Dark clouds over Poland's coal-fired power could boost Danish exports
The Polish economy is booming and sending its total energy requirement soaring.
By Jeppe Skårhøj, senior analyst, EKF
The future looks dark for Poland's coal-fired power plants, which account for just under 80 percent of domestic energy output. Many of the plants date back to the Soviet Era, and largely account for why Poland has the worst air pollution in Europe.
The ageing coal-fired power plants are inefficient, struggling to match demand and failing to meet current emissions requirements. This means that in the coming years, at least half of the plants will come offline and either be modernised or replaced by alternative energy sources.
The obsolete and inefficient coal-fired power plants also account for why Poland, in spite of its vast coal reserves, is among those countries in Europe that have the highest wholesale electricity prices. While electricity consumption is falling in many other European countries, in Poland it is rising by around two percent per annum due the country's robust growth rates.
One of the cheapest and swiftest solutions to Poland's energy challenge is to install wind farms. Meanwhile, the right-wing nationalist Law and Justice Party (PiS), which won the 2015 elections with a pledge to support coal miners in Silesia, Poland's 'coal kingdom', was voted back into power this autumn.
The government issued an act on siting of onshore wind farms that was so restrictive that it effectively blocked wind farm ventures. This virtually put the wind energy market in Poland on the verge of collapse.
However, in recognition of the need to find a solution fast – and preferably one that is both low-cost and effective – the act has now been shelved. Instead, the government has drawn up an ambitious plan to establish various forms of renewable energy production.
Nuclear power plants are both costly and take longer to bring on stream. Therefore, the plan is for up to a third of the energy to be generated from wind, biomass, biogas, solar and hydro sources.
According to the Polish Ministry of Energy, this will entail large-scale expansion by 2035 of offshore wind capacity by a full 8 gigawatts – equivalent to twelve times the capacity of the world's largest wind farm, the UK's Walney Extension.
Plans are also in the offing for large-scale development of onshore wind capacity by as early as 2023, and in biomass, biogas and solar energy too, Poland is poised to power up. Meanwhile, the ageing Polish transmission grid is also due for an overhaul.
High Polish growth, which reached 5.1 percent in what is otherwise a no-grow EU, has brought investors flocking to Poland, which spells sound prospects for project financing.
This holds obvious potentials for Danish energy-sector exporters.
Other sectors are also showing heavy demand for Danish goods. This is because Poland has undergone colossal development in recent years. In fact, it is now doing so well that skilled labour is in short supply.
This has led to large-scale efforts to attract the many ex-pat workers back to jobs in Poland. Denmark alone has some 40,000 Poles, and to incentivise the young to return home, or not leave in the first place, the Polish government has abolished the 18% income tax for everyone under 26. At the same time, Polish wages have now reached a level matching what the Poles can achieve by working and living abroad.
The growing middle-classes have benefited from a substantial increase in purchasing power, with high-knock on effects for Danish exporters, since Poland is among Denmark's ten largest export countries.