild Together” are proof of the demand for reliable and up-to-date information about the Ukrainian market and of the need for a platform to establish direct business relations between partners from both countries. ZPP has been active in this field for years and is the only Polish association of entrepreneurs supporting business relations through its offices in Kyiv, Lviv, Lutsk and Vinnytsia, also representing Polish-Ukrainian joint ventures through its office in Brussels.

 

Memorandum of the Union of Entrepreneurs and Employers: SMR – Modular Atom for Business

Warsaw, 6th July 2023

 

Memorandum of the Union of Entrepreneurs and Employers:
SMR – Modular Atom for Business

 

  • According to experts, small nuclear power reactors have the potential to give Polish economy leverage in the future.
  • The first power plant in Poland with a BWRX300 reactor is to begin commercial operations in 2029.
  • For Poland to have a chance to become a European incubator of SMR technology, it is necessary to implement a number of recommendations listed at the bottom of the document.

SMR, which stands for a Small Modular Reactor, is a type of modern nuclear technology that meets the needs of large energy-intensive enterprises as well as local communities. Such solutions may in the future determine their safety and energy independence. In recent months, this technology has been emerging from the shadow of large-scale nuclear facilities and attracting investors due to several advantages.

Nuclear power in Poland is no longer a question of “if”, but “how fast and how much”. Large-scale nuclear and SMR projects will therefore be developed in our country in parallel and will become complementary.

What do we know about small nuclear reactors today? What the technologies are available on the market? What is the stage of development of Polish projects? What legislative solutions do we need? How do Polish plans compare to European ones? Have we got a chance to become a leading force in the development of SMR technology on the so-called Old Continent? All of these questions were answered during the first Polish conference entirely dedicated to modular reactors.

On 12th June 2023, the “SMR – Modular Atom for Business” conference took place organised in Warsaw by the Energy and Climate Forum of the Union of Entrepreneurs and Employers. Representatives of central administration, industry experts, technology providers, investors and scientists took part in the event. PKN ORLEN was the Main Partner of the conference, EDF was its Partner, and the Honorary Patrons included: the Ministry of Climate and Environment, the Ministry of Development and Technology, the Ministry of State Assets, as well as the National Atomic Energy Agency, the National Centre for Nuclear Research and the National Fund for Environmental Protection and Water Management.

Atomic Law and Nuclear Special Act in Poland

In the opinion of Adam Guibourgé-Czetwertyński, Undersecretary of State at the Ministry of Climate and Environment, who was one of the invited guests at the conference, the Polish Nuclear Special Act and Atomic Law were sufficient for SMR investments to be developed based on their provisions, while the national regulations were based on technological neutrality and the desire to streamline processes related to obtaining the necessary permits. In spite of this, seeing the growing interest in small nuclear reactors, the Ministry is currently working on making the regulations regarding smaller, modular atomic units more specific.

The Act of 9th March 2023 amending the Act on the preparation and implementation of investments in nuclear power facilities and accompanying investments and certain other acts introduced directional provisions to five different legal acts: the Nuclear Special Act, the Atomic Law, the Special Act on strategic transmission networks, the Environmental Protection Act, and the Act on the structuring of the Agrarian System.

The amendment of the Nuclear Special Act and the Atomic Law entered into force on 13th April 2023. The purpose of the changes was to streamline the investment process in the construction of nuclear power facilities at all stages, including decreasing the time necessary to obtain individual permits – most importantly, without departing from the nuclear safety standard.

Along with the amendment, the position of the fundamental decision was changed and now starts the licencing process, which is justified, since it is an expression of the state’s acceptance of a given facility. The basic decision entitles the holder to apply for a decision on location of an investment in the construction of a nuclear power facility and other decisions necessary for the nuclear power facility’s preparation, implementation, and operations.

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Source: Ministry of Climate and Environment

Amendments to the law introduced the possibility of parallel proceedings for issuing environmental and location decisions. The period of validity of a location decision was also extended from 5 to 10 years. Furthermore, before obtaining a permit for the construction of a nuclear power facility, the investor may apply for a permit for preparatory work, which should positively impact the pace of implementation of the investment. The new provisions also allow for the possibility of attaching selected documents and decisions during the process of obtaining a building permit, instead of having to submit them together with the motions for a decision as it used to be before. As a result, some of the permitting processes can be carried out simultaneously and in an overall shorter time.

Does the Polish legal framework, which does not provide for separate requirements for investments in large-scale nuclear energy and those in SMR, need a special act on modular nuclear reactors? It seems that while a dedicated legal act should not be expected, analytical work is underway at the Ministry of Climate and Environment related to possible further adaptation of the regulations to the specificity of investments in modular reactors.

Nuclear safety and supervision

The President of the National Atomic Energy Agency (NAEA) is the central authority of the government administration competent in matters of nuclear safety and radiological protection. Its activity is regulated by the Act of 29th November 2000 – Atomic Law and executive acts to this Act. The minister responsible for climate issues supervises the NAEA President.

Numerous aspects of SMR projects were elaborated on during the conference, such as safety considerations and the important role of NAEA, which will evaluate the “small atom” on the same basis as full-scale nuclear investments. The National Atomic Energy Agency is involved in licencing the construction of a nuclear power plant at all stages of the investment, issuing permits for construction, commissioning, operation, and decommissioning. At the initial stage, the NAEA President issues a general opinion, an opinion on the preliminary site report, and participates in the evaluation of the Environmental Impact Assessment Report for a nuclear power plant.

It is obvious that the NAEA approached the new tasks related to investments in SMRs very seriously. The Polish nuclear regulator was already a party to about 10 agreements with international regulatory authorities, but on 13th February 2023, the Polish and Canadian nuclear regulators signed an agreement regarding small modular reactors, particularly the BWRX-300. Polish and Canadian supervision authorities will exchange information on best practices and technical reviews in the field of this technology. The parties also agreed to share the results of independent analyses and assessments conducted as part of the licencing process. The memorandum also provides for joint operations in the above-mentioned areas and in the field of training and development of regulatory solutions to ensure the safety of this technology.

Financing investments in SMRs

Presently, it seems that the technology of light-water nuclear reactors, of which there are approx. 150 operating worldwide, is not really the main challenge, but their power and size need to be scaled up – otherwise, costs may prove to be a barrier. Experts agree that two aspects can aid investors in this respect. On the one hand, appropriate government guarantees and a refined financial model, so that the involvement in SMRs is associated with an acceptable risk for banks. On the other hand, the scale effect brought about by a fleet-oriented investment campaign and regional scope, which will allow to reduce unit costs and build local competencies, service facilities, and structures necessary for the new sector.

In accordance with the declarations of ORLEN Synthos Green Energy and basing on the example of the BWRX-300 SMRs, which are to be built in the largest number in Poland, it is the scale effect of the investment that is to contribute to the development of the market, services, and personnel available directly in our country. The agreement with the National Fund for Environmental Protection and Water Management signed in March this year, which provides that the parties – as part of a capital investment – will lead to the preparation, construction, and commercialisation of the BWRX300 fleet, will help in this matter. In the next steps, the parties to the agreement will agree on the environmental goals to be achieved, the economic model of the project and the schedule for its implementation, the business plan, and the provisions of the investment agreement.

It seems, however, that without external financial support, this undertaking may be difficult to carry out anyway. Therefore, OSGE assumed the involvement of EXIM Bank and U.S. International Development Finance Corporation (DFC). The aforementioned American government institutions announced the possibility of supporting the project of building the first BWRX-300 reactors in Poland with a total amount of up to USD 4 billion. An agreement in this regard had already been signed.

Almost at the same time, ORLEN Synthos Green Energy also concluded a cooperation agreement with the largest banks in Poland: PKO BP, Pekao SA, Santander Bank and BGK – a bank whose mission is to support domestic economic growth. The purpose of the agreement is to jointly develop a financial model for the project to build a fleet of BWRX-300 reactors, it also provides for the possible participation of banks in financing. And although it is difficult at this stage to provide details (even approximate cost estimates of investing in SMRs were not specified), the practice of executing nuclear investments shows that the greatest threat to them is exceeding the assumed deadline and schedule. This is certainly a key aspect that requires appropriate supervision and control, especially in a country that is just building its nuclear competence.

Available technologies

As specialists emphasise, there is no shortage of ideas for small nuclear reactors around the globe today, as there are already about 80 projects in the “early design” phase, including high-temperature reactors using other types of fuel or gas-cooled, i.e. HTRs (including a Polish concept!), or nuclear batteries that can work for 20 years without human intervention or the need for fuel supply (ARIS data, end of 2022).

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Source: Polish Economic Institute

Most projects are developed in the USA and Russia. The Polish Economic Institute estimates the value of the global SMR market in a positive scenario to come up to EUR 450 billion by 2035. Over 100 SMRs are planned in Poland, based on declarations of potential investors.

The most prominent SMR technologies include (in alphabetical order):

  • BWRX-300 (GE-Hitachi, USA) – BWR, 300 MWe,
  • Nuscale (Nuscale, USA) – PWR, 77 MWe x 4-12,
  • Nuward (EDF, France) – PWR, 2x 170 MWe,
  • SMART/iSMR (KHNP, South Korea) – PWR, 110=>170 MWe x 4,
  • SMR-160 (Holtec, USA) – PWR, 160 MWe,
  • UK SMR (Roll-Royce, UK) – PWR, 470 MWe,
  • WEC SMR (Westinghouse, USA) – PWR, 300 MWe.

The first three designs were discussed during the conference “SMR – Modular Atom for Business” by direct representatives of technology suppliers and investors. We devoted an entire chapter of this memorandum to the BWRX-300 reactor concept, it is, however, worth outlining the concepts of EDF and Nuscale as well.

The French EDF technology is thus far the only SMR from a European country already in the pre-licensing process. It is also very promising in terms of use on the EU market due to EDF’s unparalleled experience in the design and operations of nuclear reactors compared to other countries of the so-called Old Continent. Moreover, EDF would not be solely responsible for the implementation of the SMR Nuward investment, but an entire consortium consisting of European cooperators with immense experience on the nuclear market:

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Source: EDF

As the suppliers of the SMR technology Nuward themselves emphasise, that project will constitute intellectual property belonging to the EU, will make use of the European supply chain and will be adapted to the needs of the European market – not to mention EDF’s plan to obtain a license valid all across the European Union, which would certainly speed up the investment process in individual Member States.

The nominal power of SMR Nuward is 340 MWe (consisting of two integrated reactors of 170 MWe each). The planned capacity utilisation factor is supposed to exceed 90%, it also guarantees compliance with the requirements of ENTSO-E (the European Network of Transmission System Operators for Electricity represents 39 electricity transmission system operators from 35 countries throughout Europe, including countries beyond the EU borders). SMR Nuward is expected to operate for 60 years. At the core of the assumptions for the French modular reactor are nuclear, radiological, and general safety as well as minimising the impact on the environment, including responsibly blending in with the landscape. EDF plans to build NOAK reactors, that is to say, the next ones after the prototype, in about 40 months. FOAK is in plans to be built in France, currently for the year 2030. Although the first SMR Nuward will be built in France, it is a technology designed with exports in mind and implementation at the client’s target location. Among the possible roles that SMR Nuward could play are H2 production, district heating, water desalination, thermal cogeneration, electricity generation and CO2 capture.

***

Nuscale’s flagship SMR, distributed under the name VOYGR-12, is a pressurised water reactor in which all steam generation and heat exchange installations are integrated into one device capable of generating 77 MW of electrical power per generator. VOYGR-12 will consist of twelve NuScale modules with a total gross capacity of 924 MWe. NuScale also offers a four-module version VOYGR-4 with a net capacity of 308 MWe and a six-module version of the VOYGR-6 with a net capacity of 462 MWe.

In September 2020, VOYGR Nuscale became the first and so far only SMR for which the US Nuclear Regulatory Commission completed the technical evaluation and design approval process. In February 2023, the project was certified. Therefore, it seems to be the closest one to be physical completed. Especially since in April 2023, Doosan Enerbility began the process of forging the first modules for the VOYGR™ SMR. According to Nuscale’s declarations, the implementation of the investment in this case does not seem to be at risk, as the preparatory and decision-making processes in individual countries currently take longer than Nuscale’s ability to deliver the VOYGR installation to the agreed location. This makes it of interest to KGHM or Unimot. Currently, the company has signed nearly 20 Memoranda of Understanding with entities from 11 countries.

***

An interesting concept was also presented by Andrzej Piotrowski, Vice-President for Strategic Relations in CEE, representing the American company Ultra Safe Nuclear (USN), who discussed the 4th generation Modular Micro Reactor (MMR), which may turn out to be a breakthrough in how we look at nuclear energy. One of the most obvious uses for USN’s MMR is electricity generation, and depending on the model, an MMR can provide up to 15 MW of energy, enough to power around 15,000 homes locally. MMRs can also provide power to hotels, office and apartment complexes, or shopping malls with associated infrastructure such as lighting, elevators, refrigerators, video surveillance systems, telecommunications, air conditioning, water and sewage pumps, as well as spas and swimming pools. What is equally important, an MMR can provide enough energy to simultaneously charge several electric vehicles for apartment occupants, hotel guests and office workers, which is still a challenge in many places today. According to the presentation by the technology supplier, an MMR can also provide high-temperature heat for various industrial processes such as drying, sterilisation, baking, melting, and refining. Thanks to locating the source in the immediate vicinity of an energy-intensive industrial process, it is characterised by full availability, even in a crisis or emergency. Moreover, there are neither transmission losses nor emissions. Thanks to its molten salt heat storage system, an MMR can adapt to dynamic demand by storing excess heat for later use in power generation. By default, the heat buffer allows for a change in the use of energy for up to 12 hours. Among the potential uses of MMRs, USN also indicates seawater desalination, drinking water purification, electricity supply in the process of wastewater treatment, hydrogen production, heating and cooling, and stabilising the operations of a hybrid system or power grid. The assumption is that a Micro Modular Reactor will operate without human intervention for about 20 years – the fuel stored in the unit is sufficient for such a period. The container construction, in turn, is to enable easy transportation and location even in difficult terrain and urban conditions.

Case study: BWRX-300 – the largest Polish investment in SMRs

BWRX-300 was designed by GE Hitachi Nuclear Energy – a company from the US specialising in nuclear technology. This technology was chosen by Synthos Green Energy and PKN ORLEN, which established a joint venture “ORLEN Synthos Green Energy” with the goal to implement the BWRX-300 technology in Poland and develop other zero-emission energy sources.

Several analyses of SMR technologies developed worldwide preceded the choice of BWRX-300 technology by ORLEN Synthos Green Energy. Such arguments as the maturity of the project, adaptation to Polish needs, credibility of the supplier or basing the technology on already licenced solutions tipped the scales in favour of the BWRX-300 reactor.

The first BWRX-300 in the world is under construction in Canada (the so-called FOAK which stands for “first of a kind”). OSGE claims the first power plant in Poland with a BWRX300 reactor will begin its commercial operations in 2029 (the so-called NOAK or “nth of a kind”), and it will draw from Canadian experience. This technology is also planned to be implemented in other locations in North America and Europe.

The power capacity of BWRX-300 is similar to the majority of currently operating conventional units that must be phased out due to their age and emissivity. As a result, it will be possible to make use of the existing network infrastructure (in Poland, mainly PSE) in a fairly optimal way, but also to use SMRs in the heating sector, which as of today is largely based on coal.

GE Hitachi Nuclear Energy is an American company with 70 years of experience in nuclear energy and 67 reactors licenced in 10 countries in its portfolio. Furthermore, GE has experience in the global energy industry (both conventional and nuclear) and an extensive supply chain in which Polish entities can play a significant role.

BWRX-300 is a 3rd+ generation reactor, based largely on solutions licenced by the American nuclear regulator (the ESBWR reactor). It will also use existing and licenced GNF2 fuel. The BWR is a boiling water reactor with an expected 60-year-long operational lifespan. Its power utilisation factor is 95%, and it is suitable for synchronisation with 50 or 60 Hz networks. The expected construction time comes up to 24-36 months, and the area necessary for the investment amounts to 10 ha. The BWRX-300 reactor should also be suitable for cooperation with RES, as it allows a 50%power change – 0.50% of power per minute (twice a day).

On 17th April, ORLEN Synthos Green Energy announced seven optimal locations for the first power plants with BWRX-300 reactors. These include Włocławek, Ostrołęka, the vicinity of Warsaw, Stawy Monowskie, Kraków-Nowa Huta, Tarnobrzeg Special Economic Zone (Tarnobrzeg/Stalowa Wola) and Dąbrowa Górnicza.

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Source: OSGE

As reported by Nuclear.pl, in April 2023, companies whose names indicate planned but not yet announced locations where ORLEN Synthos Green Energy would build BWRX-300 reactors were entered into the Register of Entrepreneurs of the National Court Register. In addition to the initial 7 locations announced in April 2023, the following are also probable: Poznań, Bełchatów, Grudziądz, Łódź, Kozienice, Kujawy, Łaziska, Rybnik, Pomorze, Warta and Połaniec.

All selected sites are preliminary locations that have been pre-screened and require additional detailed environmental and location studies to confirm their suitability. The research will take about 2 years. Once their potential is confirmed, inviting local communities in each of these locations to dialogue will become a priority. Only after reaching an agreement, a decision regarding the implementation of an investment will be made in each location individually.

At the end of April, OSGE submitted motions to the Ministry of Climate and Environment for the issuance of basic decisions for the first six locations of nuclear power plants with BWRX-300 reactors. In June 2023, the General Director for Environmental Protection initiated proceedings to issue an environmental decision for the construction of BWRX-300 at the Stawy Monowskie location near the city of Oświęcim.

One could say that the first half of 2023 abounded in events related to the implementation of the SMR project by ORLEN and Synthos Green Energy. The latter, on 23rd March in Washington, signed a Technical Collaboration Agreement (TCA) with GE Hitachi, Tennessee Valley Authority and Ontario Power Generation. This document assumes support for the development of the BWRX-300 technology. Thus, for the first time in history, a Polish company became a party to the contract for the development of a nuclear reactor. The contract is worth USD 400 million. Thanks to the agreement, a project of a power plant with a BWRX-300 reactor is already being prepared, taking into account European and Polish requirements. The project will enable a more efficient and cheaper implementation of OSGE’s plans to build a fleet of BWRX-300 reactors in Poland. At the same time, it is presumed that the project can be used for the implementation of investments in numerous locations.

On 23rd May, ORLEN Synthos Green Energy received a general opinion from the NAEA President on the technological solutions used in the BWRX-300 reactor. The National Atomic Energy Agency confirmed compliance with the legal provisions in force in Poland in this field.

More than two months earlier, on 15th March 2023, the Canadian Nuclear Safety Commission (CNSC) submitted the final report on BWRX-300 as part of the Vendor Design Review process. The BWRX-300 reactor is the first SMR in the world to successfully pass this process. CNSC also cooperates with the American supervision authority Nuclear Regulatory Commission by implementing joint assessment procedures. Evaluation processes for the BWRX-300 reactor have also begun in the US and UK.

Unveiling of the concept of a Polish high-temperature reactor

HTGR-POLA will be the name of the research reactor, the conceptual design of which was developed by a team headed by Mariusz Dąbrowski, Ph.D. at the National Centre for Nuclear Research. The project was prepared in cooperation with the Japan Atomic Energy Agency (JAEA), which has its own HTGR gas-cooled high-temperature reactor. The concept was presented publicly for the first time on 12th June 2023 at our conference “SMR – Modular Atom for Business” by Józef Sobolewski, Ph.D., the plenipotentiary of the NCBJ Director for the Development of High Temperature Reactors.

NCBJ’s work on the high-temperature reactor is financed by the Ministry of Education and Science under the project to be implemented in the years 2021-2024 “Technical description of the High-Temperature Gas-cooled Reactor (HTGR) for research purposes”. Total funding amounts to PLN 60 million gross (contract No. 1/HTGR/2021/14).

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Fig.: Cross-section of the designed reactor; Source: National Centre for Nuclear Research (NCBJ)

Research and development, and education

There will be no Polish technological thought, there will be no conscious participation in the value chain, and there will be no appropriate staff for the sector without research and development. In January 2023, at the initiative of OSGE, the Ministry of Education and Science along with six Polish universities of technology signed a letter of intent for the creation of the “nuclear energy” field of study. The agreement provides for the training of nuclear engineers. At the end of May, three more universities joined the agreement. This is an important step, but consistent follow-up action will be required.

One of them is certainly the concept of launching the European Personnel Training Centre for Nuclear Energy jointly by OSGE and the Łukasiewicz Research Network. The cooperation would cover both the launch of the Centre itself and its further development, including by means of support from research and development institutes that are part of the Łukasiewicz Research Network. The project assumes that a full-scale reactor model will be created within the training space, with the only difference from the real one being the lack of nuclear fuel. This would allow for personnel training in real conditions – an initiative that ought to be commended.

Regional and European contexts

During the conference, Adam Guibourgé-Czetwertyński, Undersecretary of State at the Ministry of Climate and Environment, also encouraged joint efforts on the international arena to promote nuclear technologies from a secondary player to the avant-garde of energy transformation activities as complementary solutions to investments in RES and hydrogen.

The coalition of countries interested in extending the role of nuclear power in Europe is becoming stronger, and Poland is naturally among them. The activity in the topic of dissemination of SMRs on the part of France, Finland and the Czech Republic should be appreciated. The French Nuclear Safety Authority (ASN), the Czech State Nuclear Safety Authority (SÚJB) and the Finnish Radiation and Nuclear Safety Authority (STUK) chose the design of the French NUWARD Small Modular Reactor as a test model for a joint regulatory project dedicated to SMRs. The goal is to standardise practices and to harmonise licensing processes along with SMR regulations across the region. These three national nuclear regulators will together analyse the current sets of national regulations, international safety regulations, and knowledge, and recommend on that basis relevant good practices. It can be said that this process is a kind of pre-licencing dialogue, thanks to which it will be easier for SMR Nuward suppliers to anticipate the challenges of international licencing processes and to meet future market needs. It seems important that Poland also engages in the process of harmonisation of European regulations, so that they also address the requirements and specificity of our market. Even more so because the Czech example shows that although the local government had adopted a roadmap for the development of SMRs and declared interest in this technology (mainly from the state-owned entity CEZ), Poland is acting so quickly in this area that in a few months it will definitely have overtaken its neighbours and has a real chance to become the first country where modular reactors will actually be built.

For industry, for heating, for the environment – for everyone

As Jarosław Dybowski, Executive Director for Energy at PKN ORLEN and Vice-President of the Management Board at ORLEN Synthos Green Energy, pointed out during the conference “SMR – Modular Atom for Business”: “We cannot nowadays think of atomic facilities as classically understood power plants, which in the past were only supposed to provide electricity. The use of SMRs in domestic conditions naturally means replacing worn-out coal-fired units, but modular reactors will also work in combined heat and power economics as well as will be used in numerous industrial processes”. Heating and energy-intensive industries are indicated as the main beneficiaries of SMR technologies, and the number of entities declaring interest in these solutions is growing.

This is directly linked to the transformation of the Polish economy towards zero-emissions, and at the same time to the specificity of energy consumption in the industry, which needs stable sources. Concurrently, there are plans to phase out Polish coal-fired power plants in the years to come:

  • 2 GW in the years 2022-2025,
  • 0 GW in the years 2026-2030,
  • 8 GW in the years 2031-2035,
  • 0 GW in the years 2036-2040.

In total, approx. 20 GW of the capacity installed in large-scale coal-fired power plants will be shut down by 2040, which could be replaced at least in part by SMRs located in places of former coal units. It would also be optimal for a power system that is designed for flows from existing conventional generation units.

On the other hand, more than 16 million Poles (40% of the population) are connected to heating networks. Warsaw has the largest heating network in the EU (3 SMR units with a capacity of approx. 300 MWe could in the cogeneration model satisfy up to 81% of Warsaw’s forecast demand for heat in 2040 – 14 TWh). The installed capacity for heat production in our country amounts to 55,200 MW. Heating in Poland is produced by 399 companies, out of which 11 are responsible for 33% of total production. Approx. 51% of units working for the heating sector have a capacity of over 100 MW. Unfortunately, about 82% of the heat generated in Poland still comes from coal. In the nearest future, the heating sector will face a deep transformation towards zero emissions. It seems that natural gas has ceased to be considered as a full-fledged alternative – because prior to Russia’s aggression against Ukraine, it was perceived as a fuel that would bridge the gap, a transitional solution on the way to sources that are fully CO2-free. Then again, the announcement of the PEP2040 update clearly shows a lower assumed share of gas in the generation mix and the assumption that only those gas investments are to be completed that are already underway. It seems, therefore, that SMRs may be the solution that will answer the unfulfilled hopes that a few years ago were associated with gas.

According to Kamila Król, Undersecretary of State at the Ministry of Development and Technology, who was present at the conference “SMR – Modular Atom for Business”, small nuclear power reactors have the potential to give Polish economy leverage in the future. SMRs can be a remedy for the growing costs related to CO2 emission allowances and provide Poland with an appropriate mix of a low-emission energy on the one hand, and on the other hand guarantee stable and secure energy supplies. Achieving these goals should translate into environmental benefits as well as lower electricity bills for end users.

Supply chain and local content

Another topic raised by the participants of the discussion was the possibility of involving Polish companies in the development of the European sector of small nuclear reactors, in which experts see significant potential due to the pace of development of SMR projects in our country.

The supply chain for the BWRX-300 technology was presented by ORLEN Synthos Green Energy, noting at the same time that the existing supply chain will be used in the initial phase of the programme to maximise the Polish potential in the future.

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Source: OSGE

There are currently about 3,000 Polish suppliers in the GE Power Supplier Database. GE Hitachi has declared that it has identified 300 Polish suppliers as potential partners for the construction of nuclear power plants. The expected outlays incurred for Polish companies are related to industries such as construction / site preparation, engineering services, mechanical equipment (heat exchangers), structural modules, and craft works.

In turn, the French EDF has indicates that as part of the implementation of existing nuclear projects, it has relations with 46 subcontractors from Poland, which are ready to smoothly engage in investments in SMRs. EDF estimates its entire subcontracting chain in Europe at around 2,700 entities, the majority of which are British and French companies:

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Source: EDF

Certainly, Polish experience in creating a value chain for the newly emerging industry of offshore wind energy can be an invaluable clue as to how the share of the so-called local content in nuclear projects can be animated directly by investors – for whom, in turn, the regional supply and service chain increases the likelihood of project implementation on schedule and on budget.

Social perception

According to experts, despite the already clear support for nuclear power in Poland today, properly conducted communication will be an extremely important aspect determining the success of SMR investments due to a unique social perception of risks arising from nuclear facilities.

According to a survey carried out by IBRiS for PKN ORLEN, conducted on 4th May 2023 on a sample of more than 2,000 respondents, more than half of the respondents support nuclear investments, even if they were to be implemented in their town, commune, or province.

[grafika]
Source: ORLEN

The authors of the study probably wanted to assess how strong the effects of the NIMBY (Not In My Backyard) syndrome can be, that is, the paradox according to which we generally support some activity, provided it is not carried out in the immediate vicinity of our home. Importantly, as the study has shown, on average, every fifth inhabitant of locations selected by ORLEN Synthos Green Energy as of potential value for SMRs would oppose locating such an investment in their neighbourhood.

Social resistance at this level should certainly not be underestimated. While the thesis about the majority of Poles supporting nuclear power plants is legitimate and true, investors should pay special attention to social dialogue in order to convince the unconvinced by the time SMRs are created.

A similar recommendation was presented during the conference by Adam Juszczak, an expert of the Polish Economic Institute, who presented during the conference the results of a study conducted using the Delphi method on several dozen market experts. According to 67% of them, SMRs will in the future satisfy at least 20% demand of the 10 largest Polish agglomerations for heat. Furthermore, 42% of experts were of the opinion that the capacity installed in SMRs in Poland would exceed 5 GWe only between 2041 and 2045. In turn, 88% believe that social acceptance for SMR installations will be at a similar or higher level compared to large-scale nuclear energy. The biggest challenges of investing in SMRs that experts point to are potential project delays, regulatory issues, and rising prices.

Summary and recommendations

Rising energy prices, restrictions on access to its sources, the need to decarbonise the global energy sector have all resulted in a growing interest in new technologies, such as SMR, in recent years. Energy transformation and decarbonisation are a huge investment and development project, which is why they are on the agenda of both politicians and management boards of the largest companies. In July 2022, the European Union classified nuclear energy as sustainable. Also in Poland, nuclear energy is nowadays treated as complementary to RES.

The need to build energy sovereignty has gained additional importance in connection with the Russian aggression against Ukraine. This has prompted decision-makers and investors to look for new energy sources, with the objective of independence from eastern sources, but also with stabilisation and predictability of energy prices over time in mind. The dissemination of SMR technology can be the perfect bonus to the green energy mix. On 3rd April, the Ministry of Climate and Environment presented the assumptions for updating Poland’s Energy Policy until 2040. The draft is currently awaiting adoption by the Council of Ministers. According to the announcements of Minister Anna Moskwa, generation from nuclear power plants (both large-scale and SMR) is to cover 23% of electricity demand in 2040, with an installed capacity of 7.8 GW.

However, in order to implement these assumptions, what is required is consistency. The organisers of the conference diagnosed several areas for which recommendations were made. “Having listened to the participants of the discussion, several recommendations come to mind, such as the involvement of Polish regulators in the work on harmonisation of regulations in the field of nuclear power and standardisation of SMR certification in Europe, the need to consider establishing a TSO unit (Technical Support Organization) within the structured of the National Centre for Nuclear Research, or finally, starting a debate on the European forum regarding the future of the atom in the EU taxonomy, which assumes support for nuclear investments only until 2045,” thus Jakub Bińkowski, Member of the Management Board of the Union of Entrepreneurs and Employers, summarised the discussion.

It also seems necessary to strengthen the staff and systematically improve the competences of employees of the National Atomic Energy Agency and Office of Technical Inspection in the scope of the specificity of investments in SMRs. An extremely important aspect in this context is the pre-licensing dialogue with investors, but also amendments of selected regulations to the latest IAEA standards and the exchange of experience with foreign nuclear regulators.

When it comes to provisions of the law, one ought to remember that not only national regulations, but also international ones, such as conventions on liability for nuclear damage, must be taken into account. The challenge here is the lack of structuring legal norms over time – basically, regulations on nuclear investments were basically being “added” to existing regulations.

Investors will also need to be active in the area of encouraging the process of value chain creation for the industry and building a constructive and reliable social dialogue so that support for nuclear investments is sustainable.

More than 150 participants attended the event. The conference organised by the Energy and Climate Forum of the Union of Entrepreneurs and Employers gathered in one place both legislators and regulators responsible for atomic law, several American and European SMR manufacturers, recipients declaring interest in small reactors of various power, as well as nuclear specialists who tried to sum up and structure the current state of knowledge about modular nuclear power plants and outline the prospects for the development of this type of investments in Poland and the CEE region, which we have presented in this memorandum.

Link to the event page: https://zpp.net.pl/events/event/konferencja-pt-smr-modulowy-atom-dla-biznesu.

Below are the links to all presentations displayed by speakers during the “SMR – MODULAR ATOM FOR BUSINESS (Poland as an incubator of SMR technology in Europe?)” conference:

Kamil Adamczyk, Chief legislation specialist, Department of Nuclear Energy, Ministry of Climate and Environment: Nowelizacja tzw. specustawy jądrowej oraz ustawy – Prawo atomowe. Procedury administracyjne związane z budową elektrowni jądrowych (The amendment of the Nuclear Special Act and the Atomic Law. Administrative procedures related to the construction of nuclear power plants)

Ernest Staroń, Ph.D. Eng. & Joanna Furtak, National Atomic Energy Agency (NAEA), Department of Nuclear Safety: Ocena technologii SMR (SMR technology assessment)

Patrycja Wysocka, Attorney-at-law, Partner and Co-leader of the Energy & Natural Resources Practice, & Partycja Nowakowska, Attorney-at-law, Senior Associate, Expert of the Energy & Natural Resources Practice: Otoczenie regulacyjne dla SMR – Aktualne wyzwania i wizja przyszłości (Regulatory environment for SMR – Current challenges and vision for the future)

Dawid Jackiewicz, Vice President of the Board at OSGE: BWRX-300 – najlepszy SMR dla Polski Technologia | Zaawansowanie projektu (BWRX-300 – the best SMR for Poland Technology | Project progress)

Scott Rasmussen, Director of Sales, NuScale Power: Small Reactors for Business Conference – Is Poland the SMR Technology Incubator in Europe?

Sandro Baldi, NUWARD Commercial Director: SMR – The Modular Atom For Business

Józef Sobolewski, Ph.D., Plenipotentiary of the Director of the National Centre for Nuclear Research for the Development of High Temperature Reactors: Research and development in SMR technologies – HTGR, a promising technology

Adam Juszczak, Advisor, Polish Economic Institute: Perspektywy wykorzystania reaktorów SMR w polskiej transformacji energetycznej (Prospects for the use of SMR reactors in the Polish energy transformation)

Michal Mareš, Energy Consulting: Czech national plan for the development of SMR technologies

Andrzej J. Piotrowski, Vice President for Strategic Relations in CEE, Ultra Safe Nuclear Corporation: Znacznie więcej niż energia elektryczna. Modularny Mikro Reaktor – IV generacji przełom w koncepcji energetyki (Much more than just electricity. Modular Micro Reactor – 4th generation breakthrough in power engineering)

We hope that these presentations will provide you with valuable additional information on the prospects for the use of SMR technology in Poland and the region.

The entire recorded event can be found on our YouTube channel: https://www.youtube.com/playlist?list=PLcUoUDPRMlSXe4wROjpe-PNGnY_UFSf-L

 

See more: 06.07.2023 Memorandum of the Union of Entrepreneurs and Employers: SMR – Modular Atom for Business

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