Heaps of unused coal have been building up in Poland, with the country’s surplus rising to 23.5 million tonnes by the third quarter of the year and the state stepping in to help buy up the excess.
Although Poland still relies on coal for around 70% of its power generation – by far the largest share in the European Union – demand for coal-fired electricity is dwindling, with domestic power production set to shrink by 5% this year, reports WysokieNapiecie.pl, an energy news service.
Several factors have contributed to the drop. For one, amid the pandemic Poland is forecast to use around 2% less electricity this year than in 2019.
Moreover, Poland is increasingly replacing its expensive domestic electricity with cheaper imports from its neighbours – which have risen by over 20% this year – as well as switching to using gas (up 15% this year) and renewables (up 12%), according to WysokieNapiecie.pl.
The share of coal in electricity production in 2020 is forecast to reach a historic low of 70%, down from 74% at the start of the year.
Where coal is still used, power stations have replaced old technology from the 1970s and 1980s with more efficient units that can use as little as half the amount of fuel, further reducing demand.
Earlier this month, Tomasz Rogala, head of the state-owned Polish Mining Group (PGG), which is the largest hard coal producer in the EU, estimated that this year demand for coal in Poland fell by 7 million tonnes.
Yet mines continue to churn out Polish coal, which is among the most expensive in the world. There are now some 8 million tonnes of coal heaped up around mines, including 0.5 million tonnes that have already been purchased by energy producers but not yet collected.
A further 13 million tonne has been deposited in heaps around power and cogeneration plants across the country, while another 2 million tonnes are estimated to be stockpiled by smaller companies.
Poland’s total surplus of 23.5 million tonnes would suffice to meet the country’s coal needs for approximately six months.
As a result, Polish companies are increasingly trying to sever expensive contracts. On 22 December, Tauron, a state-owned power provider, announced its intention to terminate its 2018 contract with PGG, with the two sides reportedly planning to renegotiate terms, reports BiznesAlert.pl, a business news website.
PGG, which produced 29.5 million tonnes of coal last year in its eight mines in southern Poland, is itself in trouble. With a drop in coal sales, the company is struggling to shoulder the costs of wages for its 40,000 employees.
Unable to close its inefficient mines – following a deal brokered in September between the government and mining unions to extend the gradual shut down of mines until 2049 – the company may lose 1 billion zloty (€222 million) this year.
By 2040, PGG is expected to reduce its workforce to 14,400 and its output to 9.2 million tonnes of coal, reports Interia.
To ensure liquidity for the struggling PGG, the state has stepped in via its Material Reserves Agency (ARM), which bought up around 1 million tonnes of hard coal in early 2020, dumping it in a depot near Ostrów Wielkopolski in central Poland.
The state is also expected to subsidise the coal industry to the tune of 20 billion zloty (€4.5 billion) over the next decade, subject to approval from the European Commission, which has pushed for Poland to commit to more ambitious emissions targets.
Main image credit: Peabody Energy/Wikimedia Commons (under CC BY 3.0)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
