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32 (127) 2017
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Interviews

Looking for the energy opportunities

Header janusz bil

Janusz Bil, the new head of the Department of International Trade's energy section at the British Embassy in Warsaw, talks to Michael Dembinski about the potential for UK investment in Poland.

MD: Over the past decade, we've seen successive waves of UK investors entering and then leaving the Polish market in several different areas from wind power to shale gas. What seems to be putting off foreign investors is the lack of transparency, and above all, predictability, when it comes to the regulatory environment.

JB: So far, the British Embassy has been involved in two high-value campaigns, one around nuclear power, and one in mining. I've started by reviewing the opportunities, exploring those areas where the UK is strong, where UK firms could do more. The UK has quite a lot of experience and expertise in offshore wind, gas-fired combined heat and power (CHP) and energy from waste. These should also be interesting areas from Poland’s perspective. Thus I think there exist opportunities for matchmaking Polish and British companies here.

MD: Poland's premier, Beata Szydło, while on the campaign trail ahead of the 2015 elections, said that the future of Polish energy is coal. How does the situation look two years into her government? How is the regulatory environment shaping up? Do you see any hopeful signs of the clarity longed for by foreign investors?

JB: Stability is an important issue when you think about foreign investors and UK companies as well. The overall conditions should be deemed as good. With 38.5m inhabitants Poland is a large market. In fact Poland is the largest country in the CEE, closely integrated with the EU markets. It is also widely regarded as attractive destination for foreign direct investments and investment grade ratings are assigned by the three leading rating agencies. Also the country is the fastest-growing EU member, with an average annual real GDP growth of 3.8% over the last 10 years. Worth mentioning Polish economy benefits from EU funds. It means positive impact of EU funds with €105 billion to be invested (2014-2020), the highest of all EU, including €27 billion in the energy sector.

UK companies should  be interested in coming over to Poland to get a full picture of the opportunities, and yes, the potential barriers. But then these face all foreign investors. Our role at the British Embassy is to work with UK business and the Polish government to help create favourable conditions for foreign investors. Excellent cooperation between our governments as part of  the Intergovernmental Consultations process provides great opportunity to exchange best practice and new ideas.

MD: Where do you see opportunities for British investors coming into the Polish energy sector?

JB: Energy from waste – the circular economy offers new opportunities to invest in technologies which will help to process waste – this is not just simple combustion of municipal waste – there is experience in UK in this area. Another is offshore wind,. a sector supported by the UK, which has a supply chain that can benefit. In the Polish parliament – there's a new task force – a parliamentary energy commission – which will be dealing with offshore wind. So Poland is interested in developing offshore wind. Now, the UK is the European leader in this field with 6GW of installed capacity. The UK's offshore wind supply chain is very impressive, including the construction of almost everything in the windfarms. Based on different studies, Poland's Baltic coast has the potential for between 9-40 GW of installed capacity. At present, 2.2GW have been granted terms of connection – for two investors, PGE Renewables, a subsidiary of the largest Polish energy company PGE, and the privately owned Polenergia. Both are developing offshore projects, currently in the early development stages, the first is expected to be in operation in 2024 – much earlier than first nuclear power plant.

MD: Solar energy is another area of renewable energy that is highly susceptible to the whims of the regulator. How is the market for photovoltaic looking from the point of view of UK exporters?

JB: Again, there are regulatory issues – the regulations for prosumers (consumers who also produce energy, selling the surplus to the grid) are very attractive in the UK. Having said that, we've witnessed tremendous growth of rooftop installations in Poland under the new renewable bill. There's a pretty attractive scheme for household installations; more and more people see this as an opportunity, more installed by prosumers. Householders can sell surplus power to the grid – but the overall concept favours onsite consumption over exporting to the grid. Pure production to the grid is not economically valid. Large-scale photovoltaic schemes are subject to the same auction-based support scheme for all renewables. There is an opportunity for UK suppliers who can offer an attractive business model. One Polish company, Columbus Energy, is offering photovoltaic panels on a rental option, with a fixed payment each month, covered by the saving on electricity. It's an impressive development. This model overcomes the consumer's objection that PV modules technology is continually improving; PV panels will continue to be  more effective and cost less.

Heat pumps and solar PV taken together allow householders to produce electricity that can be stored in the form of hot water. Across Poland's villages, there is a need to replace old furnaces. Deployment of heat pumps on a wide range should be considered as one of the options to achieve this. This would however require some support from government combined for instance with special tariffs offered to householders.  At the same time, the regulatory authority could consider withdrawing from approval of tariffs for household. This could help suppliers to offer more flexible tariffs, including pricing schemes based on spot prices.

Other renewables like small hydro or biomass are also areas worth exploring in terms of potential opportunities for UK firms. Last but not least, energy efficiency is a big opportunity in Poland. The Polish economy consumes 227.3 kgoe per €1,000 of GDP. This is significantly higher than EU28 average 120.4 kgoe/1000EUR and much higher than benchmarks like Denmark (65.1) or the UK (94.3).

Mining offers significant opportunities for UK companies. The Polish coal-mining industry was facing an uncertain time during last two years. Since then a new government and a new energy strategy has combined with rising coal prices to create a more optimistic climate.

Polish coal mining companies want now look to the future and are optimising their operations to increase efficiency and reduce production costs, despite difficult geology.

The establishment of the SRK and the state grant to support mine closure is a step in the right direction. The Clean Coal Technology Centre and the research institutes also are helping the industry evolve.

The future of coal mining in Poland depends on optimising production and closure of unprofitable mines. The UK has expertise developed from experience and solutions across the mining supply chain. The industrial revolution of the 18th century saw the UK begin to commercially exploit coal reserves, using it to power steam engines, trains and ships. This led to world-leading expertise in mine design, mining methods and equipment while delivering world-class health and safety. This expertise has been taken to the international markets with many UK companies having over a century of international coal mining service and equipment sales expertise to call upon.

The industry declined from the 1980s as economic reserves depleted. The subsequent closure of UK coal mining created world-class expertise in mine closure planning, energy recovery and economic regeneration. The UK, having invested substantially in research and restoration activity, is home to world-leading environmental consultancies who have vast experience of coal mine restoration and closure work.

As the UK moves to a low-carbon economy, the UK’s world-class reputation for innovation in academia is now focused on exporting solutions for pollution mitigation, design of clean coal power stations and carbon capture and storage.

Coal mine methane management is also an area where UK is able to offer good expertise. Burnt methane is one of the cleanest fossil fuels, producing significantly less CO2 per unit of heat than other hydrocarbon fuels. And methane can continue to be produced even after a mine has closed.

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