POLISH INFORMATION AND FOREIGN INVESTMENT AGENCY. Energy sector in Poland. Marta Kokoszka Manufacturing Team Foreign Investment Department

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1 POLISH INFORMATION AND FOREIGN INVESTMENT AGENCY Energy sector in Poland Marta Kokoszka Manufacturing Team Foreign Investment Department

2 EU climate and energy policy - targets for 2030 Raising the share of EU energy consumption produced from renewable resources to 27% A 27% improvement in the EU's energy efficiency. A 40 % reduction of greenhouse gas emissions from 1990 levels A 43 % reduction of greenhouse gas emissions from 2005 levels (ETS sectors i.a. energy sector) Beboy-Fotolia.com

3 Polish energy mix 2012 vs Source: Jak pakiet zmieni polski miks energetyczny, Polityka Insight na podstawie danych ARE

4 Investment trends According to the International Energy Agency Poland will have to invest over EUR 195 bn till 2030 (EUR 134 bn new power and CHP plants, EUR 61 bn distribution and transmission grid) Average age of energy blocks = 40 years New trends: decrease in the importance of coal construction of nuclear power plant construction of gas installations construction of coal installations development of renewable energy LNG terminal in Swinoujscie building of new gas piplines and storage facilities extension of oil terminal in Gdansk new cross-border connections (PSE)

5 Major investments planned Project Investor Capacity (MW) Fuel Estimated value (PLN bn) PP Północ - Rajkowy Kulczyk Investments 2 x 1000 Black coal Estimated completion date PP Opole II PGE 2 x 900 Black coal 9, PP - Ostrołęka Energa 1000 Black coal PP - Kozienice Enea Black coal 6, PP - Jaworzno III Tauron PE 900 Black coal 6, PP - Turów PGE Lignite coal 3, CHP - Stalowa Wola Tauron +PGNiG 400 Natural gas 1, PP - Włocławek PKN Orlen Natural gas 1, CHP - Fortum Wrocław Fortum 400 Natural gas + biomass 1, CHP Łagisza Tauron 400 Natural gas 1, CHP - Zabrze Fortum 135 B. coal & biomass CHP - Bydgoszcz PGE / Natural gas 1,5 2017

6 Major investments planned Project Investor Capacity (MW) Fuel Estimated value (PLN bn) CHP - Gorzów PGE Natural gas PP - Pomorzany (Szczecin) PGE Natural gas CHP - Katowice Tauron PE 135 Natural gas CHP - Zofiówka (Jastrzębie Zdrój) JSW 75 B.c. & biomass 0, CHP - Tychy Tauron PE Black coal 0, PP - Grudziądz Energa 600 Natural gas 3, CHP - Żerań (Warsaw) PGNiG Termika 450 Natural gas 1, PP - Blachownia Tauron + KGHM 850 Natural gas PP - Dolna Odra (n. Gryfino) PGE 2 x 430 Natural gas PP - Skawina CEZ 430 Natural gas 1, PP - Kompania Węglowa / Czeczot Kompania Węglowa + Mitsui 1000 Black coal Estimated completion date

7 Polish Energy Groups Energy groups are responsible for: generation of energy distribution of energy investments

8 Electricity - overview 38 GW total power installed (2013) 19 power plants e.g. Bełchatów, Opole,Turów, Połaniec, Kozienice, Rybnik, Dolna Odra production of 75% of electricity consumed in PL mainly coal and lignite CHP plants 50 CHP plants located in cities 160 industrial CHP plants Renewable sources of energy mailny wind farms and hydroenergy production of 7% of electricity consumed in Poland GDF Suez; 5,10% Structure of electricity production 2013: Dalkia; 1,60% CEZ; 1,60% EDF; 9,70% PAK; 7,30% Enea; 8,10% PGNiG; 2,60% Energa; 3,20% Fortum; 0,40% Others; 7,30% Tauron; 13,60% PGE; 39,30% Source: Raport Roczny Prezesa URE

9 Heat - overview Regional branches of Energy Regulatory Office There is no nationwide heat market Heat sources and of local range heating networks are A large number of licensed companies and their geographical spread meant that their activities are regulated by local branches of Energy Regulatory Office Source: URE

10 Gas market Gas market is dominated by PGNiG Capital Group. The core activity of the PGNiG encompasses: field exploration and production of natural gas and crude oil import storage trade distribution of gas and liquid fuels. Gas consumption in Poland = circa 14 bn m3 per year 75% of gas is imported (mainly from Russia) demand for gas in Poland will grow even up to 25 bn m3 in 2023 new LNG termianl is being built in Swinoujscie new cross-border gas conncetions with Czech Republic, Slovakia, Lithuania, Denmark (Baltic Pipe) domestic shale gas is a potential resource Source: l Raport Roczny Prezesa URE

11 Shale gas 56 shale gas exploration concession (Dec.2014) According to the Polish Geological Institute Poland has enough of the domestic fuel for at least 50 years Estimated shale gas resources could vary from to billion cubic metres (PIG) Analyses have identified three main basins in Poland (the Baltic, Podlasie, and Lublin) Source:

12 Why new power plants are needed? Power shortage risk The average age of Polish power plants = 40 years 15% of power blocks should be switch off immediately Population of 38 mln and a booming economy determine rising demand energy decade of gas, nuclear and green energy

13 RES in the final energy consumption in 2011 Current share of RES Share of RES in 2020 *Share of RES in EU % electricity 8,5 % 19,43% Final energy Consumption in TWh (=100%) 57% heating / cooling 12 % 17% 27% 23 % transportation 6 % 10,2% 10,8% 15,5%

14 Electricity produced form RES Type of installation Quantity Power (MW) biogas power-stations biomass power-stations photovoltaic power-stations 72 3,6 wind power-stations hydro-electric power-stations co-fired technology 45 na URE, as of Source:

15 Renewable Energy on the Map of Poland Source: PAIiIZ

16 W2E plan(t)s in Poland only 35% of biodegradable waste to be landfilled by 2020 only 1 municipal waste incinerator in Poland ZUSOK, Warsaw ZUSOK accepts ca. 60 thous. T of MSW (out of 814 thous. T collected in Warsaw solely!), incinerates ca. 47 thous. T, producing ca MWh of electricity in order to meet requirements of EC 20/20/20 directive several new W2E plants need to be built New W2E plants under construction Gdansk Szczecin Poznan Bydgoszcz Konin Bialystok Krakow Source: ZUSOK, WNP

17 Who is present on the market? Wind energy Biomass Biogas Solar energy Hydroenergy Waste-to-energy Vortex, EDP, RWE, E.ON, CEZ, GDF Suez, Mitsui & J.Power, Acciona,Tauron, PGE, Energa, Enea GDF Suez, Dalkia,Foster Wheeler, PGE, Tauron, Enea, Agrogaz, Aufwind Schmack, Duda, Poldanor, CEZ, Biogaz Zeneris, BioPower, Energia Biogaz, Wikana, PGE, Energa, AXZON Group Households, condominia Polish energy groups 1 municipal incinerator in Warsaw, several new to be built

18 Green jobs in Poland renewable energy total employment Solide biomass Biofuels Solar thermal Wind power Geothermal energy Small hydro power Biogas PV Waste Source: The State of Renewable Energies in Europe 2012 by EurObserv'ER

19 Cleantech manufacturing sector Approx. 200 production companies Components for windfarms Solar collectors PV modules Devices for biogas plants Solid biomass installations Devices for hydropower installations Devices for transport biofuels manufacturing Heat pumps

20 International comparison According to EurObserv'ER Poland is ranked 5th in the EU in terms of production of primary energy from solid biomass. In May 2012, the Ernst & Young renewable energy attractiveness indices ranked it the 10 th most suitable location for wind power projects in the world. Poland is also leading among new EU member states in terms of total installed wind power capacity. Total installed wind capacity in EU-12 in 2005 vs (MW) Source: Ernst & Young renewable energy attractiveness - May 2012; Eastern winds. Emerging European wind power markets. European Wind Energy Association 2013

21 Case study Poldanor (AXZON Group) Part of the AXZON Group, a global concern focused on sustainable development of agricultural business. In 2005, Poldanor built and launched the first agricultural biogas plant in Poland, and thus began the implementation of a programme which provides for the development of a total of 14 such plants next to pig farms operated by the company. The company employs more than 520 people Pomeranian Employer of 2012 Pantheon of Polish Ecology Business Fair Play awards Płaszczyca biogas plant Source:

22 Case study LM Wind Power Located in Goleniów LM WIND POWER BLADES Poland Sp. z o. o manufacturing of wind blades LM WIND POWER SERVICES (Poland) Sp. z o. o. - provider of operations and maintenance support to wind turbine components and wind farms 600 people empolyed Source:

23 Case study - GreenEvo project of the Ministry of Environment prepared with a view to promote Polish environmental technologies 4 editions ahead 47 winners Technologies: Water and waste water management Energy savings Air protection Renewable energy sources Waste management Biodiversity conservation Source:

24 Key drivers of renewable energy development in Poland: Dynamic economic growth in recent years, growing number of business entities and domestic market of 38 million consumers, Rising demand for energy Targets of the Polish and European energy policy: increase the proportion of energy from renewable sources in final energy consumption up to 15,5% in 2020 (19,3% for electricity, 17% for heating and cooling, 10,2% for transportation fuels). Obligatory reduction of the percentage of municipal biodegradable waste that may be landfilled to 35% by 2020, and building waste-toenergy plants, Favourable wind conditions, a large potential for obtaining biomass and biogas Investment incentives for renewable energy producers

25 Support scheme Support scheme is being modified The new RES bill assumes the transition from the system of certificates of origin to the auction system New rules of support will come into force on January 1, 2016 New installations launched after January 1, 2016 will benefit from the new system exclusively. Installations launched before January 1, 2016 will be entitled to use either new or old support system upon the owner s decision. Small RES (below 1 MW) prefered January 1, new rules of support

26 Four support models Model without support Certificates of origin with the possibility to switch to auctions Certificates of origin Auction model Source: c-fotolia.com

27 Auction system Support is granted as a result of auction conducted by the President of Energy Regulatory Office at least once a year Separate aucions for installations smaller than 1 MW At least 25% of electricity to be generated by small installations (<1MW) Support granted for 15 years (max till 2035; for ofshore wind farms till 2040) Tha basic criterion will be the price of 1MWh of generated electricity for the period of 15 years The installations which offers lowest price wins the auction and is obliged to produce energy in the amount specified in the auction (3 years settlement period) The Minister of Economy sets the max. price for 1 MWh depending on the type of technology; separate max. price for installations launched before Jan 1, 2016 which switch to the new system

28 Auction system Sales price is adjusted annually by the inflation rate. Energy generated in small installations below 0,5 MW will be purchased at fixed prices set in the auction Energy from installations bigger than 0,5 MW will be sold directly on the market The price differences between the auction price and the market price will be either paid by or returned to Renewable Energy Settlement Operator (Operator Rozliczeń Energii Odnawialnej)

29 We invite you to cooperation Warszawa, ul. Bagatela 12 tel. (+48 22) , fax (+48 22)