Polish government to restructure the utilities and mining sector

Polish government seeks to restructure the utilities and mining sector with a view to balancing environmental and social aspects, Moody’s latest report shows.

The recent agreement between mining unions, the state and the largest miner, PolskaGrupaGornicza (PGG), heralds an end to domestic coal mining by 2049 as a precedent of state support is set.

Solar power is growing strongly from a small base thanks to subsidies for households. Offshore wind is expected to start generating electricity from 2025 onwards.

75% of Polish electricity was generated by coal and lignite in 2019

Polish utility sector has a high reliance on coal and lignite, with around 75% of electricity generated from these fuels in 2019.

Carbon intensity of Poland’s GDP has fallen 40% over the past decade, but is still higher than other EU countries.

The National Energy and Climate Plan to 2030, submitted to the EU Commission, foresees a gradual reduction of coal and lignite fuels.

The latest draft of the Polish Energy Plan 2040 foresees the share of coal in electricity generation at 37%-56% in 2030 and 11%-28% in 2040. Solar installations and offshore wind will be the main replacements.

In the first eight months of 2020, electricity consumption in Poland declined by 4.4% from a year earlier, whereas generation fell by 7.2%.

The decrease in power generation was disproportionately borne by coal and lignite plants, where output fell by 12.9% and 11.5%, respectively.

Poland’s interconnection capacities with its neighbours have increased since 2015, resulting in cheaper wind and hydropower from Germany, Sweden (directly and via Lithuania) as well as nuclear power from the Czech Republic competing in the Polish market.

More capacity will be added through the Baltic Synchronisation project, which will synchronise the Baltic countries’ grids with Western Europe, with Poland serving as an important gateway.

No offshore wind before 2025 at the earliest

Initial Polish offshore wind capacity is planned to come online from 2025.

The government has therefore sped up its efforts to pass a legislative framework for offshore wind installations, which we expect to come into force by early 2021.

Large utilities have started to team up with experienced European developers, such as EquinorNew Energy(Baa1 negative), Iberdrola(Baa1 stable) and Orsted (Baa1 stable).

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