Poland urgently needs an Energy Doctrine

Warsaw, 17^th April 2019

Poland urgently needs an Energy Doctrine

The current state of affairs as well as the prospects for development of the Polish energy sector is our biggest problem in the context of the competitiveness of our entire economy. Failure to address issues and lack of strategic thinking dangerously bring us closer to a systemic recession and decline in the standard of living. Poland urgently needs an energy doctrine that takes into account the processes taking place globally, not just politicians’ wishful thinking. This is the conclusion of the latest report by the Union of Entrepreneurs and Employers “Assumptions for the Energy Development Strategy in Poland”.

The essential condition for improving the business environment in Poland is to create a political consensus around a long-term programme of energy transformation. Without it, one cannot debate a long-term energy transformation of Poland. To ensure stable and competitive energy prices for the Polish industry, a gradual process of generation source and transmission line privatisation is imperative, which will force state-owned producers to adapt their actions to the market.

A four pillar doctrine

1^st Pillar. Change in ownership structure and diversification of generation sources. Systematic replacing state-owned power-generating consortia with privately owned dispersed energy sources. Gradual reduction of the solid fuel share in order to ensure that coal-based power in 2030 accounts for 50% of the Polish energy mix, while the other half is obtained from renewable sources and gaseous fuels. If nuclear power is to join the energy mix, it definitely can only happen after the year 2030.

The largest and newly built coal blocks must remain in the hands of the state, although they will only provide 30-40% of the highest domestic demand. While the 400 kV and 220 kV transmission lines will remain in the hands of the state for many years, the remaining part of generation sources and transmission lines (revitalised 200 MW blocks), wind farms, energy from gas and waste, photovoltaic power, together with 110 kV lines, medium and low voltage lines should be privatised and subject to free market mechanisms.

2^nd Pillar. Coal remains an important source of energy. What changes are the strategy of mining and the importance of the resource itself. This means limiting the extraction to profitable deposits, taking into account the necessary mining investments. Conventional coal-fired energy is only to guarantee electricity supply in the event of a system collapse or increased demand.

3^rd Pillar. Development of renewable energy sources as part of a nationwide policy for the development of dispersed sources. The need to optimise and increase energy efficiency, with the simultaneous risk of further increases in energy prices, make RES investments increasingly commonplace and desirable. Regional programs should be launched and decisions concerning the development of dispersed energy sources should be transferred to local communities, with a nationwide support system for regional initiatives and the assumption that the support period ends after 15 years. The support period can be differentiated for individual technologies.

4^th Pillar. The state must still be responsible for electricity supply. This does not mean, however, that it must be the owner of all generation sources and all transmission lines. Strategic generation sources and strategic transmission lines may, but do not have to, remain in the hands of the state as the guarantor of the country’s energy security. Ultimately, the role of the state must be reduced only to the creation and supervision of energy policy.

Pursuant the above-mentioned assumptions, the Union of Entrepreneurs and Employers recommends the following:

• Rapid implementation of the energy mix changing policy. Gradual reduction in the share of solid fuels, share increase of renewable energy and increasing the share of gas fuel, mainly as a regulator of renewable sources. Within a decade, we should reach the level of 50% in the balance of energy production from gas and renewable sources, and 50% from carbon sources;
• Determining and disclosing domestic black coal resources based on the economic availability of this raw material. Comparison of the national production potential with import possibilities, in terms of prices, dates and delivery guarantees;
• Development of investment plans for coal-fired power plants and mining, based on 50% coverage of the maximum system demand;
• Limiting the operation of lignite blocks until 2030 and replacing them with renewable energy sources, gas blocks, and in the post-mining areas as part of the reclamation of these areas, construction of pumped-storage hydroelectric units;
• Presenting the energy doctrine programme to the European Commission, obtaining acceptance and negotiating free CO₂ emissions, justifying the necessity of executing a comprehensive transformation over a longer period of time;
• Enabling the fastest possible development of cross-border connections both with EU member states and the closest neighbours;
• Privatising distribution companies in order to force state-owned tycoons to adapt their operations to the market by means of stock exchange instruments, while maintaining state supervision;
• Allowing market players to freely trade in energy, both from domestic sources and imports from any direction;
• As a result of legislative simplification, intensive development of public-private partnership in local governments in the area of launching energy and heat generation sources and creation of local transmission networks;
• Legal regulations enabling the development of energy clusters and cooperatives;
• Intensive development of a small individual energy programme through a system of incentives for recipients as well as through preferential investment conditions in this field;
• One ought to consider the transfer of the Polish programme for nuclear power plants construction to the areas where lignite power plants are gradually decommissioned;
• The decision to build offshore wind farms should be made as soon as possible and to facilitate these investments a separate legislative path ought to be created;
• An immediate return to supporting the development of onshore wind farms which are the cheapest electricity generation source;
• An efficient and reasonable support system for photovoltaic sources should be implemented as soon as possible.

17.04.2019 Report by the Union of Entrepreneurs and Employers: Assumptions for the Energy Development Strategy in Poland