Prospects and development of the energy sector

At the strategy development stage, we assumed that within the short-term horizon, that is until 2020, no significant changes would occur in the market or in the competitive environment. The domestic energy market will continue to be divided among the largest vertically integrated utility groups (ENEA, ENERGA, PGE and TAURON) with the participation of smaller enterprises, which due to the scale of their business will have a rather insignificant impact on competition.

In recent years, consolidation processes have taken place on the domestic market (acquisition of EDF’s assets by PGE and ENEA) and 1,000 MW units in Kozienice and Opole have been commissioned. In 2020, a unit in Jaworzno is scheduled to commissioned. We are also witnessing a growing trend in the share of industrial electricity generation – companies such as Orlen and PGNiG are getting more active in this field. We assume that new major players will appear on the conventional production market in Poland.

The development of the power sector is tied to global megatrends and the situation on local markets. In the next few years, the development of the power sector will remain under the influence of decarbonization initiatives and activities related to climate protection. Until recently, trends related to green energy generation were often of a purely ecological nature and resulted from growing environmental awareness. Economic considerations unsupported by these additional aspects did not always permit the development of new projects.

Currently though, improvements in the advancement of relevant technologies and decreasing unit expenditures mean that renewable sources have become more competitive and are able to effectively challenge conventional generation technologies.

The key outcome of the technological development of renewable sources is the increase in their efficiency at a fraction of the cost. Increasing energy prices also affect the development of prosumer installations and industrial installations operated to supply energy to various industrial facilities.

Continued integration of energy sources also requires appropriate investments in distribution and transmission networks. Distribution networks will be modernized by adapting their topology to cooperation with rapidly developing prosumer and industrial installations. Involvement in the development of smart grids and the rollout of smart meters will also be necessary.

Renewable sources are often perceived as unpredictable and unstable, creating a risk of adverse effects on the security of the whole power system. Owing to the development of tools related to energy generation management and weather forecasting, this adverse impact should gradually diminish. Further integration of renewable sources also requires operational security for the pertinent balancing units. Due to the nature of operation for balancing purposes, the best solution seems to be gas units that are capable of quickly adapting their operation to the needs of the grid. The development of energy storage solutions which will be able to guarantee the supply of energy during periods when weather conditions prevent energy generation from renewable sources will be of great significance for improving the security and continued integration of renewable energy sources.

The increase in demand for electricity will also be supported by the expected development of electromobility and popularization of electricity consumption for various other purposes, including heating, as a measure aimed at reducing the number of low-emission carbon-based sources. The electrification of heating (combined with an increase in the significance of district heating) will be increasing along with environmental awareness and intensification of activities related to smog reduction.

The structure of energy generation in Poland will change. The share of hard coal and lignite in the energy mix will decrease at the expense of renewable sources (including large-scale ones like offshore wind farms) and natural gas-fired power plants and cogeneration plants. If a decision is made to build nuclear power capacity on the scale announced in Poland’s Energy Policy until 2040 (6-9 GW), this source will also constitute a significant share in energy generation.

The development of offshore wind energy is also noteworthy due to its status as the fastest growing branch of the utility sector in Europe. The construction of offshore wind farms in the Baltic Sea will affect Poland’s energy transition toward a low-carbon economy, guarantee the country’s energy security and become a tool in the fight against air pollution.

Poland’s district heating systems are among some of the best-developed such systems in Europe. Recently, climate change, resulting in mild winters, has reduced the demand for heat. Moreover, the relatively high cost of system heat increases interest in thermomodernization of buildings and automation systems that reduce heat consumption. All these factors combined cause increasingly limited growth opportunities for the district heating systems. The reduced heat consumption, growing competition from the local (individual) heat sources based on natural gas or electricity and the need to expand the district heating network outside the city centers will deteriorate the economics of such business operations.

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