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Less than six months before Poland hosted more than 10,000 delegates for the UN’s climate talks, Donald Tusk, the prime minister, was in the south-western city of Opole showing where his priorities really are.

He was there to shepherd through an agreement to spend 11bn zlotys ($3.5bn) building an enormous 1.8GW coal-fired power station that Polska Grupa Energetyczna, the country’s leading utility, was so reluctant to build that Mr Tusk had to browbeat Krzysztof Kilian, then chief executive, into going along with the project.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/d5b4d2bc-47aa-11e3-9398-00144feabdc0.html#ixzz2liiiJQte

 

“We are now in the process of shaping the energy mix in which coal will again find its place,” Mr Tusk said during the signing ceremony. “It is important that coal produces energy, that people have work and that Poland has enough energy.”

Poland is under growing pressure from the European Union and elsewhere to move decisively away from coal, which provides about 90 per cent of the country’s electricity. However, there are few immediate alternatives.

Natural gas, a much cleaner fuel, is unpopular because most of it has to be imported from Russia. Meanwhile, hopes of a native shale gas industry have failed to materialise until now because of ­financial, regulatory and geological hurdles.

The Polish government is still planning on building a nuclear power plant but the original plan to have it running by 2023 looks optimistic. About 10 per cent of Poland’s electricity comes from renewables.

“Coal will be present in Poland’s energy mix for decades to come,” says Agata Hinc, managing director of DemosEuropa, a Warsaw-based think tank. “The road away from coal will be a long and difficult one.”

The country’s ties to coal were put on international display during the UN climate summit, when the Polish capital also hosted an international coal summit, to the fury of environmental groups.

“Organising the coal summit at the same time that delegates are negotiating reductions in greenhouse gases shows where the Polish government’s priorities really lie – it is much more committed to coal than to combating climate change,” says Katarzyna Guzek of Greenpeace Polska.

The effort to shift from coal has been negligible. In fact, driven largely by price, the country is moving away from hard coal to even more polluting brown coal, or lignite.

In Belchatow, about 160km southwest of Warsaw, enormous excavators rip into soft brown coal, sending lignite mixed with the remnants of 20m-year-old wood flying as it pours on to a high-speed conveyor belt at the bottom of the enormous open pit mine.

The conveyor ends in the maw of Europe’s largest thermal power plant which produces 20 per cent of the country’s electricity, while dumping about 32m tonnes of carbon dioxide a year into the atmosphere. This equates to almost 10 per cent of Poland’s total greenhouse gas output.

While Poland continues to rely overwhelmingly on coal, the industry itself is in a crisis. Poland’s hard coal mines dug 79m tonnes of the fuel last year, 3.5m tonnes less than in 2011. More than 8m tonnes is piling up unsold, while utilities increasingly turn to significantly cheaper imported coal. Poland has been a net importer since 2008 and last year bought 10m tonnes on international markets.

“It’s not possible to compare Polish coal to other coal sources,” says Tomasz Konik, a partner at Deloitte central Europe, the consultancy. “The mines here are deep – more than 1km underground. When you look at the danger and the cost, it is a lot higher than largely open pit extraction from Russia and Australia.”

About two-thirds of the cost of mining Poland’s black coal comes from labour. With international coal prices at about $80 a tonne, the result has been a financial bloodbath for the Polish coal industry. The whole coal sector, brown and black, posted a 24m zlotys loss in the first half of this year, down from a 1bn zlotys profit in the same period last year.

Poland’s two leading hard coal ­companies, Kompania Weglowa, Europe’s largest coal miner with 80,000 employees, and the smaller Katowicki Holding Weglowy, together posted a 120m zlotys profit last year. This year, they predict a combined loss of 420m zlotys.

The industry has been dramatically restructured since 1989, when it employed more than 400,000 people.

Future injections of state aid to shore up coal mines will be restricted by the EU, which has banned such support since 2011.

Despite the problems besetting the coal industry, it employs about 130,000 people and remains politically powerful. “Poland’s economy and Poland’s energy has stood on coal and will continue to stand on coal,” Mr Tusk announced during a recent visit to Katowice, the country’s coal capital.

 

 

Source: www.ft.com