Offshore wind-to-coal switch a financing challenge for Poland
Tuesday, May 12th, 2020
PGE Baltica chief executive Monika Morawiecka says Poland faces a number of challenges developing offshore wind in the Baltic, but finance is the biggest.
“The main challenges Poland faces are finance, grid expansion, developing a supply chain and permitting,” Ms Morawiecka told a WindEurope webinar in early May 2020.
“But finance is an especially big challenge because we face the need to finance the development of renewable energy such as offshore wind whilst also winding down fossil fuel use” – a challenge she said would not be without significant costs of its own.
“Poland has big plans for offshore wind. Up to 8 GW by 2030, possibly more,” she said, “but I do not think it will be possible without financial support from the European Union.
“Finance is the most acute problem for offshore wind in Poland. We know that the EU has its European Green Deal and that offshore wind will be an important part of that, but we really need to know if the EU can mobilise new sources of funding to make it happen.
“To build offshore windfarms we will also need to develop a supply chain. That will not be easy but doing so is also an attractive prospect because of the jobs it will create.”
In the past, Ms Morawiecka has also noted that what she described as “social acceptance” will also be key to the offshore supply chain. She said wind energy can provide jobs and reskilling presents a ‘major opportunity.’ This would boost public support for wind projects as coal-fired generation declines.
Poland still generates most of its energy from coal, as does PGE. Earlier this year, the Institute for Energy Economics and Financial Analysis (IEEFA) said PGE – which is one of Europe’s most coal-intensive energy companies – should ‘invest urgently’ to decarbonise its electricity generation, to replace declining profits from coal power plants through the 2020s.
A report from the IEEFA said Europe’s biggest coal plant, Bełchatów, should close around 2035, and PGE must invest more urgently in low-carbon alternatives, to avoid a collapse in cash generation and profitability in the 2020s.
The profitability of hard coal and brown coal (lignite) power plants will fall through the 2020s, the IEEFA said, as a result of rising carbon costs, falling capacity payments and high maintenance expenditures. PGE should therefore invest urgently in low-carbon, low-risk, high-cash generating assets, and especially renewables, to replace lost coal profits. It did not indicate how PGE might obtain the funds required to transition quickly from coal to renewables.
In addition to finance, the supply chain, and permitting, Ms Morawiecka also highlighted marine spatial planning as a significant challenge.
“This is really important for us,” she said. “We really need countries in the Baltic to collaborate on marine spatial planning and on cross-border issues this involves.”
PGE Baltica was established in January 2019 to implement PGE’s offshore programme and coordinates preparations for the construction of three offshore windfarms: Baltica 1, which has a capacity of up to 900 MW; Baltica 2, a circa 1.5 GW windfarm that has secured a grid connection agreement with PSE, the Polish transmission system company; and Baltica 3 , a 1.045 GW windfarm that has a connection agreement .
All three special purpose vehicles formed to develop the projects also have permits enabling their construction. Norwegian energy major Equinor is PGE’s partner for the development of all three windfarms.