Gas and wind is the future. Report on the Polish power industry
Ireneusz Chojnacki - 15-11-2018
The number of new low-emission energy generation sources in Poland is gradually increasing. This kind of investments are favoured by the EU climate and energy policy. National support systems have an important role to play in this matter.
The fact that modernization, reconstruction and prospective development of the national power system are a necessity has been known for a long time.
There are several reasons for this, among them are the aging of generating assets and the growing demand for power and energy.
The energy supply industry also has its investment needs. Its assets and the reliability of energy supply to recipients still leave much to be desired. It is also necessary to modernize old and build new transmission networks.
Possibilities and needs
In the report on the results of monitoring the security of electricity supply during the years 2015-2016, the energy department referred to the age of power plants' generating assets. There were no surprises. At the end of 2015, 339 turbosets operated in domestic thermal power plants, 182 of which were already in operation for over 30 years, and the total installed capacity of the oldest units was 20 455 MW, which translated into 66.6 percent of their share in the total power capacity installed in all turbosets.
The Chairman of the Energy Regulatory Office said that in 2017 the average annual demand for power (in relation to the value during the evening peaks) amounted to 22 979.7 MW, that is 2.21 percent more than in 2016, while the maximum demand during the weekday peaks amounted to 26 230,6 MW (an increase of approximately 2.68 percent y/y).
According to ERO information, the gross national electricity production volume in 2017 amounted to 165 852 GWh, which in comparison to 2016 represented an increase of 1.98 percent. Last year's (2017) gross national electricity consumption amounted to 168 139 GWh and increased by 2.13 percent compared to 2016.
In the first half of 2018, the increase in energy demand was maintained. PGE reported that in the first six months of 2018 they noted an increase in gross electricity consumption by 1.9 percent in comparison to the comparable period of the previous year. The increase was lower than in the first half of 2017, when energy consumption increased by 2.3 percent in comparison to the same period of 2016.
PSE Operator predicts that in 2018-2027 the total increase in electricity demand will amount to 15.64 percent (stable forecast), and according to the so-called high forecasts - 17.8 percent (forecast for the annual peak, net power).
When it comes to electricity demand, there are also more moderate forecasts than those of PSE. The energy demand in 2030 anticipated by experts - asked to make an evaluation by the Friendly State Foundation - is within the range of 7.6-17 percent in comparison to 2017.
Even considering the increase of electric cars, the energy demand should grow no more than 1 percent per year - cumulative growth over the next 10 years will amount to 10 percent, and in the next decade - only 3 percent. - said Pawel Skowronski from the Institute of Heat Engineering at Warsaw University of Technology, quoted in the report of the Friendly State Foundation.
Gas and wind
The EU regulations also play an important role in the directions of energy investment. In this respect, the decisions regarding the scale of RES development (the EU RES target for 2030 is 32 percent with a possible revision of the adopted assumptions) and changes in the emissions trading system are of crucial importance. Changes in the operation of the EU ETS have already resulted in a dynamic increase in the CO2 allowance prices, which increases the operating costs of conventional energy and, at the same time, promotes low-emission technologies.
A partial reply to the questions “what will be the direction of investments in power generation” and “how can the national energy mix change”, is given by announcements of energy companies. They unequivocally indicate that the power industry is clearly interested in investments in low-emission sources, including gas (including announcements made by PGE and ZE PAK) and in the generation of energy from renewable sources, including wind energy (Polenergia projects).
The future of nuclear power in Poland is still unclear.
The approach to new investments in lignite-based production is precautious. “We expect to obtain a license for Zloczew before the end of 2018. However, the execution of the investment depends on the future direction of climate policy and the role of lignite in the country's energy policy” - this is PGE's answer to the question asked during the ordinary general meeting in July 2018.
What will the state do?
The further functioning of the RES auction support system, the introduction of a new support system for electricity produced from cogeneration and, of course, the functioning of capacity market (the power capacity that will cover the projected demand of consumers in a given year is supposed to be contracted several years in advance through the capacity market) will be of great importance for the future investment directions.
The structure of net power generated by entities classified as planned, entered as part of this year's general certification in the capacity market register, is 4.37 GW for gas, 4.02 GW for coal and 0.51 GW for fuel specified as “other, including RES”.
Entities that entered the capacity market register during the general certification have the right to participate in the main auctions of the capacity market for the supply period falling in the years 2021-23 (they are to take place in November and December 2018).
It should be noted that the mechanisms used to support electricity production, such as the auctions set out in the RES Act or the prepared cogeneration Act, give or are to give the authorities high influence on the scale and directions of investments covered by the support systems. For example, in the case of a renewable energy support system, the quantity of energy, the sources and the maximum price for energy depend on the administration.
The sum of investment expenditures planned by PSE in the years 2018-2027 is approximately PLN 12.4 billion. According to the project, the main group of the expenditure structure is composed of the sums designed for construction, extension and modernization of transmission network facilities - approx. 95 percent of the total expenditure for the period 2018-2027. The investment needs of the distribution sector are still significant.
“In case of the distribution network, the highest degree of wear is typical of overhead lines of 110 kV and MV. Almost 80 percent of these lines were built over 25 years ago and since then, due to legal barriers and lack of appropriate measures, most of them were not exchanged or modernized. They were only subject to the required inspections and repairs” - the PTPiREE report “Power industry. Distribution and transmission – 2017” says.
In the case of this sector, one may assume that in the following years one of the main investment directions will be network wiring that is perceived as a security element of Poland's energy policy (a significant body of the text “With the current of technology” is devoted to these investments).
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