The war in Ukraine caused a sharp increase in energy prices and significant volatility in energy markets. Poland, whose energy mix was mainly based on imported coal and gas from Russia, had to radically change the suppliers of solid fuels and the existing guidelines for the energy transition. The soaring gas prices have questioned the rationale for choosing natural gas as a transit fuel. Consequently, coal imports and consumption have risen to unprecedented levels for years. That raises whether the country will be able to meet the requirements of the EU’s ambitious policy to move away from fossil fuels in the coming years. And finally, the turbulence in the energy markets has forced the Polish government to act dynamically on developing nuclear power plants and focus more attention on innovative RES solutions. More than a year after the outbreak of war in Ukraine, the directions of the energy sector are being hotly debated by industry experts.
A conference on the current and future situation of the energy markets in Poland and other EU countries will take place on 13-14 April 2023 in Warsaw.
The impact of the war in Ukraine on the shape of energy transformation processes in Poland
The war in Eastern Ukraine has significantly impacted Europe’s energy transition, particularly Poland. As a result, the European Union has decided to accelerate the energy reform process to reduce dependence on Russian energy supplies and limit the growing threats to Europe’s energy security. Among others, a strong emphasis has been placed on investments in renewable energy sources. Poland has also taken steps recently to adjust its economy towards a more sustainable one. However, the country still relies heavily on coal and natural gas and imports a lot of electricity from neighbouring countries.
After banning Russian coal imports last year, Poland faced severe coal shortages. As a result, the country had to import coal from farther away, increasing seaborne imports by over 1500% to almost 6.7 million tonnes in 2022. Therefore, the declining trend in coal use seen by Polish utilities last year may be about to reverse and push higher again.
However, according to some experts, the war in Ukraine, which has caused an unprecedented rise in coal and gas prices, may provide the impetus for a more dynamic energy transition. It seems that after the initial period of slowing down of the decarbonisation processes in Europe and especially in Poland, in the slightly longer term, it may significantly accelerate the transition towards green energy sources and nuclear energy.
Renewable energy sources and nuclear power are expected to play a much more significant role in the future, without a doubt. The problem, however, is Poland’s energy security in the meantime until nuclear energy takes over the role of sources stabilising the national energy system.
Poland faces the critical question – What transition fuel to choose instead of natural gas?
Before the Russian aggression in Ukraine, Poland identified gas as a key transition fuel that would enable, in the long term, the achievement of a zero-carbon energy mix. However, the turmoil in the European energy market has raised questions about the economic viability of using natural gas as a transition fuel to create a low-carbon energy industry. Thus, it is not surprising that there is increasing publicity that, from both economic and energy security points of view, it is beneficial for Poland to continue using coal instead of gas as its primary source of energy.
Experts predict that the current tight situation in the global gas market will remain the same in the coming years. Consequently, Poland and other EU countries can expect a further surge in natural gas prices. That forces increasing the pace of their energy transition. Furthermore, especially with the falling cost of renewable electricity and heat pumps, it is becoming more attractive to skip the planned intermediate step of converting coal-fired CHP plants to gas and go directly to renewable retrofits.
Right now, Poland and other EU countries can intensify the implementation of energy efficiency measures, accelerating the development of renewable energy sources and clean heating based, among others, on heat pumps. In the long term, the countries should focus on replacing natural gas with renewable gases, hybrid systems, biomethane and hydrogen.
Will gas continue to be a Polish transitional fuel in the current situation on the energy market?
The energy crisis caused by Russia’s aggression against Ukraine meant that Poland had to revise its existing plans in terms of the road map for the ongoing energy transformation. Gas was supposed to be a link to a new model of the energy system based on RES and nuclear energy. The war in Ukraine will limit the role of gas to the necessary minimum. The demand for gas in the economy will continue to grow, but we want this increased demand to be met by domestic biomethane production. The priority is to ensure a stable energy supply, with the largest possible share of renewable energy, at a competitive price for industry and households. Poland will develop RES and nuclear energy while using existing capacities in the conventional energy sector, especially modernized flexible Block 200+ units, and pumped-storage power plants. – says Ireneusz Zyska, Secretary of State, Ministry of Climate, Government Plenipotentiary for RES, Guest of honor
Will Poland’s renewable energy sector gain in the face of rising gas and coal prices?
In the face of the energy crisis caused by Russia, it is crucial to strengthen energy security through energy production based on its own generation sources. Such sources are Renewable Energy Sources, working on the basis of various technologies.For over 7 years, the government has been consistently developing the renewable energy sector. From the end of 2015 to December 2022, the installed capacity of renewable energy sources increased from 7.1 GW to 22.67 GW. This represents a more than 3-fold increase. Thanks to the connection conditions issued so far and projects implemented on the basis of contracts concluded in RES auctions and under other support schemes, we anticipate that in 2025 the installed capacity of RES will be around 28 GW. By the end of the decade, zero-emission energy sources will account for more than 50% of gross electricity consumption, while their installed capacity could exceed 50 GW. This creates a very good prospect for the development of RES even after 2030. However, a necessary condition for a positive scenario is the modernization and expansion of the electricity transmission and distribution system. – says Ireneusz Zyska, Secretary of State, Ministry of Climate, Government Plenipotentiary for RES, Guest of honor
We are witnessing a crisis that defines some issues connected with the functioning of the power energy and gas market, as well as energy security, energy transformation, and international policies of many countries of the EU. The problems we can observe in the gas market in the EU are caused by the dependence on gas supplies from Russia. They raise questions about the sectors’ future depending on the continuity of gas supplies and the end, as well as the significance of the fuel in the transformation process. They also make us expand our area of interest in the regions that only now were considered in the analyses. Until now, Europe has based on “traditional” gas supplies and transferred them via pipelines, and the LNG gas, due to its price, did not seem to be a tempting alternative. Instead, the Russians made gas a political tool, and then the War in Ukraine broke up. As a result, the concept of “diversification” became more accurate regarding energy security.
The limitation of gas supplies by Gazprom caused an enormous rise in prices. In response, many EU countries introduced a list of instruments mitigating the increase in gas and power energy prices for end-users (statutory price regulation, revenue cap, taxes on excess profits, etc.) The role of gas as a transitional fuel in the transformation process. In reply to the growing crisis in May 2022, the European Committee published the REPowerEU documents, which intend to save energy, its ecological production, and diversification of supplies. The Committee proposes raising the European objective for renewable energy sources for 2030 from 40 percent to 45 percent.
The shift from gas fuel and the fast development of renewable energy sources will require enormous investments in power engineering transfer and distribution systems. In the case of the Polish market, the Charter for the Efficient Transformation of Poland’s Power Distribution Networks was signed in November 2022 from the initiative of the President of the Energy Regulatory Office and constituted a reply to the challenges. The sectoral agreement is a part of the modernization, digitalization, and adjustment of the power distribution networks to the new energy market architecture based in an ever greater degree on the dispersed sources, with a significant share of renewable energy sources.
Limiting the significance of conventional energy sources requires the development of energy storage technologies, which in turn takes time and effort. Therefore, gas will still constitute an essential element of the energy mix to provide undisturbed power energy supplies. In this context, the LNG market becomes more significant.
“A crisis is a terrible thing to waste,” – said Paul Romer, awarded the Nobel Prize in Economics Studies. However, we must remember that we decide how to use the crisis or if we don’t waste it. The continuity of power energy and gas supplies in the competitive market or whether we will be surprised by the “temporary changes” will depend on the discussions over the market shape and the decisions the legislator takes. The market will come out of the current crises more experienced and wiser, which we will transform into a success in a longer perspective. – says Rafał Gawin, President of Energy Regulatory Office
Cybersecurity of critical infrastructure as one of the pillars of the security structure of the EU, including Poland.
In an era of intense digitalisation of the energy sector, cybersecurity has become one of the priorities of the security strategy of EU countries, including Poland. Moreover, Russia’s war against Ukraine has brought new threats – both physical and cyberattacks – often combined in a hybrid form. The experts stress that the war in Ukraine is the first armed conflict in Europe during which cyber operations play such a prominent role. And the energy sector is an important geopolitical battleground because an attack on this sector could seriously disrupt the state’s functioning and its citizens’ lives. As a result, the EU Member States are more than ever aware that cyber carelessness today is untenable—especially considering the interconnectedness of the region and the world.
A significant reason for the steady increase in cyberattacks is the use of new digital technologies. For example, the energy industry is relying on the use of cloud computing, artificial intelligence (AI) and the internet of things (IoT) at an increasing rate. In the past, the energy infrastructure units could be operated in more secure closed systems, but as the internet of things (IoT) has become an integral part of the sector, the chance for hackers to exploit it has increased. The experts on cybersecurity stress that the use of intelligent technologies in cyberspace and the real world, as well as the close integration of data obtained in this way, is the key to the effective protection of critical infrastructure.
Cyber threats to critical infrastructure will be discussed during the 37th EuroPOWER & 7th RES POWER Energy Conference organised by MMC Polska.
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