PGE picks wind as Poland embraces green power
State-controlled PGE has abandoned its leading role in plans to build Poland’s first nuclear power station as it focuses on new wind farms in the Baltic Sea, two sources said. Two other sources said state-run refiner PKN Orlen could take on PGE’S role. PGE, the largest Polish power group, announced a nearly $10 billion offshore wind project in March but has also been responsible for the nuclear project.
Both plans are part of a major change in Polish policy. Coal mining provides around 80 per cent of its energy and thousands of jobs but makes it one of Europe’s biggest polluters.
The government promised to defend coal from competition but has been forced to look for alternatives to fill an electricity shortfall and to meet European Union emissions targets.
One source said PGE could not fund both projects and cheap technology had swung the decision in favour of wind. PGE could still play a smaller role in the nuclear project which has been delayed and still needs government approval.
“PGE cannot afford both — offshore wind and nuclear. The decision was taken to go for offshore,” the source said. A government source also said that PGE would focus on offshore.
Asked whether it could take the project on, PKN Orlen’s press office said in an emailed statement that the company “continuously analyses a number of different projects that could be part of the long-term development plans of the group.”
Poland’s ruling conservative Law and Justice (PIS) party promised before elections in 2015 to defend the coal industry and put in place laws to prevent new investment in both onshore and offshore wind farms.
But in March it changed tack and proposed a law to make it easier to build wind turbines. That is currently being debated in parliament.
If the law is passed, as expected, several other wind farm projects could also proceed.
Polenergia, owned by the Kulczyk family, has said it would like to build a wind farm in the Baltic by 2022. PKN Orlen is also considering building one.
PGE said in March that it wants to build offshore wind farms with a capacity of 2.5 gigawatts (GW) by 2030.
PGE did not say how this would be financed. The state owns 57.39 per cent and there are over a hundred other small shareholders, according to data.
The group’s cash amounted to 2.5 billion zlotys ($712.92 million) at the end of 2017. It could issue more bonds as part of its 2 billion euros and 5 billion zlotys bond programmes.
Analysts and investors say that offshore wind farms are the easiest and fastest way for Poland to fill the expected capacity gap from coal and reduce CO2 emissions in line with EU’S 2030 targets as Poland seeks improved ties with Brussels.
They provide more electricity than onshore wind farms, which Poland already has, and can be built more quickly than a nuclear power plant.
The decision to open up the offshore power industry could also draw in investors. Statoil said in April it would join Polenergia’s offshore project which has drawn interest from other international wind companies.
“We received phone calls from all over Europe after Statoil’s decision was announced. If such a player has entered, we need to be in too, many investors say,” said Maciej Stryjecki, President of the board at SMDI Advisory Group.
Some investors will also be waiting to see if Poland offers subsidies in cash or payments for getting connected to the grid.
“Even if we take into account the very positive trend in the decline in offshore technology costs, offshore wind farms will not be built without support,” said Michal Michalski, Polenergia management board member.
The PIS minister responsible for Poland’s power and gas infrastructure, who reports directly to the prime minister, said companies should not need such incentives.
“We expect that offshore wind farms will be built without support, but the falling cost trend is very encouraging,” Piotr Naimski said.
He has been a strong advocate of coal but said offshore would be a part of Poland’s energy mix in 2025-30.
THE GOVERNMENT PROMISED TO DEFEND COAL FROM COMPETITION BUT HAS BEEN FORCED TO LOOK FOR ALTERNATIVES TO FILL AN ELECTRICITY SHORTFALL AND TO MEET EUROPEAN UNION EMISSIONS TARGETS