Polish Energy Companies Warn Government of “Inevitable” Power Shortages

Text of report by Polish leading privately-owned centre-left newspaper Gazeta Wyborcza website, on 5 April

[Report by Rafal Zasun: "Government, More Energy!"]

Poland may face a power shortage, energy giants are warning in unison. Unless the government does something quickly, we will meet the same fate as the Republic of South Africa, where “planned outages” are commonplace.

For younger Poles, the reminiscences about communist-era Poland, where power cuts happened on a regular basis, sound like tall stories. Electricity in a socket is as obvious as the fact that the sun shines.

Meanwhile, Warsaw ran the risk of a blackout in the particularly hot summer in August 2006. In order to save the system, Vattenfall activated the cogeneration plant in Warsaw.

At that time, energy companies began to warn the government. All to no avail. In recent weeks, they have written new reports on the issue, this time taking on a dramatic tone.

The first report is entitled “The most important issues in the functioning of the electric power sector in Poland.” It was written by executives and managers from Poland’s main state-owned enterprises: PSE-Operator, Zespol Elektrowni Patnow-Adamow-Konin [power plant], Polska Grupa Energetyczna [Polish energy group] together with its subsidiary BOT as well as Poludniowy Koncern Energetyczny [energy concern], which is part of Tauron. In the report, they warn the government that in the next few years our country may face the worst-case scenario, namely the lack of electricity. Poland’s economy is growing at a very fast pace, consuming more and more electricity, but the system’s capacity is not growing.

In order to avert the catastrophe, it is necessary to get new power stations with a capacity of 1,000 megawatts up and running each year. Even though energy companies are talking a lot about investment projects, no paperwork has been started, not to mention actual construction.

“It can be assumed that, in all likelihood, no significant new power plants will be built until 2015,” the report reads. This results from the lack of money, from lengthy construction procedures and sometimes from the necessity to wait for equipment delivery.

Still worse, a significant portion of the old power plants that were built in the times of the Polish People’s Republic [communist- era Poland] will be shut down. Consequently, the capacity of power plants will fall from 25,000 megawatts to 14,500 megawatts in 2020.

Instead of spending money on new power plants, Poland’s energy sector will have to invest billions of zlotys in the purchase of new carbon dioxide emissions permits. “The implementation of the aforementioned scenario accompanied by the lack of new power capacity will cause an inevitable and already dramatic shortage of electricity,” the report says.

Energy companies are urging the government to look for allies in the countries whose significant source of energy is coal (as is the case in Poland) to alleviate the consequences of the EU plans to reform the trading of carbon dioxide emissions permits. This is because the European Commission wants power plants to buy all carbon dioxide emissions permits on an exchange, which means that current free permits will no longer be applicable. Likewise, the government should urgently call tenders for the construction of new plants as well as analyse state aid for these projects and agree it with Brussels.

The government is aware of the danger and is trying to negotiate a more lenient version of the energy reform for Poland. But the transitory period that we are trying to negotiate would be merely three years.

Energy companies are also saying that it is necessary to quickly build several so-called standby power plants. Normally, they would be idle but they could be activated quickly if the system runs out of electricity. They are necessary mainly in the north of Poland.

The authors of the report are also calling for legal amendments that would make it easier to build new power grids, patterned after the procedures that allow swifter construction of highways. Finally, they want the government to seriously consider building a nuclear power plant.

Energy companies are also bitterly describing the fact that even though the previous government drafted a strategy for the energy industry in 2006, this is a general document. In addition, it was developed without the involvement of scientific or technical resources.

Likewise, the privately-held Vattenfall, which supplies electricity mainly to customers in Silesia, is warning against an energy catastrophe. Vattenfal is urging the abandonment of regulated energy prices (which discourage companies from building new power plants), a lower electricity excise tax (which is five times higher than the minimum rate required by the EU) and boosted competition in the market.

The scenario that Poland may face is now being painfully experienced by South Africa, whose main source of energy is coal. During the 1980s, there was plenty of electricity. Since 1998, the South African energy provider Eskom has been sending out signals to politicians that it is necessary to build a power plant and to allocate money from the budget for this purpose or to raise energy prices, which are regulated by the government.

However, politicians had other things on their minds. Meanwhile, South Africa has been experiencing an economic boom since 2000. It was fuelled by the fact that this country had been granted the right to stage the world soccer championships. And the worst-case scenario has been fulfilled 100 per cent. Today, the country is grappling with an unprecedented power shortage.

Energy companies decide who receives or does not receive electricity, and when. Clients are informed about such cuts in advance but sometimes “planned outages” are completely unexpected.

[On 5 April 2008, Rzeczpospolita (Internet version) carried a related report by Agnieszka Lakoma about the Economy Ministry's proposal to build a nuclear power plant in Poland within the next 12 or 15 years. According to the report, the proposal should be included in the ministry's document entitled "Poland's Energy Policy Until 2030."]

Originally published by Gazeta Wyborcza website, Warsaw, in Polish 5 Apr 08.

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