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New report – Subsidies: Motor or brake of the Polish energy transformation?

WiseEuropa and ClientEarth Lawyers for the Earth have published the report “Subsidy: Motor or brake of the Polish energy transformation?”

As part of the preparation of the report, all forms of public subsidies used by the Polish energy sector were examined. In total, several mechanisms consume over PLN 7 billion a year from the state budget and the pockets of energy consumers. They are mainly used by coal-fired power plants. We subsidize the energy sector with PLN 7 billion a year. As much as two-thirds of support goes to conventional energy.

The report “Subsidies: a motor or a brake on the Polish energy transformation?” is a compendium presenting all forms of public aid that have been reaching the energy sector since Poland’s accession to the European Union, with a perspective until 2023. The report assesses these mechanisms in terms of their legality, costs and effects environmental and impact on energy transformation. “It turns out that, despite the noisy announcements of politicians about increasing support for green technologies, the stream of public money is not flowing towards RES. Still about two-thirds of the funds are fed into conventional, mainly coal-fired energy”  – says Wojciech Kukuła from ClientEarth, co-author of the report.

Coal is subsidies
Only in the years 2013-2018 from the state budget and energy bills we paid about 45 billion PLN to the energy sector. As much as 30 billion went to conventional energy.

“For comparison, for money that went to coal-fired power plants, one could build a nuclear power plant in Poland, considered to be an extremely expensive road, or two large wind farms in the Baltic,” adds Kukuła.

The most, because about PLN 8 billion, went to conventional energy from free greenhouse gas emission allowances granted under the EU ETS and from compensation for termination of long-term contracts (so-called LTCs), which only cost energy consumers PLN 7 billion during this period. It also benefited from support under the operational power reserve and intervention cold reserve, colored certificates for co-firing biomass with coal and cogeneration, or the Energy Prices Act.

Energy companies also benefit from financing from the Polish Development Fund and Bank Gospodarstwa Krajowego. Thanks to them, he managed, among others complete the construction of a new hard coal block in Jaworzno. In order to obtain legal certainty, this type of support should be notified to the European Commission.

The state also generously subsidizes Bełchatów Power Plant – the largest power installation in Poland, boasting low costs of produced energy. Meanwhile, only in 2019 the power plant got as much as half a billion zlotys in subsidies, which corresponds to about 10 percent its total revenues. In total, in the years 2013-2019, it received over PLN 2.5 billion in the form of free CO2 emission allowances. As the power plant co-burned biomass with coal, it also benefited from funds allocated to support green energy. Between 2010 and 2013, revenues from green certificates fed her budget by almost a quarter of a billion zlotys. The power plant could also count on preferential loans and European funds.

After 2020, the value of subsidies for Bełchatów Power Plant will increase even more. As part of the capacity market, it will receive up to PLN 800 million per year.

Green energy pays off
Renewable energy can count on much more modest support. In the years 2013-2018, renewable energy support systems cost Poles less than PLN 15 billion, which is just one third of the total value of subsidies received by domestic power engineering at that time. However, no changes should be expected over the next decade. In the years 2021-2023, the net cost of the capacity market will amount to approximately PLN 11 billion, while the net cost of the RES support scheme – only PLN 0.3 billion. Both systems are financed from the accounts of energy consumers.

Unlike the capacity market, renewable energy auctions are the optimal support system, both in terms of consumer benefits and environmental effects. This is confirmed by the results of recent tenders. The prices obtained at the auction on Thursday for new wind and solar power plants, on average less than 210 PLN / MWh, once again proved to be lower than market prices. On the other hand, the December auction of the power market closed with a record high price, almost 260 PLN / kW / year.

“Renewable energy auctions cease to function as subsidies. The mechanism will soon bring savings to energy consumers. Therefore, the government should try to extend its validity so that the auctions can also be organized after 2021 “- assesses Kukuła.

Others seem smarter
The report indicates that Poland – in terms of GDP – allocates to the energy sector similar sums as Germany and Great Britain, but with worse ecological effects. In 2012-2016, Great Britain reduced its energy emissions by half, and Poland by only about 10 percent.

“The existing support mechanisms in the Polish energy sector have mainly sought to maintain the status quo in the industry. Despite the multi-billion dollar support, the sustainable competitiveness of energy companies based on traditional coal technologies has not been built,” says Aleksander Śniegocki of WiseEuropa, co-author of the report.

“Without modernizing technology and business models, the industry will face stagnation: conventional energy will gradually shrink, generating high costs for consumers, and new zero-emission energy sources will not be able to replace it,” sums up Śniegocki.