OverviewElectricity production in 2021 was the highest in Polish history at 179.4 terawatt hours (TWh). Electricity demand was also a record 180.3 TWh. Net imports of electricity were the lowest in 5 years. 99.5% of electricity demand was met by domestic generation. The share of coal in electricity generation in 2021 increased and is over 72%. Poland’s share of renewables fell to about 17% despite record production from these sources (30 TWh). Total available capacity increased by 3.7 GW (to 53.5 GW). Capacity of conventional units has remained stable for years, with 36GW power capacity installed; renewable energy sources (RES) capacity is growing (+4.4 GW y/y), especially photovoltaics (+3.7 GW y/y). The pace of expansion and modernization of generation units is still insufficient to ensure energy security in the face of planned shutdowns in conventional power generation. Despite high CO2 prices, coal-fired generation was less expensive than natural gas-fired generation, resulting in a record increase in the use of coal-fired capacity and a decrease in the use of natural gas-fired capacity. For the first time in years, wholesale electricity prices in Poland were among the lowest in this part of Europe. This resulted in high exports and production. The weighted average price of CO2 in 2021 was $62.85/t CO2. Poland’s revenue from the sale of CO2 allowances was more than $6.5 billion in 2021. Natural gas prices, and in turn also electricity prices, have risen to record highs across the region. Show Leading Sub-SectorsPower Generation  • 72.4% was the share of coal in electricity generation in 2021 – 2.7 p.p. more than a year earlier. Production from coal and lignite increased by 20.1 TWh compared to the pandemic year 2020. This is a result of increased electricity exports, among other factors. The large scale of the increase is also due to low production from coal in 2020. Coal-fired generation replaced gas-fired plants. The latter fell in 2021 for the first time in more than 10 years due to the very high price of natural gas. Among renewable sources, electricity production from photovoltaics grew most dynamically (+95% y/y, +1.9 TWh), while biomass co-firing recorded the largest decline (-18% y/y). Production from wind farms increased by 5% y/y. Domestic electricity production totaled 179.4 TWh. This record result is 14% higher than in 2020 and is the first increase in electricity production since 2017. The increased demand for electricity mostly has been met by an increase in coal-fired capacity generation, especially from hard coal. In 2021, 30.4 TWh of electricity was generated from renewable energy sources (RES), which is 8.5% more than in 2020. Wind power was responsible for more than half of the production from RES (54%), with the share of biomass at 15% and photovoltaics at 13%. In 10 years, production from RES has increased by 80%, from 16.8 TWh in 2012 to 30.4 TWh in 2021. Excluding PV, the largest increase in production was seen in wind power, at +250% in a decade. The achievable capacity of the Polish electric power system amounts 53.5 GW in 2021, which was 3.7 GW more than a year earlier. The share of RES capacity increased to 31% (from 25%). The decrease in hard-coal power plant capacity results from the shutdown of 12 units (two units each in the power plants Dolna Odra, Rybnik, Laziska, Lagisza, Siersza, and Stalowa Wola). The increase in lignite-fired plant capacity is due to the commissioning of a new 496 MW unit at the Turow power plant. The largest increase in capacity was in renewable energy, especially in prosumer photovoltaics. Conventional capacity has fluctuated between 32 GW and 35 GW for years, with a decline of 0.7 GW last year to 35.3 GW. RES capacity has quadrupled over the decade, from 4.1 GW in 2012 to 16.7 GW in 2021. At the end of 2021, 16.7 GW was installed as RES, an increase of 4.4 GW (+36% y/y). Solar PV capacity increased by 3.7 GW (+94% y/y), reaching 7.7 GW. In 2021, solar PV capacity surpassed that of wind farms. RES development in 2021 was mainly driven by the rapidly growing number of prosumers, and to a lesser extent, by RES auctions. The importance of gas in the Polish energy mix continues to grow. Domestic production of this fuel has declined for several years, and demand has been replaced by imported gas. However, the progressive diversification of gas sources is clearly visible, mainly due to contracts for the purchase of liquefied natural gas (LNG), mainly from Qatar and the United States. Imports from Russia account for less than 50% of Poland’s domestic gas supplies. In April 2022, Gazprom unilaterally halted gas deliveries to customers in Poland and Bulgaria, also the contract that Poland had valid until October of this year was terminated. The decreasing trend in domestic hard coal exploitation, which has been visible for several years, is to be revised by the current geopolitical situation. Russian invasion in Ukraine will slow down the move away from coal. Imported coal accounts for almost 20% of Poland’s consumption due to lower costs and of higher quality than Poland’s domestic coal resources. In the first half of 2021 Poland imported 6.2 million tons of hard coal, what was 15% more than in 2020 with the top suppliers being: Russia (9.5 million tons in 2020), Colombia, the United States and Kazakhstan. The current political situation forces Poland to look for alternatives to Russian coal. Most Polish coal-fired power plants were built between 1960 and 1980, and now must be retired and replaced. Poland’s newest and the last coal-fired power plants are Kozienice (1,000 MW) and Opole (2x900 MW), Jaworzno (910 MW) and Turow (450 MW). Subsequent power plant investments in Dolna Odra (2 x 700 MW) and Ostroleka (750 MW) will utilize natural gas sources. Ostroleka is evidence of the transition from coal to gas; the plan was originally contracted as a coal facility, but the plants’ owners have committed significant capital to convert the half-finished project into a gas fired plant. European Union Green Deal and FIT for 55 PackageThe European Green Deal aims for a 55% reduction of greenhouse gas emissions by 2030 (compared to 1990 levels) and full climate neutrality by 2050. For the energy sector and the Polish economy, it provides a chance to modernize, innovate and progress, including increased opportunities for investment. Poland is included in EU-wide targets; but has not committed to reaching individual climate neutrality targets on its own. The EU budget for 2021-2027 provides $164.3 billion in subsidies and $40.3 billion in repayable aid for Poland (in current prices), thereby making Poland the biggest net EU fund beneficiary among all the member states. Although the EU budget has been allocated to the member states, two countries, Poland and Hungary, have still not signed their respective agreements with the EU Commission. In the case of Poland, the EU Commission is challenging the current judiciary system and has demanded concrete changes. Once the changes are introduced the Ministry of Economic Development and Technology will be able finalizing the Partnership Agreement, i.e., the document specifying where Poland will invest its allocation of EU development funds. Poland will receive about €3.8 billion from the fund to mitigate the effects of energy transformation and moving away from coal, which will go mainly to the Silesia and Lesser Poland voivodships. The Polish government estimates that the energy transformation requires about $250 billion. Adopted in February 2021, “The Energy Policy until 2040” (PEP2040) assumes that Poland will gradually reduce its use of coal, on which it is 70% reliant upon. By 2030, Poland’s energy mix is to decrease to at least 56% reliance on coal. The share of renewable energy sources is to increase to no less than 23% by that time. According to an agreement which the government reached with coal miners, the last mine in Poland is to be closed in 2049. Poland may receive nearly €13 billion from the new “Fit for 55 Fund.” As part of the new climate package, the European Commission proposes to establish a new Social and Climate Fund. Its budget for 2025-2032 is expected to amount to €72.2 billion. Poland is to be the biggest beneficiary of the new instrument easing the costs of transformation. The new Social Fund for Climate Action aims to provide Member States with specific funding to help citizens finance investments in energy efficiency, new heating and cooling systems and cleaner mobility. The Social Fund for Climate Action would be financed from the EU budget with an amount equal to 25% of expected emissions trading revenues for fuels used in buildings and road transport. It will provide funding to Member States of €72.2 billion for the period 2025-2032, based on a targeted revision of the Multiannual Financial Framework. Thanks to the proposal to use equivalent funding from the Member States, the fund would mobilize €144.4 billion for a socially just transition, the Commission reports. In the years 2025-2032, Poland is expected to receive €12.7 billion from this fund, which constitutes 17.6% of the entire budget. Civil Nuclear EnergyIn 2009, Poland began developing the civil nuclear power program. Initially, the state-owned power company PEJ envisioned construction of two nuclear power plants with a 3,000 MW output to be completed by 2035. The program has been delayed significantly due to government reforms. Construction of six nuclear power blocks with 6-9 GW of total capacity by 2043 is now being considered. The Ministry of Climate and Environment expects PEJ to launch operation of the first 1-1.6GW nuclear power reactor in 2033, with the remaining five reactors of the same design coming online every two years until the project is completed in 2043. Site characterization and environmental analyses were being performed by PEJ at selected sites in Zarnowiec and Lubiatowo-Kopalino and were expected to be completed at the end of 2021. The reactor technology tender has yet to be announced. The PEJ estimates the cost of the nuclear power program at $45 billion and is looking for foreign technology provider to offer up to 49% of equity. On July 1, 2021, Westinghouse Electric Company announced the launch of front-end engineering and design (FEED) work under a grant from the United States Trade and Development Agency (USTDA) to progress the nuclear energy program in Poland. FEED is one of the key elements in the implementation of the Intergovernmental Agreement (IGA) between Poland and the United States to cooperate on the development of Poland’s civil nuclear power program signed in October 2020. This 30-year agreement, the first of its kind, represents an enduring energy bond between the United States and Poland. The Agreement provides that by August 2022 the United States and Poland will work together on a report delivering a design for implementing Poland’s nuclear power program, as well as potential financing arrangements. This will be the basis for U.S. long-term involvement and for the Polish government to take final decisions on which technology will be used in Poland’s nuclear power plants. In April 2022, the Polish government received an official offer from the French EDF for a proposal to build four reactors with a total capacity of 6.6 GW or six with a capacity of 9.9 GW for $35-50 billion, with the first unit potentially coming online as early as 2033. The company also declared financial support of up to 50% of the total investment cost, from the French government. Additionally, the Korean company KHNP presented technical and price proposals for the construction of 6 nuclear reactors with a total capacity of 8,400 MW. The first reactor could start operating in 2033. The Koreans declared that their offer is about 30% cheaper than the French one. The Polish government is considering conducting research into High Temperature Gas Reactor (HTGR) technology in Poland. The plan is to create the special HTGR development center in cooperation with foreign partners who have experience with this technology. The first step would be building a 10 MWt HTGR reactor in the National Center for Nuclear Research (NCBJ) facility for testing and licensing purposes, then develop commercial HTGR reactors that would provide heat for the chemical industry, and energy for the electric grid in Poland. Poland is also considering small modular reactors (SMRs) for process heat applications. The country has become a focus of interest for companies seeking to develop SMRs. Polish firm Synthos Green Energy has exclusivity to deploy GEH’s design in Poland. They are in a joint venture with PKN Orlen to deploy a fleet of SMRs across Poland and potentially in neighboring countries. Primary applications for newly deployed SMR are industrial heat and replacements for existing heat and power facilities. Synthos hopes to start operating is first reactor as soon as 2029. In addition, Polish mining giant KGHM is partnering with NuScale for a 1GW deployment. The reactor is primary intended to support KHGM’s alloy processing operations but would also send electricity to the grid. KGHM is working closely with Romanian officials who plan to deploy the world’s first NuScale reactor in 2027 or 2028. Poland hopes to follow closely and start operations as soon as 2029. Renewable EnergyIn 2008 all EU member states agreed to reach at least a 15% share of renewable energy (RE) by 2020. Building on the 20% target for 2020, the recast Renewable Energy Directive 2018/2001/EU established a new binding renewable energy target for the EU for a minimum of 32% by 2030 and includes with a clause for a possible revision in 2023. Poland’s share in 2020 had slightly exceeded 16% reaching 12.49 GW. Thanks to the rapid growth of photovoltaic installations the amount of energy produced from RES, Poland reached 18.7 GW in March 2022. Poland’s RES capacity totaled 18.1 GW in February 2022, and it grew by 8GW from 2020. Solar power that accounted for 48.5% of this capacity, and wind power with 39.7% are the main drivers of RE development in Poland. Biomass, hydro, and biogas, despite presenting huge potential, play a minor role. Photovoltaics in Poland is one of the fastest growing RES sectors. After a very good 2020, in which the growth of installed capacity was 2.4 GW, 2021 turned out to be even better. The installed capacity at the end of 2021 reached 7.67 GW. 2022 also looks promising; within the first two months, 1.1GW power was installed in new photovoltaic installations. Prosumers account for almost 80% of the installed capacity, which is close to one million. Renewable energy laws strongly support prosumer activities, and individual producers of maximum 10kW power from the newly installed RES system have guaranteed tariffs for 15 years. In July 2022 the system will change to net-billing. For larger producers, the law introduced an auction system. Each year, the Ministry of Economic Development and Technology announces the amount of renewable energy it will need and announces the reference prices for each group. According to the assumptions of the National Plan for Energy and Climate for 2021-2030, the capacity of energy from renewable sources in the national mix will increase from 28GW in 2025 to 50GW in 2030. In 2016 Poland passed legislation knows as the 10H law, which functions as a de facto moratorium on new onshore wind investments by restricting zoning in all parts of the country. The government is currently considering loosening restrictions and indicated a bill liberalizing the so-called distance law should be passed by the end of the third quarter of 2022. As reported by Bloomberg Poland, Europe’s “coal heartland” is now the hottest market for green power. Poland plans to increase its renewable power capacity through the development of offshore wind farms. By 2027, Poland expects 6GW power capacity to be generated by offshore wind. Poland finalized its 2040 energy policy and looks to the world’s largest players in RE to help them develop the market. Photovoltaics (PV)Poland is working its way to the top of the European ranks in photovoltaics. In February 2022 the installed capacity in photovoltaics reached 8.77 GW. By the end of 2021, it was 5.36 GW power installed, in 2020 - 2.64 GW and in 2019 - 0.82GW. After Germany, Poland is the second largest PV market in terms of new installed power in the European Union. The Polish solar market is set to grow by 35% annually, and in 2024, the total PV capacity is expected to reach 12.9 GW. This scenario is forecast by the European PV industry association, SolarPower Europe, in its latest EU Market Outlook. The Polish solar boom is happening at every level, from smaller privately-owned rooftop PV systems and commercial rooftop systems, to large free-standing installations. According to the Polish Society for Photovoltaics (PV Poland), the number of registered small-scale systems (below 50 kW) with an average capacity of 6.5 kilowatts (kW) grew from 460,000 (3 GW) at the end of 2020 to 845,00 (6 GW) at the end of 2021. These small-scale systems account for 80% of total PV power installed in Poland. Several larger PV projects, with capacity of approximately 6.3 GW, with grid connection permits operated in Poland by the end of 2021. According to a IEO’s Report (Instytut Energetyki Odnawialnej) GW of PV projects under development on the market with connection conditions issued. Of this number, 3,658 PV projects with a capacity below 1 MW have conditions of connection to the distribution and transmission grid, whose total capacity is close to 3 GW. In addition to the sharp drop in the cost of photovoltaics and growing environmental consciousness, the market is being driven by a whole raft of incentive programs (e.g., My Current - €230 million, Clean Air, Thermomodernization, etc.). An incentive program called Agroenergia with a budget of €50 million is specifically geared toward farmers and offers low-interest loans or direct subsidies for the construction of solar power systems between 50 kW and 1 MW. The Polish government introduced strong regulatory support, and there are subsidies for PV systems for on-site consumption as well as for utility-scale facilities. The expansion of “balancing” programs, which is what the Polish call net metering, is an example of how small and medium enterprises support prosumers. Solar power systems with less than 50 kW also benefit from a reduction (23% to 8%) in value added tax (VAT). The purchase and installation costs for PV systems can also offset income and reduce personal income tax. Additionally, state-supported auctions are used to fund large-scale installations. Currently, in the photovoltaic market, projects of large-scale PV farm (above 1 MW) are already balancing, in terms of connection power, small photovoltaic projects (up to 1 MW). According to IEO (Instytut Energetyki Odnawialnej) database, at the end of March 2021, 610 large solar farm projects with a total power of 5.6 GW had the conditions for connection to the grid. Large PV projects have attracted investors attention for about 3 years. In 2020, 2.8 GW of PV projects obtained the conditions for connection to the grid, and only in the first quarter of 2021 this decision was granted to 1.8 GW of PV projects. The largest operating photovoltaic farm, with a capacity of 70 MWp, is located in Brudzew, in Western Poland. It was built for the ZE PAK Group by ESOLEO. It consists of 155,554 photovoltaic modules of 455 Wp each and covers an area of about 100 hectares. The largest farm, now under construction in northern Poland, will produce 286 MW; it obtained financing guarantees in June 2022. The energy produced by this farm will meet the energy needs of a city the size of Lisbon. Wind: onshore and offshorePoland’s onshore wind generation capacity development was restricted in 2016, when President Duda signed a bill making it illegal to build turbines within 2 km of other buildings or forests, ruling out 99% of Poland’s land area. Due to these changes, the installed capacity in wind generation grew only by 0.8%. Since then, the government has made plans to revise parts of the bill that hindered wind energy development and created several investment disputes between Poland and international investors. According to assurances by the Minister of Development and Technology the bill liberalizing the so-called distance law should be passed by the end of the third quarter of 2022. Liberalization of the distance law will allow 12-13 GW of capacity to be reached by 2030, when the total potential for onshore wind power in Poland will exceed 44 GW. There are more than 1,200 installations in Poland using wind as a renewable energy source. Their installed capacity is over 7,185 MW, which is about 65% of installed capacity in all types of renewable energy installations in Poland. Nearly 160 further wind installations are under construction, with total installed capacity of approximately 2,500 MW. The amount of energy produced from wind sources and introduced into the Polish power system is systematically increasing. In recent two-to-three years, the amount of energy from on-shore wind installations was approximately 14 GWh. Wind energy accounted for about 10%of energy consumed in the country in 2020. According to the Polish Energy Regulatory Office, producers of wind and solar energy have been the primary beneficiaries of the auction support system for renewable energy production operating in Poland for more than five years. The results of the eight auctions decided in 2020 by the Energy Regulatory Office translated into nearly 54.5 TWh of capacity contracted for over $3.4 billion. As a result of two auctions conducted in 2021, 51 TWh of energy from RES was contracted for over $ 3 billion. The increase in energy production from the auction system is an important mechanism to fulfill Poland’s renewable energy target. In order to meet the goal of 21% of RES by 2030, the Polish government is planning an extensive offshore wind farm development. The PEP Road Map 2040 provides for visible participation of offshore wind in Poland’s 2027 energy mix, meaning the first mature projects should appear even around 2024. In the 2040 prospectus, the strategic document sets a potential of 10.3 GW. A draft law on the promotion of electricity generation in offshore wind farms published in January 2022 provides for the first auctions to be conducted by the President of the Energy Regulatory Office in this sector as early as 2023. Companies controlled by the Polish State Treasury will have a dominant share in the development of offshore wind farms. Investments in offshore wind farms are carried out by companies such as the Polish Energy Group, PGE. By 2030, PGE and their Danish partner, Ørsted, intend to erect wind farms with 2.5 GW capacity on the Baltic Sea. Another state group, PKN Orlen, also has concessions for the construction of a 1.2 GW offshore wind farm partners with Northland Power. PEP 2040 predicts that 55.2 TWh of energy will be produced from wind only. The Baltic Sea will be one huge construction site in the coming years, with planned investments estimated at roughly $25 billion. In the Baltic Sea, advanced preparations for the construction of several large wind farms are underway, with others planned. In the coming years, the demand for personnel in the offshore wind sector will increase dramatically. It is estimated that over 70 thousand specialists may find employment in the sector. The Polish Wind Energy Association (PSEW) estimates that the Polish energy system will require 1,000MW of newly installed wind energy capacity each year to comply with EU targets. Transmission and Distribution NetworkThe Polish electrical transmission system is fully integrated with the EU system. Since 2005 Poland has been a member of ENTSO-E, the European association for the cooperation of electricity transmission system operators (TSOs). On June 2, 2022, Polish Minister of Climate stated that Poland aims to overhaul the power line that connects Rzeszow with Ukraine’s Khmelnytskyi Nuclear Power Plant by the end of 2022. The line was shut down in 1993. Before then, it was used to import electricity from Ukraine. To implement the overhaul plan, the Polish Energy Network (PSE) has begun design work and tenders to select the investment contractor and for the delivery of equipment. This is a radical change in the Government’s position, which for years opposed the effort to overhaul the power line, fearing the inflow of cheaper electricity from Ukraine. PSE now expects the line to be operational by October 2022; however, it could take longer before Ukraine is approved to export additional electricity to the European grid. On June 1, 2022, Westinghouse signed an agreement with Energoatom (the operator of Ukrainian nuclear power plants) for the construction of four additional AP1000 reactors in Ukraine. In total, as many as nine will be delivered, five of which under a similar agreement concluded in November 2021 (estimated at around $30 billion). The first two are to be constructed at the Khmelnytskyi Power Plant. The power line to Rzeszow will enable Ukraine and the United States to export surplus cheap electricity with a high profit margin from Ukrainian reactors through Poland to Germany and Lithuania. On June 8, 2022, the European Commission announced that the synchronization of the Ukrainian power system with the mainland has entered a new stage after the network operators from Europe (ENTSO-E) agreed to prepare the conditions for starting trade in energy from Ukraine on the European market. Ukrainian Ukrenergo became the ENTSO-E observer. Ukraine began energy trading via its interconnector with Slovakia on July 7, 2022. Initial exports are limited to 50 mw, but if the European gride remains stable, ENTSO-E plans to gradually increase the export limit to a goal of 2000mw. Poland’s electrical transmission network is in good technical shape. The average age of Polish transmission lines is less than 40 years. Expanding and upgrading Poland’s electricity transmission network is a key element to meeting the EU goals of increasing renewable energy sources, improving energy efficiency, and better integration into European transmission networks. In 2021 alone, the largest energy groups invested $1.8 billion in the energy transmission and distribution sector; a year earlier, investments in the sector reached $2.1 billion. In 2021, Tauron Polska Energia S.A., an energy holding company in Poland, spent $520 million on investments in the power network. For comparison, the value of all Tauron’s investments in 2021 was $760 million. In 2021, Tauron spent $260 million on the construction of new connections, $226 million on the modernization and restoration of network assets, and almost $10 million on the dispatch communication system. The second place in terms of the value of network investments in 2021 was held by the Energa Group. The total capital expenditures of Energa Group in 2021 amounted to $543 million, of which $392 million was spent on distribution. PGE Group was ranked third. The value of capital expenditures in this segment amounted to $348 million, of which $179 million was spent on the modernization of distribution assets and $172 million on new projects in the distribution segment. The value of all PGE Group’s investments in 2021 reached $ 1.2 billion. Distribution was the second largest investment area in PGE, with more money spent only on conventional power generation (the construction of gas units). The Enea Group spent $266 million on investments in the distribution segment in 2021, and these investments are expected to increase to $260 million in 2022. The Polish Energy Network (PSE) spent $250 million on investments in 2021. The company’s most important investments are two 400 kV lines under construction: Plewiska-Pila Krzewina-Zydowo Kierzkowo and Krajnik-Morzyczyn and Morzyczyn-Dunowo. PSE completed the construction of the 220 kV Glinki-RecLaw line and the Reclaw substation in 2021. In the coming years, network investments will be as large or even larger. In March 2022 PSE published the draft of it “Development Plan for Meeting Current and Future Electricity Demand in 2023-2032.” The document envisions that PSE’s investment outlays will amount to nearly $8.2 billion in the next decade. Distribution companies are also planning to increase network investments. Smart GridAccording to the draft of Poland’s Energy Law, Poland plans to install smart meters with 80% of end-users by 2026. Currently, smart meters are installed with only 11% of end-users. The initial phase of installing smart meters in Poland took place between 2011-2015, but the process has since slowed. The reason behind this slowdown was a lack of applicable legislation that would obligate Distribution System Operators (DSOs) to implement Advanced Metering Infrastructure, and a lack of regulator actions enhancing such activities. The introduction of the capacity market in 2018 forced DSOs to install intelligent meters that enable remote data read-out. Among the five DSOs, Energa is the most advanced in Advanced Metering Infrastructure (AMI) implementation, with installation of meters for 30% of its clients. Energa has invested $500 million in smart grid development as of 2020. During next three years, Energa plans to introduce smart grid in their entire territory, which covers 25% of Poland’s area. The project worth $60 million aims to modernize the low voltage grid using EU funds. Tauron has installed 350,000 intelligent meters in Wroclaw (Smart City Wroclaw), and Innogy has installed 100,000 units in Warsaw. PGE, the largest DSO, has installed a project of 50,000 meters in Bialystok and Lodz. Enea signed a contract for introducing an intelligent grid in Szczecin and Swinoujscie in December 2019. PGE, Tauron, and Enea have together conducted several tenders for purchasing smart meters. According to Poland’s calculations, the installation of smart meters for 80% of end-users by 2026 will cost $1.2 billion. EU Infrastructure and Environment funds will cover $300 million of the cost spent by DSOs for grid infrastructure development, smart grid development, intelligent meters, grid automatization, and energy storage systems construction. The high and medium voltage distribution lines are primarily automated, while low voltage systems, which are most common in Poland, still require automation updates. The needs of the Polish power sector in the smart grid arena are enormous, and in order to meet them even partially, significant financial resources are needed. Nevertheless, many solutions are gradually being implemented, including the so-called hard (physical) technologies, which have already reached sufficient technological maturity and the benefits of their implementation far outweigh the potential risks (e.g., cyberattack). Activities in this area include:
Currently, Polish DSOs must unite to accelerate the development of Smart Grid in Poland. Market experts estimate that doing so will allow Poland to end its energy dependence on Russia faster. Smart Grid is also an important element in moving away from fossil fuels. Energy EfficiencyAccording to Poland’s Energy Policy, energy efficiency is one of the country’s three major energy priorities. A system of white certificates that award energy efficiency, investments, and expansion are an instrument for incentivizing energy efficiency in Poland. This system is required for the consumer utilities selling electricity to the end-user market. The system is available for all projects that meet specific criteria. To receive a white certificate, a company needs to send an energy efficiency audit to the Office of Energy Regulation. Energy efficiency audits are required for companies with more than 250 employees. EU funds dedicated to improving energy efficiency have allowed the energy market in Poland to grow over the last decade, advancing the thermo-modernization of buildings, street lighting, and industrial processes. The EU has allocated €6.8 billion to support the low carbon economy in Poland. This includes €3.8 billion available from the European Regional Development Fund and €3 billion from the Cohesion Fund, which includes the Environment and Infrastructure Program. The EU may also fund the production of electric energy, including co-generation, electricity transmission and distribution, including the smart grid; energy modernization of public buildings and housing; and increased energy efficiency in factories. Other financing dedicated to such projects include: the National Fund for Environmental Protection, made up of subsidies and preferential credits; EBRD; and EU PolSEEF, which includes preferential credits. In June 2022 the European Commission announced that it has made €2.4 billion available to seven countries under a fund to modernize energy systems and reduce greenhouse gas emissions from energy, industry, and transport. Poland is to receive €244.2 million from this fund to improve energy efficiency in industry. Energy StorageIn May 2021, Polish policymakers removed legal and regulatory barriers that had prevented the development of the energy storage industry. The Polish Parliament adopted an amendment to the national Energy Law concerning the treatment and definition of energy storages. The comprehensive regulations open the possibility of using energy storage facilities in various areas of the power system, the new rules cover electricity storage system licensing and eliminate tariff obligations, which were “double charging” energy storage systems connection to the grid. The new rules incentivize energy storage by reducing the fee payable by owners and operators of energy storage assets for connecting to the grid. The new rules create an opportunity for Poland to create a broad energy storage industry, from the development of technologies and products to the creation of jobs. Poland’s state-owned power company, PGE, has the largest plans to invest in energy storage facilities and intends to have approximately 800 MW in this technology by 2030. The company has selected several locations, of which the largest CHEST project with a capacity of 205 MW and 820 MWh, is to be constructed in Zarnowiec. Almost all storage facilities currently designed by PGE will use the lithium-ion technology, but a liquefied air storage facility is planned in Kielce. Another state-owned power companies Enea and Tauron received funding from the same program for storage projects. Enea is testing five different technologies - lithium-ion and double-layer capacitors and lithium-ion (LFP, LTO) and lead-acid batteries in five locations: Bydgoszcz, Zielona Gora, Gubin, Pogorzelica, and Opalenica. These are small storage units with capacities ranging from 1.8 to 100 kWh. The test results will be used to develop an efficient way to store energy at the low-voltage level to help balance prosumer micro-installations. Besides the big commercial investors, Poland has almost one million prosumers who invested in small RE installations, the majority in photovoltaics, in the recent three years. This prosumers’ development boom was driven by subsidies that the Polish government offered to individuals. So far, the grants partially financed the purchase and fixing of photovoltaic installation. The new prosumer billing rules, which came into effect April 1, 2022, are expected to make home PV owners start investing in energy storage. Also, issued in November 2021, the Meter Act created a legal framework for the development of modern technologies that enable the integration of distributed energy and lifted previous barriers to the operation of energy storage, such as double counting of network charges. Currently, storage facilities are not subject to mandatory registration and are treated as generation units. The Metering Act has introduced mandatory electronic registration of energy storage facilities above 50 kW. This will allow monitoring the development of storage technologies in Poland. Introducing auctions for hybrid renewable installations, such as facilities combining at least two renewable energy systems and an energy storage facility with a utilization factor of at least 60%, is still in the government’s plans. In 2022, resources for small scale projects (1MW or less) totaling 5MW and larger installations totaling 15MW are expected to be tendered in a pilot auction. HydrogenIn 2021, the Council of Ministers adopted the Polish Hydrogen Strategy, a strategy that sets out the main objectives for the hydrogen economy development in Poland and the actions needed to achieve them. The Polish Hydrogen Strategy specifies three key areas (i.e., industry, power generating sector and transport), six specific goals to be achieved, and forty tasks which, when completed, will enable Poland to become a beneficiary from hydrogen technologies. Currently, the Ministry of Climate and Environment is working to regulate the market and implement support mechanisms for the production and use of low-emission hydrogen. Green Hydrogen is a priority in Poland, in alignment with European Union energy policy. The EU aims to increase the use and importance of electrolysis- generated hydrogen in the energy and transport sectors. This forward-looking approach will reduce the dependency on hydrogen produced from fossil fuels, which accounted for 95% of hydrogen production in 2020. Although Poland already has a hydrogen strategy in place, and the construction of a hydrogen electrolysis plant near Konin is nearing reality, the Polish market is still awaiting government hydrogen regulations. According to energy experts, the hydrogen market should develop very dynamically due to increasing amounts of renewable sources, which are the basis for green hydrogen production. The President of Poland’s National Fund for Environmental Protection and Water Management announced that in 2022 the Fund will enter hydrogen initiatives, giving low interest loans to investors. In the budget of the Recovery and Resilience Plan submitted to the EU Commission, Poland has allocated €800 million to implement the hydrogen economy by adapting the law governing the use of hydrogen, creating infrastructure for production, transmission, refueling, and storage of hydrogen. The Commission will first authorize disbursements of these funds based on the satisfactory fulfilment of the milestones and targets outlined in the Recovery and Resilience Plan, reflecting progress on the implementation of the investments and reforms. Some milestones are necessary to ensure the effective protection of the EU’s financial interests and must be fulfilled before Poland presents its first payment request. Natural GasPoland consumes about 20 billion cubic meters (bcm) of gas annually. Before the February 2022 Russian invasion of Ukraine, Poland relied heavily on Russia for its gas supply. In 2021 natural gas imports (both pipeline and LNG) totaled 17.4 bcm, the same as in the previous year. About 55% of the imported natural gas came from Russia. Other import came from Germany (21%), Qatar (13%), and the United States (6%). In 2021, 1.4 bcm of natural gas was exported from Poland, mostly to Ukraine (98%). The remaining 2% of exported gas went to Germany. LNG imports accounted for 22% (3.8 bcm after regasification) of all imported gas fuel. The main suppliers were Qatar (60%) and the United States (26%). Natural gas production in Poland has remained approximately 5 bcm per year for many years. On May 23, 2022, Poland broke a 1993 agreement with Russia to build a transit pipeline system and supply gas to Poland. This was in response to sanctions on gas transit and to Russia’s withholding of supplies. This gas contract was set to expire at the end of 2022; however, Poland decided to end it earlier. As such, Poland is in the process of building its own gas infrastructure in order to become more energy independent and meet growing consumption. Poland began this process with its first LNG terminal in Swinoujscie in 2015. Poland’s LNG terminal in Swinoujscie is the first onshore regasification facility in the Baltic Sea region. This facility receives shipments from a Qatari supplier under a long-term contract, as well as a series of auxiliary deliveries secured via the spot market. In November 2017, PGNiG signed a five-year contract with Centrica LNG Co. This contract allows the deliveries of U.S. LNG from Cheniere Energy’s Sabine Pass LNG Terminal in Louisiana. In 2018, PGNiG signed other long-term contracts for US LNG that include 20-years contracts with: Venture Global Calcasieu Pass LLC and Venture Global Plaquemines LNG LLC for together 2.7BCM and Cheniere Marketing International 1.95 BCM of degasified LNG yearly. In May 2022 PGNiG signed yet another contract for LNG supply; this time with Sempra Energy that agreed to deliver 3 million tons of liquified gas per annum starting 2027. The first deliveries from these contracts will start in 2022-2023. In 2018, the Polish government made the decision to increase the LNG terminal’s capacity by 50%, giving the terminal 7.5 BCM capacity. The tender was announced in the beginning of 2019 and was recently concluded. Starting in 2023, PGNiG will have at least 7.45 million tons of liquefied gas, which is more than 10 billion cubic meters of natural gas. Such quantities of LNG will strengthen the company’s position on the market for this fuel and will contribute to the increase of gas supply security of Poland. As of May 2022, Poland has received a record number of LNG shipments. PGNiG emphasized in the communiqué that never has the company taken delivery of so many cargoes of LNG in a single month. The total volume of May deliveries amounted to 450,000 tons of LNG (i.e., 620 million cubic meters of natural gas after regasification). PGNiG is currently in the process of building Baltic Pipeline which will to carry gas from Norway to Poland. This pipeline is scheduled to be operational by the end 2022. The European Commission recognizes Baltic Pipeline Project as a “Project of Common Interest (PCI).” The EU is providing support funding to Baltic Pipeline because it strengthens the European internal energy market by securing more affordable, secure, and sustainable energy sources. PGNiG has booked all 10 BCMA of capacity on Baltic Pipeline starting in 2023, however they have yet to secure enough supply to fill the pipeline. PGNiG-leased Norwegian fields may provide up to three BCMA, but if the company wants to fill the pipe, they will have to compete on the increasingly competitive spot market. Once fully operational, the Baltic Pipeline will account for 43% of Poland’s gas consumption. Poland expects to receive another 37% via the expanded LNG terminal, which will receive imports from a variety of sources, including the United States. In addition, the Polish government is planning to build a Floating Storage Regasification Unit (FSRU) by 2026; it will be located in the bay of Gdansk with plans for possible expansion. This investment will allow Poland to accept delivery of 6.2 bcm of LNG per year. In addition to transporting liquefied gas, the tanker would also enable reloading and bunkering (refueling) of LNG-powered vessels. The Russian invasion of Ukraine triggered negotiations between Poland and its neighbors without sea access (i.e., the Czech Republic and Slovakia) regarding possible gas supply using the existing gas interconnectors between the countries. The Czechs and Slovakians are interested in accessing up to 6 bcm of gas delivery capacity. During the Tri-City Self-Government Congress in Lublin in June 2022, the Polish Minister of Climate announced that the planned floating LNG terminal in Gdansk Bay will be twice as large as originally planned and will reach a target capacity of 12 billion cubic meters. The revision of the plan is the result of greater interest in gas from Poland’s southern neighbors - the Czech Republic and Slovakia - but also from Ukraine. Resources
For more information about the Energy Sector, please contact: U.S. Commercial Service Poland Commercial Specialist: Anna Janczewska E-mail: |
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