“We are dealing with a state of emergency in the energy sector.” An expert on how to get out of the crisis

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The government plans unfavorable changes in the law on photovoltaics

The goal of Forum Energii is to support the transformation of the Polish energy sector, which is why we propose 10 steps to overcome the crisis. It is the result of our many years of work and each of the proposed points has its justification in in-depth analyzes. This plan can be prepared in two years. In the coming weeks, we will encourage further groups of experts, politicians and non-governmental organizations to discuss. The future of the energy industry deserves a consensus.

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Step 1. Strengthen your energy strategy planning and implementation

At the moment, there is no more important topic than maintaining Poland’s energy security and maintaining the competitiveness of the economy. Strong institutions are needed for this – it is necessary to subsidize and strengthen organizations that are key to maintaining the country’s energy security: Ministry of Climate and Environment, the Energy Regulatory Office and the operator of the PSE system. It is necessary to define realistic and ambitious energy policy goals in the 2030 and 2050 perspective and to define the tools that will allow them to be achieved. This is necessary to send a signal to the market for the investments desired from the transformation perspective. The appointment of the deputy prime minister responsible for the energy transformation would give the topic an appropriate rank. A competent analytical center is also needed, which will support the decision-making processes in terms of content – it will allow for the preparation of independent regulatory impact assessments and will be responsible for cost calculation and strategy implementation proposals. It will also be important to establish an independent, expert and authoritative committee on energy and climate, which will support the government in making difficult decisions.

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Step 2. Separation of coal assets

In order to accelerate investments in new capacities, energy companies must get rid of coal assets. Today it is a real ball at the leg, making it difficult, among others. obtaining financing. The government’s NABE project should be overhauled. It does not take into account the principles of market competitiveness, the regulations in force in the field of support for coal capacity and limitations of state aid. It raises serious doubts in other ministries and the energy industry. It does not decide what should happen with the huge debt of the sector reaching tens of billions of zlotys. Its introduction threatens to lose control over the market price of energy. The separation of coal assets should be based on a thorough analysis of the availability of coal resources; real costs of coal mining and electricity production; energy security and climate goals. It is necessary to separate assets from individual groups, but not to put them in the same bag. An urgent revision of the NABE concept and its adaptation to the realities of the market is necessary.

Step 3. Gas strategy

Moving away from coal requires determining the role of gas (including green gases – hydrogen and biomethane) in the future energy mix. The enthusiasm for fossil gas in Poland is currently very high, it is necessary to rationally plan its development, avoiding too much dependence on this raw material – especially in the current market realities, in which we can see how quickly one strong player can destabilize the market. In the future, various sectors of the economy will compete for gas – industry, electricity, heating and transport. Gas development can only be promoted where it replaces the more emitting coal and where there are currently no alternatives to it. We must already think about adapting the production and transmission infrastructure to green gas. Poland must plan the use of gas in a strategy dedicated to this topic.

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Step 4. Strategy for RES and grid development

The construction of renewable energy sources must be treated as a priority, overcoming network and market barriers related to their integration in the system. By 2030, at least 50% of energy in the power sector may come from renewable energy sources. It is necessary to set ambitious goals for the development of these sources and mobilize the market to compete and deliver cost-effective and well-prepared projects. RES are sources that can supplement the missing capacity, reduce CO2 costs, and guarantee energy security. It is important to mobilize distribution companies to adapt the grid to the development of RES. It will be important to implement a localization market.

Photovoltaic panels, illustration photo.A revolution in photovoltaics. The Sejm has just passed changes to RES

Step 5. Plans to build nuclear power plants within realistic time and financial frames

It cannot be ruled out that a nuclear power plant in Poland will be necessary to achieve climate neutrality in 2050. However, it is obvious that it will not appear within 15 years, while the problems of the energy system are already present. It is necessary to professionally design the implementation of this project within a realistic cost and time frame. Citing the Polish Nuclear Program as the key to solving Poland’s problems in 2033, and the simultaneous lack of progress in its implementation – threatens the energy security of our country.

Step 6. Support for building available capacity until 2030.

In the coming years, coal technologies will come out in waves from the Polish power system. This is a major challenge for the security of energy supply, given that there are no real options to fill this gap. It is necessary to support the construction of available capacities until 2030. The analyzes of Forum Energii show that Poland needs 11 GW of controllable capacities – probably gas-fired. However, planning new gas capacities must be approached with caution, bearing in mind that this fuel is largely imported and emitting fuel, subject to global price fluctuations. The demand for gas can be reduced by appropriately modifying the capacity market (to the clean capacity market, more on that below), promoting energy efficiency and the inclusion of the heating sector in the balancing of the energy system. There is an urgent need to revise the effectiveness of the existing support mechanisms for cogeneration, either in the capacity market or in the energy price premium auctions. So far, the increases in cogeneration capacity are at a very low level in relation to the potential of the country. The flexibility of heating and the ability to participate in the balancing of the NPS are too weak.

Step 7. Modifications of the capacity market to a clean capacity market

The capacity market improves the short-term security of electricity supply, but it is very expensive and so far has not led to the development of new capacities that are currently most needed in Poland. It is too early to liquidate the capacity market, sudden changes would destabilize the energy market. However, since coal capacities can no longer apply for support within the capacity market, it is necessary to revise the rules of its operation and create conditions encouraging a more active participation of all flexible and low-emission resources, e.g. storage facilities, DSR and small cogeneration units. At the same time, it is necessary to outline a vision of the market reform by 2025.

Step 8. Coal Departure Plan

The lack of transparency in the approach to coal is blocking the transformation and is causing concern – e.g. in regions, industry, energy sector. The agreement agreed with the mining unions specifying the year 2049 as the end date of coal mining in Poland can hardly be called a social agreement – because it refers only to the perspective of one professional group. Transformation requires communication and consensus – between energy recipients, experts in the generation sector, industry, system operator, and environmental organizations. Taking into account the increasingly limited supply of domestic raw material, the volatility of prices and the price of CO2 emissions – a departure from coal by 2035 at the latest is not only real, but necessary. However, for this to be possible, Poland must have a plan to supplement the NPS with new generation capacities, grid development and market reforms. In addition, everything must be done not to repeat the scenario of the 1990s in the energy transformation, when many industrial plants collapsed overnight, leaving people without state support and plunging regions into unemployment for many years. The transformation must be socially fair.

Step 9. Flexible and effective use of PPS resources

The Polish energy system, which was created in the 1960s, is not adapted to accept large amounts of renewable energy in a short time without significant changes in the operating model – primarily in terms of remunerating flexible resources, which are the most desirable source. We propose the introduction of a reform – implementation of a multi-commodity market that will reward resources according to their functions in the system, e.g. according to the criteria of flexibility, power, voltage regulation, demand reduction. At the same time, it is necessary to gradually plan to phase out the capacity market.

Step 10. Reform of the financing system for decarbonization projects

Poland may have large EU funds at its disposal in the new financial perspective, it is hoped that the government will effectively use them. However, the lack of good decarbonisation projects ready for implementation is worrying. There are many reasons for this. This includes the lack of state policy that would stimulate innovation and ambitions of the industrial sector, but also the lack of analytical centers that would support the implementation side and communication with market participants about the expected changes. The financing system was created in Poland in the 1990s – and is aimed at large, repetitive projects (e.g. construction of highways, sewage treatment plants). It can be said that it is too analog for the current 3D times – digitization, decentralization and diversification. In the new financial perspective, actions will be more complex, they will have to take into account the local energy specificity, use new technologies, and precisely define decarbonisation goals. You will need better communication, technical support, help from the less resourceful, greater creativity and new technologies in the promoted solutions. The financing structure must be adapted to this.

The current energy crisis should be a warning sign and a turning point for us. The drift and the lack of decisions as to the shape and direction of further energy transformation are dangerous from the perspective of the country’s energy stability. This is the last moment to develop a rational strategy for the energy sector together with decision-makers, experts, market operator and enterprises. We encourage discussion and criticism. The topic is crucial for the future of our country.

Author: Dr. Joanna Maćkowiak-Pandera, cooperation: Forum Energii team
Date of publication: December 8, 2021

The article comes from forum-energii.eu, originally appeared on the website Wysokienapiecie.pl.

About Alex Marcell

He likes dogs, pizza and popcorn. Already a fanboy of Nintendo and Sony, but today throws anything. He has collaborated on sites and magazines such as GameBlast, Nintendo World, Hero and Portal Pop, but today is dedicated exclusively to Spark Chronicles.

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