Krystian Krupa27 January 2021

Poland’s energy transition: lessons (to be) learnt

What we’ll be beholding

• Poland in a global context

• Past and more recent trends

• European Union’s (EU) 2050 energy and climate ambitions

• Poland’s Energy Policy 2040 (PEP 2040)

• Real life challenges and examples from overseas

Global context

Electricity generation by country in 2019, gross [TWh]

164 TWhPoland’s 2019 (gross) electric output

27th / 7thElectricity producer globally / in EU-28

138

140

154

164

170

171

187

201

227

253

265

274

276

279

284

308

319

324

357

364

555

585

612

626

660

1,036

1,118

1,559

3,494

4,401

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

UAE

Argentina

Ukraine

Poland

Sweden

Malaysia

Thailand

Egypt

Vietnam

South Africa

Australia

Taiwan

Spain

Indonesia

Italy

Turkey

Iran

UK

Saudi Arabia

Mexico

France

South Korea

Germany

Brazil

Canada

Japan

Russia

India

RoW

USA

Source: BP Statistical Review of World Energy, June 2020

Electricity generation by fuel in selected countries in 2019, gross [TWh volumes and % structure]

*Other = hydro, oil and waste. **RES = renewable electricity sources.Source: BP Statistical Review of World Energy, June 2020

31%

56%

41%

28%

31%

16%

73%

15%

24%

65%

74%

6%

21%

26%

15%

35%

46%

5%

22%

39%

3%

9%

54%

25%

12%

6%

19%

3%

26%

19%

5%

6%

8%

3%

8%

16%

19%

11%

14%

7%

18%

3%

3%

15%

5%

37%

12%

9%

24%

11%

10%

14%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Ukraine

Australia

S Korea

Germany

Japan

Russia

India

EU-28

USA

China

POLAND

Coal NatGas Nuclear Other* RES**

Historical data and trends

Poland’s annual electricity generation, consumption, net imports [TWh]

Source: data by Poland’s transmission system operator (PSE)

-1 -3 -4 -2 -3 -3 -3 -2 -3 -5 -6 -7 -7 -10 -9 -11-11-5 -1 -2 -1 -5 -3 -5

2

0

2 2 611

-25

-5

15

35

55

75

95

115

135

155

175

1990

1991

1992

1993

1994

1995

199

6

1997

1998

1999

2000

2001

2002

2003

2004

2005

200

6

2007

2008

2009

2010

2011

2012

2013

2014

201

5

2016

2017

2018

2019

Net imports Generation Consumption

10.1

2.9 1.9 1.40.0

-3.2 -2.4

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Germany Sweden Lithuania Belarus Ukraine Slovakia Czech Rep.

Net imports 2019 Net exports 2019

Poland has become net importer 13.1 TWh in 2020 (interim data)

• Most flows from Germany

• Loop flows: 5-6 TWh/a

Curious

case…

Poland’s annual electricity costs and prices [EUR/MWh]

*Indicative coal efficiency = 40%, indicative gas efficiency = 58%. Source: data by the European Commission, own calculations

25

37

4650

34

47

35

25

0

10

20

30

40

50

60

2017 2018 2019 6M 2020

Hard coalindicativevariable cost*[EUR/MWh]

NatGasindicativevariable cost**[EUR/MWh]

8

19

6

9

24

17

10

15

25

10 10

24

0

5

10

15

20

25

30

Coal[EUR/MWh]

NatGas[EUR/MWh]

CO2[EUR/Mg]

2017 2018 2019 6M 2020

In light of high CO2 prices, Poland’s relatively high

share of coal generation deepens the price differential

with neighbours and results in a net importer position.

Poland’s annual electricity generation [TWh] and installed capacity [GW]

Source: BP Statistical Review of World Energy, June 2020 and PSE data

NatGas &

PVTwo most quickly growing

technologies

Coal’s decline• Mostly driven by CO2 prices and increased imports

• 10 TWh less from coal in 2020 than in 2019

(with 4 TWh drop in consumption due to COVID-19)

19.9 19.722.0 21.8 23.9 23.9

9.2 9.39.3 9.3

9.3 9.31.2 1.3

2.1 2.62.7 2.70.61.5 3.4

4.9 5.8

5.8 5.8

5.96.1

0.9 0.9

1.1 1.1

1.11.1

2.3 2.3

3.0 3.0

3.03.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2015 2016 2017 2018 2019 2020 Oct

GW

Other

Biomass/biogas

Wind (onshore)

PV

NatGas

Lignite

Hard coal

133 133 134 133122

6 8 10 13

15

111 1315 13

15

10 86 7

75 5

5 44

0

20

40

60

80

100

120

140

160

180

1990 1995 2000 2005 2010 2015 2016 2017 2018 2019

TWh

Other

Biomass

Wind

PV

NatGas

Coal

Batteries &

hydrogenMost promising

technologies

Poland’s installed PV capacity estimates [GW]

Source: ARE and PSE data

Skyrocketing PV capacity (mostly rooftop)Driven by a national subsidy scheme (PLN 1.1 bn / USD 293 m so far, new edition in the pipeline)

• 64.6 MWp farm under

construction

• Plans for another 70 MW

and 203 MW facilities have

recently sprung up

3.7

0

0.5

1

1.5

2

2.5

3

3.5

41

/01

/20

14

1/0

3/2

01

4

1/0

5/2

01

4

1/0

7/2

01

4

1/0

9/2

01

4

1/1

1/2

01

4

1/0

1/2

01

5

1/0

3/2

01

5

1/0

5/2

01

5

1/0

7/2

01

5

1/0

9/2

01

5

1/1

1/2

01

5

1/0

1/2

01

6

1/0

3/2

01

6

1/0

5/2

01

6

1/0

7/2

01

6

1/0

9/2

01

6

1/1

1/2

01

6

1/0

1/2

01

7

1/0

3/2

01

7

1/0

5/2

01

7

1/0

7/2

01

7

1/0

9/2

01

7

1/1

1/2

01

7

1/0

1/2

01

8

1/0

3/2

01

8

1/0

5/2

01

8

1/0

7/2

01

8

1/0

9/2

01

8

1/1

1/2

01

8

1/0

1/2

01

9

1/0

3/2

01

9

1/0

5/2

01

9

1/0

7/2

01

9

1/0

9/2

01

9

1/1

1/2

01

9

1/0

1/2

02

0

1/0

3/2

02

0

1/0

5/2

02

0

1/0

7/2

02

0

1/0

9/2

02

0

1/1

1/2

02

0

[GW

]

Poland’s storage capacity and electric vehicles (EV) trends

Source: PSE, GramWZielone.pl, Polish Alternative Fuels Association (PSPA)

~1.7 GWPumped-hydro storage

(legacy facilities)

6 MWLargest battery storage

facility to date

EVs Charging stations

EU energy and climate policy: the 2050 trendsetter

European Green Deal (et alia)

Source: European Commission

Sector coupling

Decarbonisation

Circular

economy

Electric

transport

Innovations

Poland’s Energy Policy 2040 (PEP2040): most recent draft as of September 2020

PEP 2040 goals: September 2020 draft version

Source: Poland’s Ministry for Climate

HydrogenHoped to be a new branch of the economy and support the power sector

Real life challenges

Potentially challenging areas

ⵙ Lack of a final version of the PEP / lack of consent or coherent vision for the future

ⵙ Power system management challenges

ⵙ Resource adequacy

ⵙ Duck curve & flexibility

ⵙ Congestion

ⵙ Aged infrastructure (generation and network)

ⵙ Need to comply with EU policy (decarbonise the power sector currently sitting at 74% coal share)

ⵙ Some other ‘trivial’ challenges

ⵙ Power sector expertise, analytics and transparency

ⵙ Organisation and financing

Poland’s generation assets and network components

Source: own calculations based on data by the PSE and the Polish Power Transmission and Distribution Association (PTPiREE)

31%

13%

31%

19%

31%

7%

29%

17%

80%

9%

31%

21%

25%

22%

28%

17%

19%

20%

17%

15%

25%

35%

29%

32%

24%

39%

33%

33%

3%

34%

13%

31%

15%

28%

16%

37%

19%

30%

42%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

LV cable lines

LV overhead lines

MV/LV transformers

MV/LV substations

MV cable lines

MV overhead lines

HV/MV transformers

HV/MV substations

HV cable lines

HV overhead lines

40 yrs

66%of Poland’s thermal fleet was built over 30 years ago

7 GW / 19 GWExpected coal retirements by 2030 / 2040

(out of 33.2 GW)

Capacity marketIntroduced in 2018, first delivery year 2021

High penetration of RES and the duck curve in Germany

Source: data by EnergyCharts.info

Thermal output down

by 16 GW over 4 hours

(67 MW/min)

Negative prices

Surplus generation exported to neighbours(Poland’s demand ~21 GW, flows from Germany ~1.2 GW)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1 5 9 13 17 21 25 29 33 37 41 45 1 5 9 13 17 21 25 29 33 37 41

26 Dec 2020 27 Dec 2020

MW

Solar

Wind

OCGT

CCGT

Coal

High penetration of RES and the duck curve in Western Australia (Wholesale Electricity Market, WEM)

Source: data by OpenNEM

-60

-40

-20

0

20

40

60

80

100

120

0 500 1,000 1,500 2,000 2,500 3,000

Pri

ce [

AU

D/M

Wh

]

Residual load [MW]

Coal operating

at minimum load

-60

-40

-20

0

20

40

60

80

100

120

0

500

1,000

1,500

2,000

2,500

3,000

1 5 9 13 17 21 25 29 33 37 41 45 1 5 9 13 17 21 25 29 33 37 41

26 Dec 2020 27 Dec 2020

AU

D/M

Wh

MW

Residual load Price (right axis)

Negative prices

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Residual load (sim) Wind (sim) PV (sim)

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Residual load 2020 Wind 2020 PV 2020

The duck curve in Poland

Source: data by Poland’s transmission system operator (PSE) for 2020, own calculations

Actual data (5 July 2020)

Simulation for PEP

wind and PV goals

Coefficient of

variation 2020:

9%

Coefficient of

variation 2040:

41%

0

2

4

6

8

10

12

14

16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Residual load 2020 Residual load (sim)

Indicative duck

curve for Poland

ⵙ Duck curve currently not too pronounced,

very likely to deepen in the future

ⵙ Likely flexibility issues with a mostly

coal-based generation fleet

(including five large units of 1 GW each)

Power system flexibility

ⵙ Bespoke essential system services (ESS) need to be provided by various, most suitable technologies

ⵙ Poland’s current ‘spinning reserve’ regime needs to be unbundled and new, separate ESS need to be defined

ⵙ Technical capabilities of Polish existing generation plant need to be verified (requisite ramp up / ramp down rates, etc.)

ⵙ Increased variability (driven by intermittent RES) calls for a redefined approach to power system flexibility

ⵙ In light of ageing generation fleet, investments in highly flexible capacity (CCGT, OCGT, hydrogen, batteries) appear crucial

Power system flexibility

ⵙ European Commission's regulations on:

ⵙ Electricity balancing (2017/1485)

ⵙ Electricity transmission system operation (2017/2195)

ⵙ Internal market for electricity (2019/943, 2019/944)

ⵙ Frequency containment reserves

ⵙ Frequency restoration reserves

ⵙ Inertia

ⵙ Australian Energy Market Operator (AEMO) regulations on

frequency control ancillary services (FCAS), split into:

ⵙ Contingency services (with regard for inertia)

ⵙ Regulation services

In Australia’s National Electricity Market (NEM), AEMO operates

eight FCAS markets:

ⵙ Two frequency regulation services markets

ⵙ Six frequency contingency services markets

Essential system services (ESS) reforms are also underway in:

ⵙ The Wholesale Electricity Market in Western Australia

ⵙ The electricity market of the Northern Territory

Power system flexibility

First stage of reforms to Poland’s balancing market started from 1 January 2021:

ⵙ Active participation of RES, energy storage facilities and demand side response (DSR)

Second stage of to start from 1 January 2022:

ⵙ Market-based provision of balancing reserves

ⵙ Scarcity pricing mechanism

Congestion

ⵙ It is also a region with weaker transmission network

(historically most generation came in the south)

ⵙ Northern Poland is the go-to location for offshore

wind (Baltic Sea) and nuclear capacity

ⵙ Renewable capacity will also connect to the

distribution networks which warrants significant

investment in the distribution layer of the system

Source: map by Poland’s transmission system operator (PSE)

Congestion in Germany

Source: www.greentechmedia.com/articles/read/germanys-stressed-grid-is-causing-trouble-across-europe

Possible approach to manage the challenges of the future

Source: www.brighterenergyfuture.wa.gov.au/whole-of-system-plan Source: Australian Energy Market Operator 2020 Integrated System Plan

Integrated resource

modelling and planning

of Australia’s electricity

systems (WEM, NEM)

helps identify and quantify

necessary investments in:

• generation

• storage

• network.

krystian.krupa@gmail.com

Thank you!

The views and observations contained in this presentation are personal views and observations of the author, solely intended to provide general, non-binding information for discussion purposes and therefore are not a

substitute for detailed research or professional advice for decision-making purposes. The views and observations contained in this presentation do not represent views and observations of EY or the IAEE.

mailto:Krystian.Krupa@gmail.com