Poland’s powerful coal-mining sector is in deep trouble.
The fuel generates most of the country’s electricity and employs about 100,000 people; defense of coal has put the Warsaw government at loggerheads with Brussels and its Green Deal effort to make the Continent climate-neutral by 2050. Poland is the only EU country to say it won’t be able to meet the climate-neutrality goal.But the ground is shifting under the industry. Polish coal mines can’t compete with cheaper imported coal, record warm weather is blowing a hole in coal demand predictions and growing renewable power is driving down coal use.
On Friday, angry miners blocked railway tracks leading to a power plant in Łaziska Górne in Upper Silesia, Poland’s mining hub, demanding that the government stop imports of cheaper Russian coal.
“We’re just days, maybe two weeks, away from having to put production on hold,” said Patryk Kosela, a spokesman for the Sierpień 80 trade union. “The Łaziska power plant is just next to a coal mine that can’t sell its coal because the power plant is taking in Russian imports.”
Poland is being swamped by imported coal, while a lot of domestic production ends up stored on mountain-sized coal dumps.
Those demands are going to be difficult for the government to meet. The power station generates 1,155 megawatts of electricity, about 4.2 percent of national demand. Its operator is Tauron, a state-controlled company that is also listed on the Warsaw Stock Exchange. It’s tricky for the government to demand that the utility buy more expensive Polish coal under both Polish law and World Trade Organization rules.
But without a helping hand, it will be difficult for Polish coal to compete. Polish hard coal mines are deep and expensive to operate, so the coal they dig up costs about $70 to $80 per ton, while coal supplied to Western Europe or by Russia costs about $60 per ton.
As a result, Poland is being swamped by imported coal, while a lot of domestic production ends up stored on mountain-sized coal dumps.
A record 19.3 million tons of coal were imported to Poland in 2018. In the first 11 months of last year, imports came in at 14.9 million tons. That contributed to stockpiling 4.5 million tons of unsold coal at Polish mines, more than double the amount in November 2018, energy portal Wysokienapiecie.pl estimated.
The unsold coal “simply must have affected the company’s financial standing,” said Przemyslaw Skupin, who heads the Sierpień 80 union at Polska Grupa Górnicza (PGG), the EU’s largest mining company, employing over 40,000 people.PGG and Węglokoks Kraj, another state-owned coal company, are due to publish their financial statements in February, but the indications aren’t looking good. Polish newspapers are reporting that PGG failed to hit its financial targets, a contention the government rejects. The company is refusing to comment.
PGG was created in 2016 out of a restructuring of the Polish coal sector that also saw a massive infusion of aid from state-owned utilities; saving the coal sector was a key promise of PiS in the 2015 election. PGG pulled out of the red for a couple of years, but the hopes it would lead to a permanent improvement in the economics of the coal sector have been dashed, according to a Friday report from the Polish Supreme Audit Office, a government watchdog.
The report noted that productivity at the company had fallen by 2 percent, while salaries had soared by 13 percent.
The recapitalization, plus strong economic growth from 2016 to 2018 “created the chance for the company to undertake a deep restructuring to prepare for the next downturn,” the report said. But it concluded that “the goal for which this entity was created has not been accomplished.”
The coal sector is also facing a public backlash as more people grow worried about pollution, mining and climate change.
Temperature data showed that Poland experienced one of the warmest Decembers on record last year, which reduced demand for coal. January was also unusually warm.
Despite a very fitful start, renewable energy is gaining traction. The amount of electricity from onshore wind installations increased 19 percent while output from solar farms more than doubled. A flood of cheap natural gas is also displacing coal; electricity generated by gas-fired plants grew by 26 percent last year.
As a result, production of electricity from lignite dropped by 15.5 percent last year, while power from hard coal fell by 5 percent — shrinking coal’s share in Poland’s electricity mix to 74 percent in 2019, the lowest in history.
The coal sector is also facing a public backlash as more people grow worried about pollution, mining and climate change. In a sign of its changing fortunes, people from the town of Imielin in southwestern Poland protesting against the expansion of a local coal mine were attacked by angry miners on Friday.
But the government is wary of alienating miners whose votes are needed this May when PiS-backed President Andrzej Duda faces a tight reelection battle.
In order to continue supporting the sector, the government decided last month to create a central coal depot where it would send 1 million tons of coal currently piling up at the mines. “We will ensure normal operation of all mines and make sure production can go on,” Adam Gawęda, the deputy minister of state assets, said last month.
So far 300,000 tons of coal have been shifted to the storage site located in Ostrów Wielkopolski, some 300 kilometers west of Warsaw.
But there are skeptics that the idea will save Poland’s coal sector.
“The depot won’t solve a single problem,” said Jerzy Markowski, a coal expert who helped reform the sector in the late 1990s. “If you add transport and storage costs, the government is going to end up with 1 million tons of unsaleable coal.”