Boston, MA -- (SBWIRE) -- 02/17/2014 -- The controversial decision to appoint Poland to host UN climate change talks has served to highlight the huge gulf between those countries in Europe that hope to benefit from the favourable economics of coal-fired power generation and those that are prepared to focus on reducing carbon emissions - perhaps to the detriment of their economies. Nowhere is the divergence between emissions polices and power sector economics clearer than in Poland, where a yearning to continue burning cheap coal in order to generate affordable electricity is underscored by a desire to advance the huge Opole coalfired power plant. With the government keen to proceed with the project, despite EU legal threats and the resignation of the head of state-owned utility PGE (the utility responsible for the project), we believe Poland is likely to continue to clash with the EU over its staunch reliance on polluting coal in the years to come.
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Our forecasts for electricity generation and consumption in Poland remain subdued this quarter - based largely on our forecasts for muted growth across the broader Polish economy as well as the cancellation of a number of large-scale capacity expansion projects. Poland is in a difficult position: it is required to adhere to EU directives so as to reduce the amount of coal in its capacity mix, but is struggling to attract the investment needed to replace or modernise aging capacity as low wholesale electricity prices and weak demand sap interest in the power sector. To this end, Poland's second largest utility, Tauron, announced that the proposed 850MW Blachownia combined cycle gas-fired power plant would almost certainly be postponed because of concerns about projected demand. With 5GW of dirty coal-fired capacity due to come offline before 2016, Poland faces the prospect of an electricity deficit once demand picks up again - triggering calls from Poland's energy market watchdog, Urzad Regulacji Energetyki (URE) for the introduction of a capacity mechanism.
The major developments in Poland's power sector this quarter include:
- As the host nation for the UN's latest round of talks aimed at reaching a new global agreement on climate change, Poland was always likely to prove a divisive choice - especially as the country is one of Europe's biggest polluters and relies on domestic coal to generate over 80% of its electricity. Yet, during the talks the obstinacy of Prime Minister Donald Tusk and his government astounded many attendees - with Poland making it abundantly clear that they would continue to adopt a combative stance towards EU efforts aimed at persuading the country to curb its carbon emissions.
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