The ongoing creation of the climate policy of the European Union, also known as New Green Deal will lead to the thorough remodeling of the economic life of the Old Continent. It mostly concerns companies that are most likely exposed to changes, e.g., regarding energetics. Some of these entities are already implementing their own pro-climate strategies, preparing for new European Union regulations.

Orlen – European champion

When it comes to ambition and strategic vision, Orlen is a leading energy company. Płock’s company, governed by the CEO Daniel Obajtek, is craving to become a multi company of a global reach. To fulfil this goal, Orlen took over Energa, Ruch, and Polish group Press, and gained an approval from EC (European Commission) for taking over Lotos and wants to take over PGNiG.

Plans of pulling together assets on the Polish oil market, based on Orlen, had arisen years before the moment the United Right Camp reached power. Then it was announced that the two giants of the Polish oil industry should combine to prevent mutual assimilation of the Treasury companies. From the start, Orlen’s role was the leading one, and this exact company was about to take over the opponent. Yet, over time Orlen began to expand its ambitions to the area outside their standard field of activity. The company bought the 80% of Energa shares (having an approval from EC), officially becoming the owner of Gdańsk's electricity company. This transaction was a phenomenon on the Polish oil and energy market. Its finalization lasted for merely 4 months.

The EC in the final decision accepted Orlen’s plan regarding the Lotos group.  Yet it made Orlen be dependent on fulfilling many requirements. Concerning i.a.: the sale of 30% Lotos refinery shares (along with a package of management rights e.g., for gasoline production), the sale of about 80% Lotos gas stations (to be exact 389 gas stations in Poland), and freeing most of the power capacity stored by Lotos in non-dependent storage (including capacity in oil terminals).

During the process of integration with Lotos, Orlen received the biggest network of press distribution in Poland, the Ruch and publishing house Polska Press. Currently, the company is aiming to take over PGNiG. Such intentions can be understood as plans for creating a reliable instrument for the implementation of energetic transformation. Along with it, the significance of the company will clearly increase on a global scale. Still, the basic role for a multi company is aggregating the power, assets, know-how and potential for a thorough rebuilding of the Polish energy sector.

Such actions fit right into the company’s strategy until as late as 2030, and its plan was presented in 2020. The strategy should rely on ‘temporal company rebuilding, consisting of new technologies, environmental and consumer trends. The priority would be ‘projects based on long-term trends’. Orlen is planning to devote 140 billion PLN for investments in the upcoming 10 years. On the resident rises the idea of expanding energy production in the electricity sector. Until 2030, the company expects to reach the level of 2.5 GW installed in renewable energy sources. The 1.7 GW will be covered by offshore windmills plants, with 0.8 GW by land sources produced by wind and photovoltaic plants. The Orlen group will also increase the power capacity in modern gas-fueled power plants from 1.1 to 2 GW. Recycling and biomaterials will appear as a new branch. All these actions are expected to lead Orlen to reach climate neutrality in 2050.

Green return of Polish electricity sector 

Orlen is not the only Polish company which started the process of huge changes in the direction of adapting to the reality of new regulations. To such a group we can include PGE, PGNiG and Tauron.

In October 2020, PGE adopted a new strategy which was based mostly on reaching climate neutrality by 2050 and a shift to the production of purely renewable sources of energy. To achieve this target, PGE plans to develop a generation capacity of wind and photovoltaic energy, but also to expand its network infrastructure. The company also wants to discontinue the use of coal. Already in 2030, the PGE’s shares of low- or non-emission in a manufacturing portfolio would estimate 85%, and renewable energy would be a 50% part of total generated energy. By 2040, the group aims to be in ownership of a windfarm with a power capacity reaching over 6.5 GW and until 2030, solar plants of over 3 GW. Capital expenditure in the perspective of 2021-2030 is estimated at 75 billion PLN.

PGNiG also has its own plans regarding the reduction of environmental pollution. In the coming years, the group estimates to spend 4 billion PLN on renewable energy sources investments, which is evaluated to create 900 MW of energy in these technologies. PGNiG aims for an intensive development of the bioenergy segment.

Tauron also showed the concept of the so-called “Green return” by planning to base its energy mix on 66% of low- or non-emission assets in 2030. Until 2025, Tauron intends to build 300 MW of photovoltaic energy plants and 900 MW of windfarms. The company has an ambition of reducing its own emissions by 20% until 2050. The first step in this direction was in 2019, with the purchase of 5 windmill plants of a total energy capacity reaching 180 MW. In order to fund the process of transformation, in 2020 Tauron decided to issue bonds of 1 billion PLN total value.

The German model in coal assets

The transformation to climate neutrality has reached even the Polish mining sector. In September 2020, the Polish government finalized the breakthrough agreement with the miners' representatives regarding the closing of mines of the Polish Mining Group. Complete undertaking will be specifically regulated by a Social Contract, whose contents will be presented in 2021. Although, we are now aware that most of the Polish coal industry is planned to be eliminated until 2049.

The agreement consists of many guarantees for miners, i.e., an employment guarantee until reaching the entitlement for mining pension for all working underground or in state-controlled units processing coal (who are employed at the moment of signing the agreement), the possibility of the use of social barriers (days off, severance pay) provided by the state, and the application for access to hard coal deposits. The government is bound to appoint a special group working on clean coal technology, a representative on post-mining areas, and an investment fund based on assets of the closure of Polish Mining Group mines. In order to meet all these requirements, the government will reach out to the EC for public help, which would allow functioning of PMG mines until 2040 (up to this year only two units are expected to be active).

The agreement has been prepared in a way not dissimilar to how Germany managed to close its coal mines. Berlin’s government made a similar decision in 2007, when it outlined the end of subsidizing the coal mining industry by the end of 2018. There are many similarities between the Polish and German models because of that. Above all else there is a division between the end of the mining sector and the end of the coal-based energy sector. While in Germany the two last coal mines closed their doors in December 2020, that very same year the government opened a brand-new power plant utilizing the aforementioned power source - the Datteln IV plant. When drafting a special investment fund for PMG, the Polish government borrowed the German model – that very same solution was implemented across the border with the so-called RAG-Stiftung, a foundation under the RAG company, the owner of the two last German coal mines in Bottrop and Ibbenbüren. The foundation is responsible for securing and recultivating the post-mining areas, recompensating any eventual mining damage and taking care of the tradition and culture of mining regions, as well as the miners themselves.

When analyzing the German model of managing carbon assets, it is important to note that the very process of decarbonization progresses quite sluggishly. Other European countries, however, have much more to brag about in that field. It may be worth noting that the British model allowed the reduction of coal in the energy mix from 40% in 2012 to just above 0% in 2021. Great Britain was the fastest country to reduce the amount of emissions from energy production out of all European countries. It was achieved thanks to expanding the gas-based parks (about 35% of the entire energy mix), renewable sources (about 35% of the mix), as well as maintaining a stable foundation from nuclear units (about 20% of the mix).

It is important to mention the French model. France has the least emissive electro-energetic system in the European Union, after Sweden, when it comes to greenhouse gas emissions per kilowatt-hour of produced energy. It has been achieved by 54 nuclear reactors responsible for providing over 70% of the French electricity supply. The other part is helped by hydroelectric plants as well as other renewable energy sources and, in a negligibly small part, fossil fuels. Thanks to an intensive nuclear expansion program commenced in the 70s, France, in just about fifteen years, could practically discontinue fossil fuels as an electric energy supply.

Polish ‘eco-propaganda’

Poland can learn from its western neighbour not only in regards to the skillful governance of the mining sector, because in the last dozen or so years Germany managed to create an incredibly efficient way of promoting its own way of energetic transformation (Energiewende). Additionally, Germany also learned how to emphasize all the transformation’s assets while skillfully hiding all its liabilities.

The Federal Republic of Germany (FRG) smoothly hid the fact it is the biggest worldwide brown coal consumer, hiding that data under continuous reports that showed, among others, the increase in power generation coming from renewable energy sources (all while failing to mention that Germany is also prematurely closing the clean, emission-free nuclear power plants), or informing about the closure of coal mines (also failing to indicate that coal mines would switch to importing the fuel instead).

Poland should reap from what Germany’s skill and experience in that field has sown - not to hide anything, but to promote the Polish achievements regarding the energetic transformation and to break away from the coal state label.

Generally, the scenario of Polish energetic transformation, outlined in the ‘Energy Policy of Poland until 2040’ consists of creating a second, parallel electro-energetic system composed of low-carbon sources. That system would allow for the moving away from burning fossil fuels towards generating power from sources with a low carbon footprint. Additionally, Poland utilizes a wide range of technologies (e.g. a comprehensive set of renewable technologies, nuclear technology, hydrogen technology, energy-saving solutions, etc.). The scale of the challenges that Poland faces when implementing such technologies positions that transformation in the first place, above other 21st century economic projects. The sole idea of capital expenditures needed to complete the aforementioned project (estimated by some to cost approx. 2 billion PLN) shows the scale of the entirety of that process, hence the enticement to promote the notion of its ongoing implementation.

Presenting Poland as a modern country pursuing a proclimatic, economic transformation might not only work as an image politics effort, but also as the first step towards potential investors or economic partners, looking for convenient areas for creating new investments or expanding already existing projects. Poland has already started to utilize ways of energetic transformation and attracts, for example, companies specializing in electric car battery production. An adequate marketing strategy may broaden the spectrum of entities interested in conducting business in Poland.

It may be worth noting that the communication regarding the energetic transformation should happen not only across the borders, but within them as well. The Polish society will bear much of the cost of that transformation effort, therefore there is value in clearly explaining to them why it is necessary to have such a major and rapid transformation. Otherwise, the percentage of people disgruntled or hostile towards the idea will rise. That would in turn risk a deceleration of the process due to the risk of an appearance of the groups opposing the idea of transforming the Polish energy industry, and through the democratic process, taking the leading mantle in the country.

Author: Jakub Wiech, Deputy Editor-in-Chief of Energetyka24