Poland’s Law and Justice party eyes second term in government

LONDON (ICIS)–Poland’s Law and Justice party is on course to win this weekend’s parliamentary elections that would grant it a second term in government.

While the party has taken steps to increase the share of renewables in the energy mix, its reliance on coal as well as controversial gas storage rules will prevent Poland from switching to cleaner sources of energy or becoming a natural gas hub in the coming years.

NUCLEAR ENERGY

The Law and Justice party, refered to as PiS, is the sole election frontrunner to voice plans to build nuclear power.

It announced that total Polish nuclear capacity can reach 10GW by 2040.

The first reactor of up to 1.5GW is planned to be launched in 2033, and the next five at two-year intervals by 2043.

However, the party’s nuclear commitment is under question after Polish energy incumbent PGE, previously the main investor in the project, announced its potential involvement in the construction of the 1GW Ostroleka C coal-fired plant.

RENEWABLES

Auctions paving the way for 3.4GW of new renewable power capacity in Poland are to take place before end of this year, following amendments to the renewables act earlier this year.

The changes ensure that companies looking to participate in Poland’s renewable auctions will have more time to complete projects and start selling electricity after winning a bid. The amended law also scraped environmental permits that were previously required to participate in the auctions.

Despite these changes, Poland is likely to miss it’s target to have 15% of its generation from renewable sources by 2020.

Aside from increasing solar capacity, it’s the offshore wind that will attract most attention as Poland is keen to utilize its capacity on the Baltic sea.

Offshore wind regulations are expected this autumn and three companies are developing projects with a combined capacity of nearly 5GW that are expected by 2030.

THE COAL PROBLEM

The Law and Justice party remains non-committal in setting concrete deadlines for phasing out coal, maintaining that the “coal problem cannot be solved overnight” as Poland needs stable power generation sources.

The share of lignite and hard coal in this year’s generation mix will be 82%. Latest Poland’s national energy and climate plan (NECP) until 2030 proposed that the share of coal in the generation mix would be reduced to 60% by 2030. But it appears that in the midium term, the country’s government has no concrete plans for moving away from coal-fired generation.

The country even opened a new coal mine this year and plans to go ahead with building the new 1GW Ostroleka coal-fired plant, despite recent court ruling that put its financial viability into question.

GAS MARKET

Only a repeal of the gas imports law is likely to provide confidence to state-owned gas seller PGNiG’s competitors to grow their position within Poland.

Two years ago, a legislation was amended by the Law and Justice party so that any gas importer had to maintain 40 days’ worth, or 11%, of the volume it delivers in an average gas year in storage.

To comply, shippers either had to book expensive domestic storage capacity or keep the stored gas abroad. If using the latter option, additional associated cross-border capacity had to be booked too. The law led to most companies giving up their trading licences and crippled OTC trade.

While the main opposition party, Koalicja Obywatelska calls for lifting of the law to develop the gas market, the current ruling party has not mentioned the issue, focusing instead on concentrating as much supply in the hands of state-owned firms as possible and working on ways to cuts its supply reliance from Russia.

PRICE DRIVERS

Increasing renewable capacity, predominantly solar and wind generation, will likely impact wholesale power prices in Poland.

Recent ICIS analysis indicates that additional capacity from offshore wind will push down Poland’s average yearly wholesale price by around €2.00/MWh by 2030.

Due to Poland’s coal fleet, carbon prices will remain a key driver for forward contracts. ICIS European carbon insight report forecasts that in 2019-2025, Polish power prices could increase from current levels of just under €65.00/MWh to €70.00/MWh due to rise in carbon prices.

In the short term, a recently introduced freeze of end-user power tariffs in Poland seems like a carrot and a stick solution to lure in electorate during parliamentary elections, rather than a sustainable policy. Once the freeze is over, suppliers might need to readjust their tariffs and end-users could face higher bills.

MANIFESTOS FROM MAIN OPPOSITION PARTIES

Two main opposition parties competing with Law and Justice in the 2019 parliamentary elections are Koalicja Obywatelska (KO) and Lewica. Below are key points of their manifestos.
KO
• Commitment to eliminate coal use in the residential sector by 2030, in heating systems by 2035 and by 2040 have entirely removed it from the energy sector
• Protecting mines in Upper Silesia as long as they contain coal and mining can provide a dignified life for miners and their families
• Plans for one third of energy to come from renewable sources by 2030, consisting of 10GW solar energy, 10GW onshore wind and 10GW offshore wind
• Intends to re-develop onshore wind farms, reversing the policies of the current ruling party
• Decentralise decisions on onshore wind farms, allowing residents to decide where windmills should be built
• Full integration of Polish gas system with European market through expansion of interconnectors on west, south and Ukrainian borders
• Liberalise the gas storage act so that competition returns to the gas market

Lewica
• By 2035 most energy to come from renewable sources, tax relief and subsidies to encourage farmers to construct solar panels and wind farms
• End of coal imports, household furnaces will be replaced by zero-emission heating systems over a period of 15 years, in a programme financed by government
• Investment in transmission networks, modernisation of buildings to include solar panels, wind farms and heat pumps
• Independence from gas imports from abroad but no details on how
Additional reporting from Ellie Chambers