For years Poland’s ruling Law and Justice party vehemently defended its sprawling coal industry against objections from EU leaders, who decried Poland’s fealty to coal as outdated and environmentally destructive.
So it came as a surprise when, in November, Polish prime minister Mateusz Morawiecki created a new climate ministry and installed as its head not a member of his own pro-coal party but a respected technocrat, Michal Kurtyka, the former president of the United Nation’s COP24 climate talks.
“Once, we could not afford to develop renewable sources of energy,” Morawiecki said in the wake of an election earlier that month, according to Politico. “But now we cannot afford not to develop them.”
That recent about-face was on display late Thursday when Polish energy firms Energa and Enea suspended financing for what has been billed as Poland’s last new coal-fired power station, Ostroleka C, saying they needed more time to find the money to build it. In a statement, the firms said that the suspension of financing for the one-gigawatt (GW) plant could also require suspending construction, 5% of which had already been completed by the end of January.
“[E]xisting efforts to acquire an investor for the project have not brought the expected results,” the two utilities said.
A handful of recent developments have foiled plans to secure funding, the firms said, including the European Investment Bank’s new commitment to phase out fossil fuel lending; the EU’s recently unveiled “green new deal”; and new plans by Poland’s state-run oil refinery PKN Orlen, which said in December that it would buy Energa, to turn Ostroleka C a gas-fired power plant rather than a coal-fired one. PKN Orlen already runs one gas-fired power station.
Under an agreement signed with contractors General Electric and Alstom Power Systems, work on Ostroleka C can be suspended for up to 90 days, meaning this does not necessarily spell the end for the project, located in northeast Poland. Still, analysts have repeatedly warned that it faces long odds.
The chief barrier is financial. Under EU emissions regulations, Ostroleka C’s owners would need to pay dozens of euros per ton of carbon emitted into the atmosphere as a byproduct of burning coal, the most polluting fossil fuel. The costs of the EU carbon trading market were prohibitive even before prices of the individual permits surged in 2018-19, analysts say. Because of such handicaps, Ostroleka C would require subsidies granted through the government’s capacity market system, a type of auction that allocates money to power stations that agree to remain “on call.”
Critics of the project applauded investors for not bowing to pressure.
“As much as Krzysztof Tchorzewski [the former energy minister] pushed for the construction of the power plant…investors and banks resisted the influence,” said Michael Hetmanski, an analyst with Warsaw-based think tank Instrat Foundation and the author of a critical report on Ostroleka C’s financial outlook. “At the end of the day, they escaped from the trap, which is coal.”
Ostroleka C has already been hobbled by a number of obstacles. In October 2018, the environmental legal non-profit ClientEarth filed a legal challenge to try to stop Ostroleka C, saying it was bound to lose money and would only hurt shareholders. In August, a court declared that Enea’s participation in the project was “invalid,” although Enea has appealed the decision. And in November Poland’s state-run PGE, the largest firm in the electricity sector and the owner of a number of existing coal-fired power stations, gave Ostroleka C the cold shoulder, saying it preferred to invest in offshore wind and solar plants instead.
None of this means that Poland has cast aside its warm feelings for coal. At climate talks in December, Poland was the only European country that did not pledge to become climate neutral by 2050. Coal still generates around three-quarters of the country’s electricity, and supportive industries such as mining provide jobs to hundreds of thousands. As many as 139,000 people still worked as coal or lignite miners in 2018, according to data from EU statistics agency Eurostat.
Nevertheless, the government’s newfound openness to renewable energy is difficult to miss. Just a couple years ago, Law and Justice was deliberately setting up barriers to invest in renewable energy, such as an infamous 2016 law that had the effect of dramatically reducing the available land on which to build wind farms. Now, that law and others have been relaxed. The government is gearing up to auction off up to 2.5 gigawatts in new wind capacity this year, and it is promoting new solar power subsidies that come with 15-year guarantees. Off the coast of the Baltic Sea, state-run PGE has drawn up plans to build a huge new offshore wind farm.
Investments are coming mainly from the private sector, but it is doubtful that they would have had the space to pursue their plans without a shift in priorities from the top.
“There is indeed a kind of a green shift in this government,” said Hetmanski, who noted that growing awareness of climate change and modest electoral gains for opposition parties threatened Law and Justice’s traditional defense of coal. “Environmental goals are fully mainstream now. It’s a huge mandate for any political party.”