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ClientEarth Communications

2nd July 2020

Fossil fuels

An expensive addiction: heavy coal handouts halt Polish energy transition

In their latest report, ClientEarth and economics think-tank WiseEuropa have zoomed in on public subsidies granted to Poland’s energy sector. Their conclusions? The massive financial support, nearly €1.6 billion per year, does not boost the development of green energy. Most of it, conversely, goes to coal plants.

The report "Subsidies: a driving force or obstruction for the Polish energy transition?" presents all forms of State aid granted to the Polish energy sector since it joined the EU, up to 2023. The authors assessed State aid mechanisms in terms of their legality, costs, environmental effects and impact on the transition towards greener energy.

"Despite politicians loudly promising to increase support for green technologies, renewable energy developments are largely omitted from the recipients list for subsidies. Instead, two-thirds of public money every year is spent on ‘conventional energy’, mainly coal,” said Marcin Stoczkiewicz, head of Central and Eastern Europe at ClientEarth.

Coal is living on borrowed time

The report leaves no doubt: the life of Polish coal is artificially sustained by public money. Between 2013 and 2018 alone, the country spent as much as €6.8bn euros on bailouts to forms of energy Poland has traditionally relied on.

"This money –  largely billpayers’ money – could be better spent. Coal-fired power plants receive subsidies large enough to finance the construction of two large wind farms in the Baltic Sea," adds Stoczkiewicz.

Instead, Poland continues supporting doomed coal plants. Only in 2019, the country’s largest and most polluting installation – Bełchatów Power Plant – received as much as €114m in subsidies. That corresponds to about 10% of its total revenue. As the power plant has been burning biomass along with coal, it also benefited from funds for ‘green’ energy. According to the report, after 2020, the subsidies for Bełchatów Power Plant will increase even further.

This raises the question of how much money should be sunk into fossil fuels after they are no longer economically viable.

Others subsidise smarter

This favouring of fossil fuels paralyses the development of renewables. Already underfinanced, they face a rocky road to development in Poland. This is despite clear signals from abroad showing that it is smarter to support renewable energy sources, not coal.

As the report shows, Poland - in terms of GDP - allocates similar sums to Germany and Great Britain to its energy sector, but with worse ecological effects. Between 2012 and 2016, Great Britain reduced its energy emissions by half, and Poland by only 10%.

"The existing support mechanisms in the Polish energy sector have maintained the status quo in the industry. Despite multi-billion zloty support to coal, the fact is that it still cannot compete in today’s market," said Aleksander Śniegocki from WiseEuropa, co-author of the report.

"Without an update of technology and of business models, the industry will face stagnation. If government and businesses are not proactive, we will watch conventional energy gradually shrink, generating high costs for consumers without the new, urgently needed zero-emission energy sources there to replace it," concludes Śniegocki.

Meanwhile, the economic outlook for coal has gone from dire to impossible.

Investors raised the alarm over planned new coal plant Ostroleka C. The rising carbon price and plummeting cost of renewables threatened to make the plant a stranded asset. Despite securing a level of state funding, the plant has newly been branded a ‘stranded asset’ as co-owner Orlen said it would only go ahead as a gas project and original sponsor companies Enea and Energa then cancelled the partially-built coal plant.

The Covid-19 crisis has slashed the value of EU coal still further.