Completing coal plants, but looking to gas

14 May saw synchronisation of PGE’s new 900 MWe Opole 6 hard coal unit by GE Steam Power, PGE (Polska Grupa Energetyczna) and the GE-led consortium partners. Unit 5 at the site, an identical 900 MWe ultrasupercritical unit, was synchronised to the Polish grid in January 2019 and in February achieved 931 MW, well above its rated capacity. Full handover was expected on 15 June 2019 and 30 September 2019, respectively, for units 5 and 6.

Opole will play a key role in Poland’s energy supply, says GE, where electricity demand is expected to grow by 40% by 2040.

Henryk Baranowski, PGE’s CEO, said, “Opole Units 5 & 6 will play an important role in Poland’s energy infrastructure as it is the biggest project in the Polish energy sector since 1989...PGE’s investments in modern coal-based energy are enhancing the country’s energy security and facilitating a gradual replacement of old capacities in the system with units that are nearly one-third more efficient. The two new units at Opole will bring the country’s CO2 emissions down by 2.5 million t.”

Opole 5 & 6 will have an efficiency significantly higher than the global average, GE notes, and will provide stability to the Polish grid as the country seeks to introduce more renewables. By using locally available hard coal, the two units also help to provide “energy security for Poland”. They are also equipped with state of the art air quality control systems to meet the latest EU standards in terms of local emissions, GE says.

Michael Keroullé, GE Steam Power’s chief commercial officer said the company was “proud to be part of the Opole project, which will stabilise the Polish grid using best in class technology to support the sustainable energy transition and further development of the renewable energy sources.”

GE Steam Power’s scope for Opole Units 5 & 6 includes the boiler and turbine islands, air quality control systems, as well as balance of plant. GE is also responsible for overall project management, general design and parts supply, and supports the consortium members – Polimex-Mostostal, Rafako and Mostostal Warszawa – in their respective scopes.

The Opole facilities are among several new large coal units that have entered operation recently in Poland, eg ENEA’s, 1075 MW Kozienice plant, or are close to start-up, eg Tauron’s 910 MW Jaworzno III and PGE’s 450 MW Turow lignite fuelled plant (which has the distinction of being a lignite fuelled power plant that meets the EU’s new BREF emissions requirements).

In July 2018 GE signed an EPC contract to build the 1000 MW Ostroleka C coal fired plant for ENEA and Energa and received the notice to proceed on 28 December 2018. The current focus is on engineering, says GE, but it is expecting “more robust” construction to begin at the site in the second half of 2019. However, the project’s viability and economics have been questioned, and financial close does not yet appear to have been fully achieved. If this project gets to completion it could well be Poland’s last large coal unit and some have dubbed it “the last coal fired project in Europe.”

Coal currently accounts for about three-quarters of Poland’s electricity generation, but the share can be expected to decline over the coming years as old coal plants are shutdown and replaced with gas fired units, the gas coming from LNG expansion and improved supply infrastructure, notably the Baltic Pipe project, which will provide direct access to Norwegian gas deposits (see map).

State-owned PGE is for example planning to build gas fired combined cycle capacity at several sites, notably Dolna Odra, where it is planning two 700 MW units employing “H/J class” gas turbine technology, with a tendering process to select the general contractor expected to begin in the second quarter of 2019. PGE reports that the units should qualify for participation in Poland’s capacity auction for delivery of capacity in 2024.

State owned oil and gas company PGNiG reports that it is half way through construction of the 490 MW Zeran combined cycle CHP plant in the Warsaw region, with completion expected in Q4 of 2020. Main contractors are Mitsubishi Hitachi Power Systems working in partnership with Polimex-Mostostal. Doosan Skoda Power is supplying the 155 MW steam turbine (DST-S10 type).

The new combined cycle CHP facility will increase installed capacity at the site by around 80% and at the same time will allow existing elderly coal units at Zeran to be shut down.

Tauron and PGNiG have a joint CCGT CHP (450 MWe/240 MWt) project under development at Stalowa Wola, although this has had a troubled history (including termination in 2016 of the initial main contract with Abener) and the current status is uncertain, as is that of a CCGT proposal under development by Tauron for its Lagisza site.

Among other large CCGT plants already completed in Poland are two cogeneration facilities developed by oil refiner, petrol retailer and petrochemicals company PKN Orlen (27% state owned). These are Wloclawek, 463 MW, supplied by GE/SNC Lavalin (F class) and the 600 MW Plock facility, which employs Siemens H class technology. Wloclawek was completed in mid 2017 and billed as Poland’s first large scale combined cycle plant, while Plock was synchronised to the grid in September 2017.

In September 2018 turbine issues were unfortunately identified at Wloclawek, resulting in an extended shutdown, with operation not expected to resume until the end of March 2019, according to PKN Orlen. Repairs are covered under the contractual warranty. 

Tempus turns its attention to Polish capacity market 

Following its successful application to the European Court to annul the approval of the UK capacity market in November 2018, clean-tech energy company Tempus lodged a new legal action in March 2019, this time against the European Commission’s decision to approve the Polish capacity market without opening an in-depth state aid investigation to examine the evidence, in particular on cleaner, cheaper alternatives to fossil fuel. By becoming “demand-flexible”, electricity consumers can actively reduce their electricity demand at peak times and shift usage to cheaper, off-peak times, usually when renewable power is plentiful and transmission costs are cheaper, argues Tempus. “This saves money, while relieving network stress at peak times, improving system reliability and reducing reliance on expensive, “peaking” fossil fuel plants.” The concept – demand-side-response (DSR) – is especially valuable for keeping energy costs – and therefore production costs – down in industrial processes, Tempus contends, but is also increasingly being used in homes and offices, thanks to the smart buildings revolution.

Tempus says it uses algorithms and machine learning technology to automatically manage the flexible, non- time-specific element of customer demand to make the best use of cost-efficient price periods. In addition to the UK and Australia, Tempus operates in the German and Swedish power markets, which are connected to the Polish electricity market via cross-border lines, Tempus points out.

The company also has plans to set up in Poland directly as part of its European expansion.

However, in 2018, the Polish government introduced an electricity capacity market scheme that “awards subsidy agreements of up to 15 years duration for the building of new coal and gas stations”, Tempus says. And due to the flawed policy design, DSR capacity providers are effectively shut out of the main auctions, meaning they can only access contracts of one year maximum, Tempus argues. This, combined with other barriers created by the scheme, skews the market, putting DSR at a competitive disadvantage and creating windfall profits for coal and gas incumbents.

In Tempus’ view, the Commission’s approval of the Polish scheme contravenes state aid rules and demonstrates that it has not learned from the UK debacle. In November 2018, the EU General Court found in favour of Tempus, requiring the Commission to open an in depth investigation into the compatibility of the UK scheme, with particular regard to DSR participation. The investigation was launched in February 2019 and is likely to run for 6-18 months. The Commission is appealing the November judgement, which could take 3-4 years and does not affect the investigation. The UK government has not respected the standstill imposed by the annulment of the state aid approval, Tempus argues, so is it is also taking legal action in the UK courts to enforce the judgment and request that the £5.6 billion already awarded under the scheme is returned to UK consumers.

On 7 February 2018, the Commission approved six capacity mechanisms on the same day, relating to Belgium, France, Germany, Greece, Italy and Poland, Tempus notes. In Poland, contracts around worth around €1bn were awarded for 23 GW of capacity in 2021 most of it going to coal, says Tempus. 50% of the units on offer were secured by PGE – Poland’s largest energy sector company – with the other dominant energy companies securing another 31% together. Polish state-run utility companies ENEA and Energa said that the money would help to finance a new coal-fired unit in the northeast of Poland (Ostroeleka C). Despite renewables and demand-side technologies now regularly outcompeting coal across the globe, Tempus notes that coal still represents 75% of generation in Poland.

“The fact that coal is a major beneficiary of the capacity market is therefore no surprise.” What is surprising, in Tempus’ opinion, “is the Commission’s complete dereliction of duty in not ensuring the cheapest, cleanest energy is procured for European consumers.”

The Polish Electricity Association, defending the Polish capacity market, says it has been designed taking into account the UK case, such that DSR customers are eligible to receive a capacity contract of up to five years, and it is also “technology neutral”, open to cross-border participation, and based on auctions to provide the consumers with the lowest prices.