What about the Polish energy sector after the elections?

With an expert eye

Anna Pawłowska-Kawa, specialist in the field of ecological heating devices

With the post-election period gradually stabilizing, signs suggest that members of the current opposition will comprise the new Council of Ministers. Amidst this transition, there’s widespread curiosity regarding the forthcoming reality shaped by this political arrangement. Questions loom over how the government will navigate the 2024 budget, whether consensus will be reached on ideological fronts, and potential disagreements in ministry assignments, among others.

However, our primary focus lies in understanding the post-election reality within the energy landscape.

As we enter the heating season, energy demand is rising, and Poland currently has one of the highest energy prices in the European Union. Our energy costs exceed those in Denmark, Germany, the Netherlands, Belgium, and France. The only country in this reference group with higher energy prices is Lithuania, facing challenges with NordBalt, its electricity supply from Sweden. This situation forces them to purchase expensive energy from Poland. Additionally, the monthly production of energy from photovoltaics decreased by 52%, mainly due to an exceptionally sunny September, which set records for energy production from solar panels. Conversely, October saw a significant increase in wind energy production in Poland, jumping by approximately 120% compared to September. For the first time, wind energy production (2,520 GWh/month) approached the level of energy produced by lignite-fired power plants (2,563 GWh/month).

source: IEO

The new government confronts significant challenges, including concerns about high electricity prices and the need to meet the ambitious goals of the EU’s climate policy. In broad terms, the entire opposition supports ecological policies and transformation. However, it’s clear that there are differences among individual factions regarding their views and vision for the future of the Polish energy sector.

Energy after the elections – what about nuclear power plants?

Let’s prioritize nuclear power. The flagship energy project of the Law and Justice party (PiS), the construction of Polish nuclear power plants, is progressing slowly. The location for the third Polish nuclear power plant hasn’t been announced yet, and it’s unclear who will undertake its construction. The Civic Coalition (KO), Polish People’s Party (PSL), Polska 2050, and the Left express support for Poland’s nuclear program.

It’s undeniable that we need this energy source, especially to transition away from coal smoothly. However, within KO, there’s a faction, notably the Green Party, that has long been skeptical about investing in nuclear technology in Poland. They argue that nuclear energy isn’t necessary for the energy transition and its costs outweigh its effectiveness. They raise concerns about the safety and testing of Small Modular Reactor (SMR) modules. Przemysław Słowik, co-chairman of the Green Party, advocates for starting the energy transformation immediately by investing in wind, solar, and biogas energy.

Yet, the Greens overlook a fundamental aspect of solar and wind energy – their dependence on weather conditions. While these sources will play a significant role in our energy mix, they can’t guarantee energy security, which is essential, especially during unforeseen events. Energy security ensures uninterrupted energy supply while maintaining the resilience of the energy system.

While wind, solar, and biogas energy are valuable, they alone cannot ensure energy security. Nuclear energy provides stability in this regard. Other opposition parties recognize this, and internal division on this issue is unlikely. At a recent national council meeting of the Green Party in Poznań, clear declarations were made to reassure the public.

Urszula Zielińska, co-chair of the party, emphasized that while alternative technologies exist, commitments made by the current government and international agreements will be upheld. She called for a comprehensive plan for financing nuclear energy in Poland, which the current government has yet to provide, and a thorough review of agreements with the United States. Prime Minister’s response to this was swift, emphasizing the government’s commitment to nuclear projects for Poland’s energy security.

Despite disagreements between the government and the opposition, as well as within the opposition coalition itself, the continuation of nuclear energy programs is certain. There is no viable alternative to nuclear power, and public support for these investments is growing. Abandoning or further delaying this direction of development would be irrational.

Back to net-metering?

One of the promises made by the Civic Coalition in their “100 specifics for the first 100 days of government” stirred up controversy. KO announced their intention to “restore” favorable settlement rules for prosumers, which sounded like a return to the net-metering system, leading many prosumers to interpret it as such. However, this interpretation is not entirely accurate.

Changes in energy billing for prosumers are influenced by EU regulations, which cannot be fully disregarded. The Civic Coalition has clarified their stance, stating that they do not intend to revert to net-metering. Grzegorz Onichimowski, an energy expert within the Civic Coalition, explained that they aim to create legislation to mitigate the negative impacts of the new system. One proposed solution is to introduce a minimum energy repurchase price, ensuring that the investment payback period is no longer than 7 years, even at the lowest electricity prices.

Windmills closer to us?

PiS has gained a reputation as an “anti-wind” group, evident from their actions since coming into power in 2016. They introduced a law early in their tenure, known as the “10h” Act, which prohibited wind turbine installations within a distance of 10 times the height of the turbine from buildings. This effectively blocked over 99% of Poland’s land area from new wind investments. Unlocking the potential of wind energy is crucial as it’s a prerequisite for receiving funds from the KPO (National Reconstruction Plan). Although PiS amended this act in spring 2023, it hasn’t significantly expanded opportunities for new investments.

Under the revised Wind Farm Act, wind turbines can only be installed based on local spatial development plans, maintaining a minimum distance of 700 meters from residential buildings. The exact distance from developments will be determined through a strategic environmental impact assessment (SEA) conducted as part of the local spatial development plan. The new government is expected to address this issue promptly. It’s likely that acoustic criteria will be applied instead of distance criteria. Modern wind turbines, despite generating high power, operate much quieter than older versions. Accurate acoustic measurements may prove more effective in selecting farm locations than adhering strictly to predetermined distances, such as 500 meters.

NABE goes to the trash

The establishment of the National Energy Security Agency, proposed in spring 2021, aimed to ensure energy security during the transition away from coal. It intended to separate coal assets from energy groups, enabling them to focus on renewable energy. However, the act was vetoed by the Senate, and the decision not to convene the last session of the Sejm by Marshal Elżbieta Witek led to the discontinuation of this and other PiS projects.

According to the principle of discontinuation, if the current term’s Sejm doesn’t complete all initiated matters before the new Parliament convenes, those issues are lost. While opposition parties agree on the need to separate coal-fired power plants from energy companies, they opposed the establishment of NABE (National Energy Security Agency) due to concerns about market monopolization and lack of acceptance by the European Commission. The new government will need to devise its own strategy to enhance renewable energy potential.

Will the new (or old) government protect us from electricity price increases?

Expert forecasts are clear: abandoning the freeze on energy prices could lead to a significant increase in electricity bills in 2024, with estimates suggesting up to a 70% rise in prices. In their coalition agreement, the parties pledged to ensure low energy prices for households and businesses through fair competition mechanisms and transparent market rules. Specifically, they plan to freeze electricity prices for six months and potentially extend the freeze for gas prices throughout 2024, gradually transitioning back to tariff prices thereafter.

Surprisingly, the former Minister of State Assets commented on energy prices, stating that households should not be left unprotected against high electricity prices. He announced plans to submit a draft bill to extend the Solidarity Shield in its current form for another year. However, this announcement contradicts the position of the Ministry of Climate and Environment, which stated that decisions regarding a potential freeze on energy prices for 2024 would be left to the new government.

Both the current government and the opposition coalition have pledged to keep energy and gas prices low, albeit with differing approaches to implementation and financing. In 2023, energy prices for households were frozen at 2022 levels (up to a specific consumption limit), while small and medium-sized businesses, local governments, and sensitive customers had a maximum price set at PLN 785/MWh (PLN 693/MWh from October 1, 2023). This freeze was funded by energy companies and the state budget, primarily through fees on excess profits, which has faced opposition from both the opposition and the energy industry.

Grzegorz Onichimowski emphasizes that financing for price freezes in the new government will come from the budget, with the compensation system based on excess profits levies set to expire at the end of the year. “We no longer intend to freeze wholesale prices but to target specific vulnerable groups. Therefore, we do not anticipate using the current fee and compensation system. We have several options for the cost of freezing energy prices, ranging from several to several billion PLN,” Onichimowski suggests.

Time will tell what the fate of the Polish energy sector will be after the elections

The coalition agreement primarily consists of general commitments, such as combating energy poverty and ensuring fairness in the energy transition. It also includes specific pledges, like allocating all proceeds from the ETS emissions trading system to energy transformation investments and implementing a ban on burning wood sourced from Polish forests in power plants.

However, it’s important to note that the agreement is merely a statement of intent to form a new government, and it’s unrealistic to expect a comprehensive action plan covering all public concerns at this stage.

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