Poland Is Facing Mounting Energy Insecurity

Poland Is Facing Mounting Energy Insecurity

Poland has made major waves in its push to diversify its energy mix, but new challenges are mounting.
Costly natural gas is making it difficult for Poland to transition away from the dirty fossil fuel.
Coal isn’t exactly cheap these days, either, as EU regulations tack on extra cost for the Eastern European country.

Poland, one of the most coal-dependent nations in the world, has slowly and steadily been working its way toward decarbonization. In 2010, 86.6% of Poland’s energy mix came from coal-fired power. In 2021 that number had dipped to 70.8%. On the one hand, this is a major improvement which deserves recognition. On the other hand, 70.8% is still very, very high, and poses a major hurdle for the European Union’s decarbonization goals – not to mention the entire world’s progress toward meeting the targets set by the Paris agreement in 2015.

According to climate projections as well as the European Union’s own goals to achieve climate neutrality by 2050, now is the time to double down on decarbonization and invest heavily into renewable energies. Such a transition was going to be difficult for Poland in any scenario, but Russia’s war in Ukraine has made it much, much harder. While Poland is one of the biggest coal producers in Europe, the Eastern European country has become increasingly dependent on cheap Russian imports in recent years. Supply chain shocks, followed by sanctions on Russian coal following the illegal invasion of Ukraine, have left Poland especially vulnerable to energy insecurity and price hikes, and pushed some Poles to queue in their cars for days to buy enough coal to make it through the winter due to fears of scarcity. 

What’s more, natural gas had been a prominent part of Poland’s plans to wean itself off of coal, providing a lower-emissions stepping stone from the dirtiest fossil fuel to renewable energy. Now that Europe’s energy sector is in crisis, however, and Russia’s Gazprom has threatened to continue restricting the flow of exports to Europe, natural gas is no longer an affordable alternative for Polish markets. Now, the Polish government is scrambling to put together a viable plan B. “In the conditions of economic recession and growing energy poverty, there is a risk that the energy transition may be slower or even stops altogether,” stated a recent report by Ernst & Young (EY) Poland.

The report, commissioned by the Polish Electricity Association (PKEE) projects that transforming Poland’s coal sector could cost €135 billion by 2030, a figure that is increasingly prohibitive as energy companies’ cash buffers grow thinner and thinner in the distressed European market. As the EY report warms, the “excessive reduction in the margins of enterprises from the energy sector to implement protective measures may slow down the pace of transformation due to the reduction of investment funds.”

Financially speaking, however, coal is no longer an inexpensive option either, leaving the Polish economy between a rock and a hard place. Furthermore, enduring reliance on coal poses major hurdles for Polish companies seeking investment dollars to transition to cleaner alternatives “because they still have to buy expensive pollution permits on the EU emissions trading scheme for their fossil fuel energy production,” and “financial institutions are increasingly unwilling to support companies with fossil fuels in their portfolio” according to reporting from Euractiv. 

While finding the cash to transition to renewables won’t be easy for Poland, continued reliance on fossil fuels clearly won’t solve any problems either. However, Polish politicians have been resistant to intensive investment and commitment to a broad renewable energy transition. Instead, Poland is taking a piecemeal approach to decarbonization, adopting a little bit of a lot of approaches, from increasing renewables and investing in green hydrogen to seeking an investment partner to build its first nuclear reactors. All of these approaches are fledgeling, however, and will take years to assume a considerable share of the country’s energy mix. In the short term, it’s going to be a long, cold winter for Poland. 

By Haley Zaremba for Oilprice.com

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