trending Market Intelligence /marketintelligence/en/news-insights/trending/vThpuUgXCo3mvstR7SK07g2 content esgSubNav
In This List

Poland's largest utility plans shift to renewables, but spends on coal

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Poland's largest utility plans shift to renewables, but spends on coal

SNL Image

The Rödsand II wind farm is in the Baltic Sea between Germany and Denmark. PGE now wants to develop its own projects in Polish waters.
Source: E.ON

Poland's largest utility is plotting a slow shift from burning coal to less emission-intensive fuels like gas and is targeting a growing share of renewables. But the company's spending priorities still heavily favor conventional generation and reflect the long process in diversifying the country's energy mix.

"We are learning our lessons with regard to the CO2 prices, which we don't expect to fall," Ryszard Wasiłek, vice president of the board and COO of PGE Polska Grupa Energetyczna SA, said during an earnings call Sept. 25, which saw executives map out their plans to diversify the utility's power plant portfolio.

Poland is one of the largest coal power users in Europe and the government there has long resisted the rapidly accelerating transformation from fossil fuels to renewables underway in other countries on the continent, although it now plans to replace some of its fossil fuel capacity with greener energy supplies.

It was also one of a handful of Eastern European countries that blocked an EU resolution to target emissions neutrality by 2050 earlier this year, concerned how to pay for overhauling a large part of its economy, including vast mining operations.

But in the meantime, Polish utilities have been waking up to the realities of rising emissions prices and the relatively cheap cost of renewables. The government's 2040 energy strategy foresees a key role for offshore wind and solar photovoltaic, or PV, in addition to nuclear reactors, although the renewable capacity pales in comparison with targets elsewhere.

For its part, PGE says it plans to spend 6 billion to 8 billion Polish zlotys to build and acquire around 2,500 MW of solar PV plants by 2030, or around a quarter of the total capacity installed in the country by then. As of today, the company has land secured for around 750 MW, Wasiłek said.

Poland's installed PV capacity has roughly doubled since last year to 941 MW in September, according to data from the country's transmission system operator, although most of the new plants are under 1 MW in size.

"We want to be the leader in development of photovoltaic plants [in Poland]," Wasiłek said. The company is adding gas-fired capacity near a new pipeline from Denmark and is rebuilding one of its hard coal plants to burn gas. Those new plants, Wasiłek added, "will be a backup vis-à-vis the development of the PV farms."

PGE is also building almost 100 MW of onshore wind capacity across three projects and is simultaneously working on plans to build the country's first offshore wind farms. It signed a cooperation agreement for offshore wind development with energy group PKN Orlen SA earlier this month and has solicited offers from international developers to partner up in building three projects with a combined capacity of around 3,500 MW, dubbed Baltica 1, 2 and 3.

Wasiłek said the company has narrowed its selection down to four companies, which have now submitted binding bids, and PGE expects to choose a partner for the first project by the end of the year.

The Polish government is still finalizing a support framework for future offshore wind developments. Wasiłek told analysts on the call that the recent experience of offshore wind pioneers like the U.K. shows that the technology is viable even without generous subsidies, although Polish developers, unlike those in the U.K., will also be responsible for building the transmission lines to export their power.

"We'll have to pay for the connection, which means a much higher capex," Wasiłek said. "So it has to translate into a higher auction price under a regime where the operator pays for the connection. That money is not derived from nowhere."

So far, PGE's overall spending does not reflect any meaningful change in its operating model. During the first half of the year, which saw earnings rise mostly on the back of one-off effects, only 31 million złotys went to renewables — representing 1% of the group's capex. Almost two-thirds of the budget went to existing and future conventional generation assets, including the construction of new hard coal and lignite units.

Executives on the call did not respond to a question about when the share spent on renewables will increase, relative to coal.

But Wasiłek said the company's 1.5 billion zlotys closed-end investment fund, to be used for "environmental projects," is evidence that PGE is embarking on "another direction than it had before."

As of Sept. 24, US$1 was equivalent to 3.98 Polish zlotys.