King Coal Is Alive and Kicking in Poland

Running counter to the overwhelming trend in Europe, coal remains the king in Poland. The country's governing party unabashedly champions the industry as the foundation of its energy sector-a footing it doesn't want to abandon.

In December 2018, as ministers and delegates from all over the world attend the United Nations-sponsored climate conference (COP24) in Katowice, Poland, they will ironically be gathering about 60 miles from the PGE Opole power plant where an army of workers are today busy constructing two coal-fired units. The project will add 1,800 MW to the plant, part of a 10-GW buildout of new coal-fired power in Poland-including 3.2 GW already under construction-all scheduled to come online throughout the next decade.

The plants will be fed by several new or enlarged underground and open-pit mines holding an estimated 3.2 billion metric tons (mt) of lignite and several hundred million more tons of hard coal, making Poland far and away the biggest source of growth for coal in Europe, and one of the few bright spots around the world for the rock that burns. Anchoring support even further, on February 8, the European Commission (EC) agreed to allocate throughout the next five years more than a1.15 billion in aid to help conduct a radical repair of the nation's outmoded mining industry. Coupled with additional state support, this translates into more jobs and more infrastructure development.

Indeed, at COP24 almost all the energy used to deliver the expert testimony on climate change will be coming from coal and lignite as the nation's electrical generation is more than 80% dependent upon it. Poland's citizens rely on cheap lignite and expensive domestically sourced hard coal for approximately 100,000 direct coal-mining jobs and perhaps a million more multipliers as coal allows Poland to compete internationally as an industrial powerhouse while keeping the lights on.

However, it is estimated that around 80% of Polish coal mines are unprofitable with annual losses climbing to over a1 billion a year. Even worse, the overwhelming majority of its outdated mines are also unable to produce up to quota, so they are both expensive to run and unable to produce. Either way, the coal churned out feeds the nations mainly Cold War-era fleet of simple pulverized combustion power plants, 70% of which are more than 30 years old. Additionally, and perhaps worse, many Pole's use cheap store-bought coal for home heating, the burning of which only magnifies air quality problems. So, it's no surprise that, according to a 2016 World Health Organization study, 33 of Europe's 50 most-polluted towns are in Poland. Among these is Katowice.

Where the King Reigns

Running counter to the overwhelming trend in Europe, but perhaps consistent with President Trump's vision for America, coal remains King in Poland. The governing Law and Justice (PiS) party unabashedly champions the industry.

"Coal is the foundation of our energy sector, and we cannot and do not want to abandon it," said Mateusz Morawiecki, Poland's recently installed prime minister, during his inaugural speech to parliament on December 12, 2017.

A Western-educated former banker fluent in both German and English, he replaced Beata Szydlo, a coalminer's daughter, as part of a major cabinet shakeup at the highest levels of the government, which took place late last year. Seemingly, "as Warsaw seeks to wean itself off Russian gas, coal was presented as the patriotic alternative," wrote a reporter covering the event for The Economist. Indeed, the new government, increasingly bellicose on many fronts, seems content to receive money from the European Union (EU) and EC for both coal and renewable investments, the former earmarked for short-term economic stability and the latter for long-term growth.

A few weeks after Morawiecki's speech, in late December, three construction groups including a consortium of GE Power and Alstom Power Systems, submitted bids to build a 1,000-MW coal-fired unit-the Ostroleka power plant-for state-run utilities Energa and Enea. According to Reuters, Energa revived the Ostroleka project in 2016 in response to the PiS government's wider plan to stick to coal as the basic source of long-term energy.

This was followed by Enea's inauguration of a 1,075-MW unit built at its Kozienice plant (Figure 1) by Mitsubishi Hitachi Power Systems. The B11 unit, as it's called, utilizes advanced technology with supercritical parameters to achieve efficiency of 45.6%-one of the most efficient installations of its type in the world.

1. Kozienice Power Plant. Courtesy: Enea

Then in early January, the Warsaw government formally adopted a program for the mining industry through 2030 that assumes a radical repair of the sector with the active participation of the state. The over-riding goal is to create favorable conditions for profitability, efficiency, and modernity for the sector. Over this time, the plan postulates that the economy will need-depending on how much the nation relies on coal power-from 56.5 million to 86 million mt annually.

"These indigenous resources are a guarantee of Poland's comfortably high level of energy independence-as understood as independence from fuels imports compared to the EU norm," said Brian Ricketts, secretary-general of the European Association for Coal and Lignite (EURACOAL), the umbrella organization of the European coal industry. In this case, "government action is focused on increasing energy efficiency and the rational use of available energy resources as energy demand increases with the very welcome economic growth in a country where per capita [gross domestic product] is still 30% below the EU average," he continued.

However, Poland's coal and lignite production peaked in the late 1980s and has declined since then. The new legislation and cash infusion will not help to grow the mining industry. In fact, "the aim is to make the best use of what resources will be mined in the future, with more efficient, more modern mines and power plants. Production will continue to contract, not expand," said Ricketts.

According to the latest figures provided by EURACOAL, hard coal production in Poland decreased slightly in the first half of 2017 to 32.8 million mt, down 4.4% compared with the same period in 2016. However, Polish hard coal exports fell dramatically over this time by almost 30% while imports jumped about 20.5%. These sharp changes indicate hard coal production (coking coal is included in these figures) is struggling to meet demand.

Conversely, according to EURACOAL's Market Report 2017 No. 2, in the first half of 2017, lignite production stood at 30.7 million mt, 8.3% higher year over year. Lignite-fired electricity provided 26.6 TWh of Poland's 83.0 TWh gross electricity generation (32.0%), higher than the share in 2016.

Just the same, Poland is on track to produce 15% of its energy from renewables by 2020, as per EU law-although some 70% of those renewables are from biomass co-fired with coal. In his first address, Morawiecki did make passing references to renewables and nuclear, recognizing that coal will not always be the backbone of the economy. But he came nowhere near the previous government's comments that the country would reduce coal dependency to 60% over the next few decades. Though this may become the nation's eventual trajectory, over the short-term, "we are committed to developing an energy strategy that will consist of sectoral programs for the mining of coal and lignite, heating, and a strategy for the projected energy mix," said Deputy Energy Minister Grzegorz Tobiszowski while presenting the plan's objectives.

The EC funds can also be used for the decommissioning of mining damage. This allows mining companies to restructure and concentrate on developing new reserves, rather than struggling with non-productive assets. "The changes are a relief for active mining companies," continued Tobiszowski.

Changing the Future

Undoubtedly, Poland is facing major challenges to its energy system as mines continue to miss supply quotas, forcing the nation to turn to expensive imported coal or even more expensive Russian gas. Recently, the nation received a shipload of Appalachian coal from the U.S., though reportedly only for up-blending purposes. The problem in Poland, as in many other developed nations, is that the majority of the mines are simply uncompetitive as reserves are ever deeper, ever closer to populated areas, or ever further away from Poland's fleet of old, aging power plants.

The modernizing plans that were just approved will provide a vital cash infusion for the largest coal producers to unlock reserves and develop new deposits. It will also allow the major energy providers to purchase additional emissions controls and adopt cleaner coal burning technologies. Though much has been said about carbon capture and sequestration (CCS) being the savior for Polish coal (and the industry worldwide), the new plans barely mention CCS. However, it must be noted that the plants are compliant with EU laws requiring them to be "CCS ready." What that means, in fact, remains an illusive technological mystery.

In any event, Poland introduced the measures in order to mitigate the supply problems it identified for the coming years, in particular for the period after 2020. According to EC reports, these supply problems are being caused "by market failures in the electricity market that prevent prices from creating sufficient incentives to invest in new capacity or to keep existing capacity in the market." Simply put, in order to be profitable, the mining companies would have to charge much higher prices for their coal, which no one can afford, thus leading to a potential collapse of the industry and posing a major danger to the overall economy. The Polish authorities have successfully demonstrated that, without state and EC intervention, this trend poses a much more immediate threat than the existential danger of climate change that delegates will be discussing in Katowice come December.

While it should be noted that other European nations have recently built or authorized the construction of new coal-fired power plants, such as the Netherlands and Germany, Poland's movement in this direction stands out. No other nation in Europe is more dependent on coal than Poland or perhaps more unwilling to abandon it as the costs of renewable technologies continue to decline.

Unsurprisingly, there are many critics of the EC policy including Joanna Flisowska, coal policy coordinator with the Climate Action Network Europe. "The Commission's green light to an unprecedented amount of coal subsidies is obviously inconsistent with the imperative to phase out coal in Europe by 2030 required by the objectives of the Paris agreement. It is a huge sell-out to the Polish coal industry at the expense of Polish taxpayers and the climate."

Caught between a black rock and a global hard place, Poland-with the EC's blessing-has apparently chosen the rock.

-Lee Buchsbaum (www.lmbphotography.com), a former editor and contributor to Coal Age, Mining, and EnergyBiz, has covered coal and other industrial subjects for nearly 20 years and is a seasoned industrial photographer.

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