WARSAW — Poland’s romance with coal is old and deep, but a divorce is looming.
Coal still generates about three-quarters of Poland’s electricity and the industry employs about 100,000 heavily unionized and politically powerful workers. But Poland is under growing pressure from markets and the EU and its Green Deal to get out of coal as fast as possible.
The government has come up with a program to progressively phase out hard coal mining by 2049 — the year before the whole EU is supposed to become climate neutral. The plan involves financial support for continued coal production, which makes it unlikely Brussels will approve that state aid.
Utilities are also hunting for a coal exit.
Two state-controlled power companies —Energa and Enea — earlier this year backed away from the construction of what was supposed to be the country’s last coal-fired plant in Ostrołęka due to difficulties in financing such projects. The plan now is to convert it to a natural gas project.
Other utilities are seeing similar problems.
“Today, finding funding is almost impossible for companies with coal in their portfolios,” Wojciech Dąbrowski, PGE’s chief executive, told POLITICO.
PGE, Poland’s largest utility, generates about 80 percent of its power from coal. Its flagship Bełchatów power plant in central Poland is the EU’s top greenhouse gas emitter — pumping more than 32 million tons of CO2 a year into the atmosphere from smokestacks overlooking a vast open-pit lignite mine.
That’s why the company has come up with a plan to hive off its coal-fired power assets into a separate company that will continue using the highly polluting fuel to 2050. The revamped PGE, shorn of its highly polluting power stations, would speed up its shift to renewable energy. The goal is to generate 50 percent of its electricity with renewables by 2030 and all of it by mid-century.
But the plan can’t go forward without political backing from Warsaw — the Polish state owns 57 percent of the company — and from the European Commission’s competition arm.
“We want the EU to look at the ideas with a favorable eye,” Dąbrowski said.
Coal dust up
Climate campaigners are skeptical of what the company is trying to do.
“Separating coal assets without setting out a plan to close power plants is nothing more than shifting dirty assets from one pocket to another,” Piotr Wójcik, an energy analyst for Greenpeace, said in a statement. “This has nothing to do with a real and just energy transformation. PGE is washing its hands of its responsibility for Polish energy and its future.”
The idea is also angering unions, which last week accused PGE of “aiming to harm workers” with a plan that would cost thousands of jobs.
But PGE doesn’t have much of a choice. The rise in the price of emissions permits under the EU’s Emissions Trading System to about €25 a ton is putting the squeeze on Polish power producers. Dąbrowksi said PGE’s emissions costs had jumped from 1 billion złoty (€220 million) four years ago to an estimated 6 billion złoty in 2020.
“It’s a huge cost for our business,” he said. “Whether we want to or not, we have to change our energy mix.”
Poland now has the highest wholesale electricity prices in the EU, according to a recent analysis by Ember, a climate think tank. It blamed Poland’s continued reliance on coal while other countries are able to take advantage of renewables and of falling natural gas prices thanks to the impact of the coronavirus lockdowns.
“Poland’s reliance on costly domestic coal means it now has the most expensive electricity in Europe,” said Dave Jones, an Ember energy analyst, in a statement. “With the Polish government set to bankroll uneconomic coal mines and take on PGE’s loss-making lignite plants, the public will pay dearly for Poland’s coal addiction.”
Poland has long been a green energy laggard compared to other EU countries; it generates about 13 percent of its electricity from renewables, one of the lowest levels in the bloc, according to Ember.
PGE plans to shift to gas-fired plants, especially for municipal heating plants, and to spend 75 billion złoty on its target of becoming climate neutral by 2050 by expanding onshore wind as well as offshore installations on the Baltic Sea and photovoltaic projects.
The change of tone from the domestic industry comes as Polish coal mines face growing financial difficulties thanks to competition from cheap imports.
The government is also very isolated in its defense of coal. It’s the only EU country not to agree to a domestic target of climate neutrality by 2050, a stance that could cost it some EU funding aimed at helping smooth the transition away from a carbon-intensive economy.
Warsaw’s position will become even more difficult in the next months if the EU approves a proposal to cut its 2030 emissions by 55 percent instead of the current target of a 40 percent reduction.
That leaves very little space for coal, which is going to create a clash as both the government and utilities want a go-slow approach to get rid of it.
“Efforts to shut down conventional power in Poland are uneconomic and unrealistic,” Dąbrowski said.