The goal of this study is to show the impact of the energy transition (Energiewende) and of the market design change in Germany on the competitiveness of the Polish power market. The analysis discusses how to increase security of supply by strengthening the Polish market with low-cost, high-efficient and environmentally friendly solutions as well as qualifies the value of closer cooperation between the German and Polish power markets. It describes the implications of this approach on the European power market integration and provides operational and strategic proposals for policy makers.
Germany’s ambitious energy transition strategy goes alongside with the need to adapt its electricity market design, which does have an impact on its electricity neighbours and raises the question of competitive position of Poland’s power sector. Having determined the risk or the opportunity for both countries, the study outlines three different scenarios for the Polish electricity market, including specific recommendations and implications.
The Polish power demand will increase by 50 percent from today’s about 160 TWh to 240 TWh in 2040, while the Polish fossil power plant fleet is severely aged, which increases the possibility of unavailability and power shortages. At least 12 GW will be decommissioned in the next 10 years, while only 6.4 GW of new fossil capacity has been planned. Poland’s electricity sector has been facing a substantial lack of investments over the last 1-2 decades and it will suffer on average 11 days of power shortages each year until 2020.
Given the current market conditions with low power prices, the urgently needed new capacities shall generate negative cash flows (missing money). Therefore, government’s intervention is re-quired to prevent power shortages. The Polish authorities should target short-, mid- and long-term measures with tailored mechanisms to secure generation adequacy in the short run and simultaneously set policies to trigger investments in clean, cost-effective and efficient power generation technologies keeping a close eye on the time lag between policy implementation, investment decision and start of electricity production.
Prompt implementation of policies that would release investments into national generation should be a key priority for this government. Strategies must be designed in such a way that eliminates the negative cash flow of clean, cost-effective and efficient power generation invest-ments. The negative cash flow (missing money) to transform Poland to a low carbon electricity mix with a solid renewable energy share equals 0.3 to 2.3 Billion Euro per year or 0.22 to 0.96 EuroCt/kWh in 2020 and 2040.
Poland needs also a much stronger integration into the European electricity system with a strong build-out of interconnectors. An increased interconnection would allow Poland to take advantage of neighbouring capacities and save annually 3 Billion Euro instead of building in-house gas ca-pacity and 6.5 Billion Euro per year compared to national coal capacity upgrade. Beyond that, Poland would be able to benefit from lower power prices e.g. from Germany, where electricity prices in 2030 are lower during 5294 hours (~60%) of the year.
The major conclusions from the study are:
1. Maintaining the current energy policy will significantly increase the risk of brown-outs from estimated (at average weather conditions11) 240 hours per year in 2016 of no electricity to as much as 2000 hours per year in 2021 and resulting uncontrolled power peaks. This will have a destructive impact on consumers, especially in the energy intensive industrial production sectors, exposed to not only growing power prices but also uncontrolled breaches in produc-tion or need to invest in in fence energy generation.
2. The lack of bold decisions to actively re-shape the energy mix of Poland and the resulting insufficient investment in modern, cost effective and low-emission sources in the Polish power sector over the last 20 years has led to a very serious situation of the power supply deficit.
3. The Polish authorities will have no other option then to miss the IED targets on SO2 and NOX emissions from large combustion sources (by extending the lifetime of aged conventional power plants) to secure supplies of energy in the short- to mid-term.
4. Investments only in coal in the autarchic approach will significantly increase the overall cost of securing energy supplies. Coal is expected to become the most expensive technology by 2030. For comparison, energy imports from the Baltic Sea region may save up to 6.5 Billion EUR per year in 2040.
5. Given the overall dynamics in costs of power generation technologies and the need to secure cost-effective, clean and secure supplies of energy to the growing Polish economy, bold changes in the energy mix and deep power market integration in the Baltic Sea region are needed.
6. Investing in RES (mainly wind and PV) allows for using vast domestic RES potential and joint efforts for wind offshore in the Baltic Sea and will be a very cost-effective approach.
7. Interconnection alongside with regionalisation of power supplies within the Baltic Sea region will further increase security of supply in Poland in a cost effective manner where the Baltic Energy Market Integration Plan (BEMIP) should serve as a platform.
=> press release following the European Parliament policy breakfast with a presentation of the study “European Power Market Integration. Poland & regional development in the Baltic Sea” under the auspices of MEPs prof. Jerzy Buzek and Claude Turmes
Table of contents:
Executive Summary .... 1
1. Introduction: Research Question... 3
2. Approach ... 4
2.1 Methodology ... 4
2.2 Working group structure ... 4
2.3 Model description ... 5
2.4 Indicators considered ... 7
2.4.1 Demand/Supply Balance – time with 100 percent supply guaranteed ... 8
2.4.2 Cost of Energy ... 10
2.4.3 LCOE needed for potential new investment ... 11
2.4.4 Investment needs ... 13
2.4.5 Cost of investment on consumers ... 14
3. German Electricity market ... 15
3.1 Background ... 15
3.2 Generation Capacity Development ... 15
3.3 Demand Development ... 16
3.4 German Electricity Market reform ... 17
4. CCEI (Clean, cost effective, efficient & integrated) approach for the Polish power sector ... 18
4.1 3-phased approach ... 19
4.2 Current planning ... 21
4.3 Fill the gap ... 23
4.4 Transformation ... 25
5. Conclusions from the study and policy recommendations ... 27
Sources ... 28
Partners ... 29
Heinrich Böll Foundation ... 29
Polish Wind Energy Association ... 30
Authors ... 31
Advise2energy – a2e ... 31
Energy Brainpool ... 32