Short-term outlook

TAURON Group against the backdrop of the world’s greatest challenges – climate changes and insufficient resources Medium-term outlook

It is assumed that the power sector will focus its efforts on the development of renewable sources. On one hand, this will be the result of an increase in prices on the wholesale electricity market, and on the other hand, it will also be the consequence of the strong support for the development of renewable energy sources and the growing cost competitiveness of such technology as compared to the ever more expensive conventional electricity generation. The noticeable fast growth of photovoltaics in Poland is primarily associated with the cost competitiveness of the technology and the launch of extensive support programs that significantly reduce investment costs. The possibility of achieving at least partial independence of rising electricity prices is also important.

Binding national RES targets for 2020 prompted Poland to introduce a system of incentives, among others for the prosumers, that result in increased interest in this technology. The development of prosumer photovoltaics installations is possible, among others, thanks to the funding from the government programs. According to the Polish Energy Policy (PEP), it is assumed that the achievable capacity in PV technologies will reach 4.9 GW in 2025. In the short term, the installed capacity in onshore wind technology will also increase – according to the assumptions of the PEP, the estimated onshore wind power in Poland will stand at approx. 9.6 GW in 2025. The amendment to the distance act (the so-called 10H) can be an impulse spurring further development of wind energy. Offshore wind farms are a new and promising investment direction.

According to investors’ declarations, the production of electricity from the first wind farm in the Polish zone of the Baltic Sea will start as early as 2025. The most advanced works are carried out by PGE, PKN Orlen and Polenergia, and the grid connection conditions were issued for approx. 10.6 GW of capacity. According to the PEP 2040, offshore capacity will stand at approx. 0.7 GW by 2025.

The pressure to decarbonize the energy sector, observed in recent years, is gaining momentum, which is reflected in the regulations aimed at increasing environmental requirements for the coal-fired units, deepening the decline of their economic profitability, and in many cases resulting in a permanent lack of profitability. The effects of the pandemic lead to a faster loss of competitiveness of the conventional sources than previously assumed and the need to intensify activities allowing for a faster development of renewable electricity generation technologies. Additionally, a change of the approach of the financial sector leading to lending only to environmentally sustainable investments will accelerate the transition of the energy sector. The estimates included in the PEP indicate that approx. 2.6 GW of capacity will be retired from the national system in 2021-2025. Hence, the share of the individual sources in Poland’s generation mix will change. It should be emphasized, however, that despite the growing number of renewable energy installations, coal will continue to be the basic fuel in the domestic energy sector until 2025.

Based on the changes observed on the European energy market and the situation of the domestic energy groups, it can be concluded that the energy business model will be modified. The mergers underway and planned – both the domestic as well as the European deals – indicate that fuel companies (e.g. Equinor-Statoil, ORLEN-Energa, PGNiG) are making investments in the energy sector. Efforts are also made to transform the business models of energy groups, place conventional energy into separate entities and focus activities on RES, distribution and supply of electricity and new products. Changes should also be expected with respect to the functioning of the energy sector on the Polish market, in this regard work is underway on the government programs for mining and coal-based energy.

In terms of the macroeconomics, in the coming years, it is assumed that the growth in demand for electricity will be continued. Despite the expected decline in the energy intensity of the Polish economy, stabilization of the economic growth rate and the improvement of energy efficiency, there will be an increase in electricity consumption per capital. This will be the consequence of the development of electromobility and the wider spreading of the use of electricity, for example, for heating purposes in connection with counteracting low emissions. The electrification of heating (combined with an increase of the importance of district heating) will be rising along with a growth of environmental awareness and the intensification of activities related to smog reduction. 

In the coming years, the development of new energy storage technologies to a level that would enable their cost-efficient implementation on a system-wide scale should not be expected. Significant regulatory restrictions on the use of fossil fuels for electricity production and energy price volatility due to the large share of uncontrollable (intermittent) sources can be an impulse for the wider spreading and use of energy storage facilities for system purposes. The nature of transmission systems and distribution grids is changing from the traditional direction of energy flow from the power plant to the transmission system, and further to the distribution grid and customers, to increasing flows in the opposite direction, i.e. from the low voltage grids to the higher voltage grids. This forces undertaking investment activities aimed at grid metering, including data transmission and IT systems supporting network management in order to maintain stability through flow control (load capacity of network elements), voltage and short-circuit power control. The low and medium voltage networks require large expenditures on modernization, so that they can absorb the avalanche of distributed generation installations. Distribution grids, especially in areas with low electricity consumption density, become a guarantee of stability and security, as well as a kind of “energy storage” for the prosumer sources and the other RES.