Poland Sees 20 Billion Euro Investment in Combined Heat and Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Polish Ministry of the Environment recently announced that the country's power sector is likely to receive funding of about 20 billion euros ($30 billion) to build new combined heat and power (CHP) plants and refurbish existing facilities. Proposed projects include the CHP units constructed by Polska Grupa Energetyczna (PGE) (Warsaw, Poland), Fortum Oyj (HEL:FUM1V) (Espoo, Finland) and Polskie Górnictwo Naftowe i Gazownictwo (WAR:PGN) (PGNiG) (Warsaw, Poland).

Finnish energy major Fortum, which focuses on providing heat, electricity and steam to the Baltic and Nordic countries, is developing a CHP plant in Czestochowa with an investment of about 95 million euros ($142 million). The project, which is scheduled to begin operations in 2010, will use a mix of coal and biomass as fuel. Project sources have indicated that the fuel mix could contain up to 30% biomass. The new plant is expected to bring down Poland's procurement of heat and gradually phase out ageing plants. The company is also proposing to build another CHP plant in Wroclaw by 2015. Presently, Fortum operates a district heating network in Wroclaw, which addresses 62% of the city's demand. This network is considered to be the largest of its kind in the country.

State-controlled PGNiG is planning to set up three gas-fired CHP units with a combined investment of about 705 million euros ($1.1 billion). The projects include the 400-megawatt (MW) plant in Stalowa Wola, the 120-MW CHP plant in Tarnow, and the 200-MW Tri-City (Gdansk, Gdynia and Sopot) project. In June, PGNiG announced that it was extending the cooperation agreement with Tauron Polska Energia SA (Katowice, Poland) to jointly build and operate the power plant at Stalowa Wola. This project, which is estimated to cost 435.7 million euros ($652 million), is scheduled to begin operations by 2013. The Stalowa Wola plant is expected to require up to 500 million cubic meters of gas per year. On commencing operations, this will be one of the largest natural-gas-fired plants in Poland.

Leading Polish energy company, PGE will construct a CHP plant in Lublin, which will use 150,000 tons per year of waste to generate heat and power. The project is expected to go live in 2014.

In a related development, Vattenfall Heat Poland SA (Warsaw), a subsidiary of Vattenfall AB (Stockholm, Sweden), announced plans to build a new gas-fired CHP plant at the existing cogeneration facility in Warsaw. The new plant will have a power generating capacity of 400 MW and thermal heat production capability of 250 MW. Although company officials have stated that the project is scheduled to begin operations by 2020, there are indications that the plant could start as early as 2016. The plant is expected to require 500 million to 600 million cubic meters of gas per year. Vattenfall Heat's cogeneration plants contribute about 50% to Warsaw's annual electricity consumption of 7 terawatt-hours.

Poland has a population of more than 35 million people. The country has been heavily relying on coal to fulfill its energy demand. The European Union directive to move from coal to natural gas has led Poland to focus on building gas-fired power plants. Recently, Russian energy major OAO Gazprom (OTC:OGZPY) (Moscow, Russia) agreed to increase its supply of natural gas to PGNiG starting next year. Once the contract is approved and signed, Gazprom's supply of natural gas to Poland will increase from 7 billion cubic meters per year to 10.27 billion cubic meters per year through 2037. Experts have indicated that under the current foreign exchange rates, PGNiG will have to pay about 1.88 billion euros ($2.8 billion) per year to receive 10.27 billion cubic meters of gas. PGNiG is confident that it will be able to sell 18 billion cubic meters of gas to domestic power producers by 2015. Presently, Polish power producers consume approximately 14 billion cubic meters of gas.

Poland's efforts to increase the use of natural gas for power generation are part of the country's strategy to reduce greenhouse gas emissions. Industry observers have stated that Poland's per capita gas consumption is about 67% less than that of Western Europe. The country is also building a liquefied natural gas (LNG) terminal on the Baltic Coast, which is expected to begin operations by 2014.

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