Poland Faces Energy Crisis

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The largest coal-fired nation in Europe, Poland, is facing risks to its electricity security within three years.

The Ministry for the Economy has warned that growing demand for electricity is not being met by an increase in power generation and the situation will be greatly compounded by the expected closures of 4,400-megawatts (MW) of existing capacity by the end of 2017.

Poland relies on coal for more than 90% of its electricity and is under pressure from the European Union (E.U.) to reduce its reliance on fossil-fuel powered electricity in favour of more renewable energy. However, the country has no other alternative in the short term, like gas or nuclear, to replace its growing reliance on cheap domestic lignite -- the dirtiest form of coal. The government admits it will remain the backbone of its electricity mix and Ministry figures estimate that Poland's lignite reserves will last 200-300 years.

Although Poland has estimated high shale gas reserves, its hopes for a major dash-for-gas have dimmed in recent times with a number of companies pulling out of the country alleging there is too much red tape. Despite the government's promised changes to the legislation to make things easier, companies like Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), Marathon Oil Company (NYSE:MRO) (Houston, Texas) and Talisman Energy USA Inc. (NYSE:TLM) have all backed out of shale gas exploration. Today, Chevron Chevron Corporation (NYSE:CVX) (San Ramon, California) remains one of the largest oil and gas companies still trying to find shale gas in Poland. Poland's Prime Minister, Donald Tusk, once claimed there would be commercial shale gas flowing in the country by January 2014 but this has failed to materialise.

The new Ministry report outlines how more than half of Poland's power plants are more than 30 years old, with plans to decommission over 12,000 MW of that by 2030. More than one third of that will be shut down between 2014-17.

According to data from the country's grid operator, PSE, power production from lignite-fired plants rose by 3.7% in 2012, while that from hard coal-fired plants fell by 7%. PSE has said that it can boost the amount of available capacity in the coming years by another 1,500 MW by increasing reserves and through importing but the Ministry claimed that despite this, the risk shortages in 2016-17 remained high.

In June, Poland's largest power company, Polska Grupa Energetyczna (PGE) (PW:PGE) (Warsaw, Poland) said it may yet build two new coal-fired units in southern Poland, just two months after cancelling the €2.7 billion ($3.5 billion) project. In April, PGE pulled the plug on the Opole II project blaming falling electricity prices, weak demand and that the project would be a risky investment for its shareholders. Government pressure has forced the re-think. For additional information, see June 26, 2013, article - Pressure On to Revive Polish Power Project.

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