Short-term outlook

According to analysts of the World Bank, 2020 will be a slowdown period in the global economy.

The main risk factors for the global economy are a slowdown of the Chinese economy, a shrinking volume of global trade, uncertainty on the financial markets, declining pro-risk sentiment and geopolitical tensions, which include tensions between China and the United States, Brexit and the conflict between Iran and the United States. Another factor affecting the global GDP is the slowdown of economic growth in the euro area countries, expected to decline from the 1.1% GDP growth rate in 2019 to 1% in 2020.

According to forecasts by the National Bank of Poland, in 2020-2021 the GDP growth rate in Poland will be gradually declining. The forecast assumes a decrease in Poland’s economic growth rate to 3.2% in 2020 and 3.1% in 2021. The inflation rate is expected to increase to 3.7% in 2020, and in the following year it is forecasted to drop to around 2.7%. The unemployment rate is forecasted to rise to 3.1% in 2020, with an upward trend expected in the subsequent years.

The energy sector is expected to continue to maintain a low level of demand for hard coal. Within 2-3 years, the demand may fall even by as much as approx. 9 million tons due to the growing generation of electricity from renewable sources. The level of demand for the coal fuel is also affected by the decline in the demand for electricity, decreasing electricity generation in Poland and growing imports. The increasing electricity generation costs, including the high prices of CO2 emission allowances, and the growing competitiveness of renewable sources will contribute to the decline of economic efficiency in the conventional generation segment.

The increase in environmental awareness among the public and changes in the customers’ approach to the way of consuming electricity are expected to continue in the Supply Line of Business, which leads to a decline of the demand for electricity and an increase in the number of prosumers operating on the market. Due to the market price developments, a pressure on margins in the Supply Segment is expected.

In the regulatory area, further work will be carried out on the key direction documents for the sector, including: further work on the document and the adoption of Poland’s Energy Policy until 2040 and regulations on offshore wind-based energy projects, adoption of the direction aimed at achieving climate neutrality in the EU by 2050 and adoption, at the EU level, of a regulation establishing the Just Transition Fund. The sector will also be impacted by a change in the policies of financial institutions with respect to the financing of coal-based energy.

One of the key challenges for utility groups in the next several months will be to adapt their generation assets to environmental requirements resulting from published BAT conclusions, which will come into force in August 2021, and the EU’s increasingly stricter climate policy aimed at reducing greenhouse gas emissions. The energy sector will also be indirectly affected by policies pursued by financial institutions which, by limiting funding for technologies based on fossil fuels, change investment directions.

It is assumed that by 2025 the highest growth rate will be observed in renewable energy sources. On one hand, this will be the result of an increase in prices on the wholesale electricity market, associated with financial burdens related to the costs of CO2 emission allowances, on the other hand, it will also be a consequence of the strong support for the development of renewable energy sources and the cost competitiveness of this technology. The installed capacity in wind-based technology will also increase – the total capacity of new installations planned for construction is approx. 1,000 MW following the RES auctions held in 2018 and approx. 2,200 MW following the RESauctions held in 2019. An impulse stimulating further growth of wind energy may be an amendment to the Distance Act, which may increase the supply of projects in the coming years, and the execution of offshore projects.

Unfortunately, the current political and economic situation related to the SARS-COV-2 pandemic may adversely affect the situation described above, which is quite likely in the short term. In light of the numerous challenges currently facing not only European Union countries but also the whole world, it is impossible to state precisely the socio-economic effects of the pandemic in the coming months and years. Depending on how long the coronavirus pandemic lasts and what its economic consequences are, short-term predictions for the power sector may need to be revised. National economies depend on the supply of energy, while utility companies satisfy current demand. Already at the stage of preparation of this report (March 2020), a sudden drop in demand for electricity caused by the coronavirus pandemic was noticeable. This situation will strike conventional assets the most, as the reduced demand will be covered by energy generated from renewable sources despite a significant (approx. 40%) drop in the prices of CO2 emission allowances.

For more on this, see the tab Strategy/Environmental conditions determining the choice of strategy in the long, medium and short term.

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