Polonization of the Yamal gas pipeline capacity

Poles want to end the history of disputes with Gazprom. The gas contracts with Russia will expire soon, but the Polish section of the Yamal gas pipeline will stay. It is to be used for efficient transmission of gas around the country, including from the Baltic Pipe and the LNG terminal in Świnoujście. The Yamal is to be functionally connected to the Polish gas transmission system without the necessity to sign new contracts with Gazprom – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Polonization of the Yamal gas pipeline

The Polish state has already dealt with the seemingly insoluble problem of the Yamal pipeline (officially known as the Yamal-Europe gas pipeline) by giving Gaz-System control over its capacity. In 2019 the EuRoPol Gaz company, owner of the Polish section of the Yamal pipe, and the Polish TSO – Gaz-System did not reach an agreement within the set legal timeline on a new contract to entrust the operation of the pipe (the previous one expired on the 31st of December 2019). This was caused by a permanent stalemate at the Polish-Russian company, where PGNiG and Gazprom have a 48 percent share each, and 4 percent is owned by PGNiG Gaz-Trading. However, Polish lawmakers were prepared for such a situation. In line with the Energy law, to solve the problem, the contract that governs the operation of the Polish section of the Yamal gas pipeline, was determined by the President of the Energy Regulatory Office and entered into force on the 1st of January 2020. The new agreement significantly widened Gaz-System’s rights as an operator.

The end of the Russian contracts saga

Also in 2019, Poland’s PGNiG announced it had told Gazprom it would not extend the long-term gas supply agreement called the Yamal contract, beyond the 31st of December 2022, and has consistently stayed on message by reiterating it would not sign another deal of this kind. This means that as of 2023 the biggest company on the domestic gas market would stop buying about 3 bcm of Russian gas as part of the Yamal contract, which is now delivered to Poland via two entrances to the Yamal gas pipeline in Włocławek and Lwówek. The lack of a new gas supply agreement with Gazprom means PGNiG will no longer use the Yamal pipe to purchase the Russian gas. However, this does not mean that it won’t be possible for Russian gas to travel across Poland to Western Europe.

Transmission via Poland

In May 2020 the transmission contract between EuRoPol Gaz and Gazprom expired. It determined how much Russian gas was transported across Poland. On the 31st of December 2022, the EuRoPol Gaz-PGNiG transmission contract, which is related to the Yamal agreement, will end as well. This means that today the majority, and after 2022 the entire capacity of the Yamal gas pipeline will be made available only through auctions organized by the Polish TSO Gaz-System. The auctions are open for all interested parties. Today Russians use, and will be able to continue to use the Yamal pipe, but only on the basis of Polish and EU regulations, and on equal terms with other potential companies.

The plan to expand the Transmission System

At the same time, Poland’s TSO is planning to completely take control over the Polish section of the Yamal pipeline, including investments related to the domestic natural gas transmission system, and the process of determining the transmission tariff. This will be made possible by a new entrustment agreement that will replace the one that will expire on the 31st of December 2022. According to my scoop, a kind of an investment road map into gas pipelines in Poland will determine which investments are needed for Warsaw to be able use the Polish section of the Yamal pipeline for the benefit of domestic consumers, without the risk of engaging in toxic relations with Russia’s Gazprom. The plan is called the National Ten-Year Development Plan for the Transmission System for the Years 2022-2031, and it is being prepared by Gaz-System. The draft is to be published already this month.

Yamal connections

The strategy, obtained by BiznesAlert.pl, says that Gaz-System wants to make technological updates to the Polish section of the Yamal, that will make it possible to use the pipe as part of the domestic transmission system. Reportedly the Plan includes, among others, the proposal to build a compressor station in Lwówek to pump the gas from the Baltic Pipe and the LNG terminal in Świnoujście into the Polish section of the Yamal gas pipeline. Then, if the gas transmission from Russia to Germany is halted, the imported gas will be transmitted to the eastern part of the country, where new exit points to Gaz-System’s network are planned. According to the schedule, these new points will start working once the hub and the compressor station in Lwówek are expanded. This will make it possible to transmit gas from the north via the hub in Lwówek to the Yamal pipeline to central and eastern Poland. Of course, by then the entry points to the domestic transmission system in Włocławek and Lwów will be launched. Today they are already enabling Polish companies to import gas purchased on the exchange in Germany, which is then delivered via a virtual reverse flow. If the gas transmission between Russia and Germany is maintained, it will still be possible to use the Yamal gas pipeline to cater to the needs of the domestic transmission system. The gas volume available for transmission from the Polish section of the Yamal gas pipeline will be maintained by Gaz-System at the current level, but from the point of view of the Polish system the pipeline will become more useful.

There won’t be a new long-term contract with Gazprom.

If it turns out that Russians will maintain gas transmission to Germany via Poland after 2022, it will be possible to deliver this fuel to the eastern parts of the country via the so-called virtual reverse flow. From a technical point of view, it will be possible to tap into the Yamal pipeline through the new entry points to the domestic transmission system in the east of the country, and the “shortage” that will be generated in this way, could be replenished with gas from the Northern Gateway – via the new entry point to the Yamal pipeline in Lwówek. This would make it possible to ensure that the volume on the border with Germany is the same as the gas received from Russia at Poland’s eastern border. This will be possible only if Gaz-System manages to make the necessary technical updates to the Polish transmission system without additional agreements between, e.g. PGNiG and Gazprom. By the way, it is worth reiterating that the planned Ostrołęka C power plant will receive gas in accordance with the conditions of the grid connection between Poland and Lithuania (GIPL). This means the gas for the plant will not come from the Yamal pipeline, because the GIPL will be tapped into Lithuania’s resources and Poland’s transmission system – the compressor station owned by Gaz-System in Hołowczyce.

Will the Suez Canal blockade impact oil and gas prices in Poland? (ANALYSIS)

The Suez Canal has been clogged since the 23rd of March. Will the blockade cause issues with the delivery of energy resources, and thus undermine Polish home budgets? Only if it lasts for a long time, which seems unlikely – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Suez Canal blocked

The Suez Canal is an artificial waterway opened in Egypt in 1869 that connects the Mediterranean and the Red Sea, shortening the time of travel from the Persian Gulf to Europe by about nine thousand kilometers, which is up to ten days at sea. The reasons behind the recent incident are unknown. However, we do know that on the 23rd of March a cargo ship Ever Given run aground on the canal’s bank blocking the passage. According to the canal authority, this happened either due to a sand storm or human error. It locked over 300 ships in an almost 100-km long queue, causing delays in delivering many goods, including oil. However, it’s been since announced Ever Given would be freed at the beginning of the last week of March 2021. On the 28th of March, new tugs were arriving to help free the ship, dig it out of the sand and lower its tonnage.

Oil barrels and gas from the Middle East that were travelling to the Old Continent still constitute an important share of deliveries to Europe. In 2020 the European Union imported 6.3 percent of natural gas from Qatar. To compare, it imported 44.7 percent of gas from Russia. Last year the EU imported 8.5 percent of oil from Iraq and 7.1 percent from Saudi Arabia. To compare, it got 28 percent of oil from Russia. Therefore, it is worth to first investigate whether the blocked Suez Canal impacted the prices of energy sources such as oil and gas.

In the first week, the accident did not impact the oil price, which… went down due to the grim economic data, which indicated the economic slowdown would continue due to the coronavirus pandemic, and despite the ongoing vaccination efforts across the world. The International Energy Agency announced the demand for oil would go back to the level from before the pandemic as late as in 2023. On the day of this announcement Brent lost over 8 percent and the US blend WTI – about 10 percent. It was the biggest slump since the second wave of the coronavirus that had occurred around October of 2020. It’s also a signal that the third wave continues to impact the market in line with the forecast of BiznesAlert.pl, a development which shatters the optimism of investors. The wave is responsible for the sliding of Brent since 18 March, and its impact was exacerbated by new lockdowns imposed during the Easter holidays in the West. Brent that up until the first week of March had been priced at over USD 70 per barrel dipped to USD 62 in the third week of that month. Another drop, to about USD 60, was caused by the news about new lockdowns in EU states introduced due to the increasing numbers of COVID cases.

Impact of the blockade on the oil and gas market

On the news of the blockade, the Brent price rose to nearly USD 64 on the 25th of March, but it dipped on the same day to almost USD 61. This is how the uncertainty about this incident shared by investors was reflected in the price. If the issue had been quickly dealt with, its impact on the oil market would have disappeared quickly, and the oil price would have gone back to normal. However, when it turned out it would be impossible to refloat the ship quickly, the Brent started to go up again on the 26th of March. Investors started to worry that the Ever Given incident would have a long-term impact on oil prices, which they reflected in the barrel price that went up on the 29 March to over USD 64, only to experience a slight dip after the recent news on unclogging the canal. The fate of the barrel will depend on how quickly the passage via the Suez Canal will be made possible. However, there are other factors at play as well, which contribute to the price dropping, such as the coronavirus pandemic’s impact on economic activity. It is worth stressing that the OPEC+ states have the necessary tools to halt the dropping prices, for instance, they may decide to limit oil output again as of April 2021.

The spot price of liquefied gas on the London exchange hovered around GBP 46 after it had plummeted from over GBP 75 for one thermal unit, which was caused by the cold spell in February 2021. The blockade of the Suez Canal forced some LNG tankers to retreat, but the market reacted moderately and priced the gas at GBP 48. It has been suggested that Europe’s dependence on gas from Qatar will cause the prolonging blockade to halt even a million tons of LNG in the Red Sea. However, it is worth reminding, that European customers still have significant gas supply from the US and South Africa at their disposal. They also have long-term contracts with Qatar, according to which the Qatari are responsible for the cargo, removing any delays and paying penalties for not supplying the gas. This is why the diplomatic crisis between Qatar and a coalition led by the Saudi Arabia in 2017 and the resulting blockade of Qatar’s shipping routes did not cause issues on the LNG market.

Poland doesn’t have to be concerned

To sum up, the blockade of the Suez Canal has a limited impact on the price of energy resources – LNG and oil. If it is removed quickly, it should not affect the finances of the Polish people, just like it was in the case of other past crises in the Middle East. It is also worth reminding that the importance of the canal for oil trade is dropping systematically, even though in the 1950s about 1.2 million barrels a day were transported across the channel. Today only a few percent of Europe’s oil imports goes through that passage. In 2019 it was 333.618 million barrels from Iraq and 287.829 million from Saudi Arabia. The array of choice is growing with the traditional supplier – the Russian Federation – leading the way and the emergence of the new tycoon – United States. Poland receives deliveries of the Saudi Light blend via the canal from Saudi Aramco and LNG from Qatar on the basis of a long-term contract between PGNiG and Qatargas. So far there haven’t been any issues with those deliveries. The oil and LNG trade is becoming more global, which means the contracted suppliers can offer an alternative, and if not, clients can find one. So the supply of hydrocarbons to Poland is not at risk because of the blockade of the Suez Canal. This means, Poles will probably not notice whether the Suez events had any impact on the prices at gas stations.

Either way the issue may cease to have any impact on the prices very soon. Inchcape Shipping Services, which is working on freeing the Ever Given has announced it managed to refloat the ship. Soon it will report on the progress on dealing with the traffic jam that formed at the passage. The oil prices started to drop. On the morning of the 29th of March the barrel cost around USD 63.48 after dropping from USD 65 a day earlier.

If Germans block nuclear power, Poland may set up an inquiry committee into Nord Stream 2

If Germans really decide to block nuclear power in Poland, Warsaw may set up an inquiry committee at the European Parliament, which will delay deliveries via Nord Stream 2, provided the pipe isn’t stopped by US sanctions – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.


Germans have launched an initiative to denuclearize Europe. They want nuclear energy to be phased out not just in their country, where it will cease to exist in 2022, but in the entire European Union. They are targeting the financial model, because they are against financing nuclear projects from EU subsidies and national support mechanisms. This may be their way to undermine Poland’s plan to bankroll half of the cost of its nuclear power with domestic subsidies, which may be a form of public aid subject to supervision of the European Commission, on which Germany may want to exert pressure. Another way to derail Poland’s plans are environmental permits, once the locations of the NPPs in Poland are chosen.

One of the arguments raised in the debate on this topic is that Germany may rely on the solidarity principle, which was elevated by the Court of Justice of the European Union to the rank of a regulation during the dispute over OPAL, a Nord Stream line in Germany. Gazprom wanted to pump more gas via that pipe, and the European Commission agreed. However, that decision was questioned in court by Poland, and subsequently undermined by the Justice Court on the basis of the solidarity principle, which says that no decision of the EC can hurt the interests of individual member states. This is why some believe that Germany could use the solidarity principle to question the Polish Nuclear Power Program, as Berlin believes that nuclear power goes against its interests. It is worth stressing that the consultations on Poland’s Nuclear Program have already ended and that Germany participated in them. This means the attempt to torpedo Poland’s plans could be made at the next stages of the endeavor, provided that Poles are successful at pursuing the project.

Relief from across the pond

However, in Poland’s opinion Germany’s anti-nuclear proposition will be against the EU law. “From the formal point of view, the implementation of German postulates would violate European law on several levels. We have repeatedly argued, and we are not alone in this, that discrimination against nuclear energy in the EU is incompatible with the principle of technological neutrality and energy sovereignty of the Member States. Neither the EU institutions nor any Member State can demand that the chosen decarbonisation path be abandoned, as long as it guarantees the fulfillment of climate obligations,” the Ministry of Climate and Environment explained in a statement for BiznesAlert.pl. According to the ministry “the exclusion of any low-emission energy source violates the freedom to shape the energy mix guaranteed in Art. 194 of the Treaty on the Functioning of the European Union, which, without the availability of funds available for other sources, becomes only a formal freedom.”

The ministry also warned that “Germany’s goal is for nuclear energy to be also excluded from the so-called green taxonomy of the EU, which would mean limiting and ultimately excluding financing of nuclear projects by private financial institutions”. However, Poles do have a cure for this problem. They want to include Germany’s demands when choosing the partner, i.e. they will acquire funding outside of the European Union. In this context it is worth taking a closer look at the financing model of the Cernavoda Nuclear Power Plant in Romania. It was co-financed by the US Exim Bank, with which Poland’s Bank Gospodarstwa Krajowego and the Climate and Environment Ministry are cooperating to develop a financing model for Poland’s nuclear energy. It’s one of the reasons why it looks like Americans are still favored by Poles. After all, the US is able to ensure financing irregardless of the intrigues surrounding nuclear power in Europe.

Therefore, the European law may be a double-edged sword when it comes to nuclear power in Poland, but still in Warsaw’s view it cannot block the atom. When it comes to Nord Stream 2 there are fewer doubts. If the gas pipeline is completed despite the US sanctions, which the White House has announced would be extended, it will still need to face new obstacles, including EU regulations. Nord Stream 2 will have to be subject to the EU gas directive that entails unbundling, which protects the market from the abuse from monopolists such as Gazprom. Until this requirement is met, the pipe will not be allowed to pump gas. The Argus agency has already suggested that deliveries via Nord Stream 2 will not be able to start before 2022. If the delay is longer, it may turn out that the contentious gas pipeline will start operation later than the Polish-Danish-Norway Baltic Pipe, which is to decrease Poland’s dependence on Russian gas.

An inquiry committee into Nord Stream 2

At the same time a new legal tool that may undermine Nord Stream 2 is emerging on the horizon. Members of Europe’s Energy union cooperate to implement the organization’s goals, which include energy security and diversification of energy sources and supply from third countries, to decrease the dependence on energy imports. The Treaty on the Functioning of the European Union which Poland’s Climate and Environment Ministry mentioned, allows the European Parliament to start an inquiry committee into the incorrect application of the EU law. If Germany tries to block nuclear power, Poland may in theory open such a committee at the European Parliament, which has been traditionally sceptical about Nord Stream 2. This could delay gas transmission via the pipeline, of course, provided US sanctions don’t stop it beforehand. The OPAL precedent also allows to question the Nord Stream 2 project and OPAL’s twin pipeline EUGAL, on the basis of the EU law and the case law of the Court of Justice of the European Union.

Time for a moratorium on Nord Stream 2. Poland may reveal how the Kremlin uses Gazprom

An interim solution to the Nord Stream 2 dispute is to impose a moratorium on its construction at least until the end of talks between the US, Germany and other interested parties. Poland could contribute to the negotiations by offering its knowledge on how Gazprom abused its position with regard to the Yamal contract – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

The West is in a dispute, the NS2 construction is picking up

The conflict over Nord Stream 2 is about US sanctions, which made difficult, but did not stop the construction of the contentious gas pipeline from Russia to Germany, which, according to Russia, has been completed at 98 percent. Reportedly the first string is to be ready by the end of June, and the entire pipe by September 2021. However, these declarations should be taken with a grain of salt, because in the past the completion date has been postponed many times. Originally it was supposed to have been ready to deliver gas at the end of 2019, but right before that deadline the US sanctions had been introduced. However, the restrictions were not sufficient to halt the construction forever. The works resumed after Joe Biden’s administration took over the reins in Washington. The Russians are using the Fortuna barge, which will be reportedly accompanied by the Akademik Cherskiy, which has been allegedly technically adapted to meet the requirements to receive a permit to construct the pipe in Danish waters. Biden inherited the duty to widen sanctions by adding new entities suggested by the across-the-aisle group of US senators. However, so far the US administration has not extended the list, and instead promised it would reveal it as late as on the 16th of May, which – if Russians are to be believed – will be after the first line of the NS2 will have been done and dusted. This is fuelling suspicions about an agreement with Germany, a revelation presented by some media as a done deal. However, the American rhetoric is that the administration is opposed to such a bargain. The new Deputy Secretary of State Wendy Sherman ensured Washington would “do anything” to prevent the completion of the Nord Stream 2 pipeline, but the Department’s spokesman Ned Price admitted that the sanctions were not the only tool available. However, these declarations have not been yet followed by any deeds. The Republican Senator Ted Cruz increased the pressure on the administration by blocking the confirmation of William Burnes as head of the CIA.

In the meantime numerous articles have been published in the American and German media on the possible solutions that could break the deadlock. One of the more popular propositions is to increase the volume of gas and the duration of the transmission contract between Ukraine’s Naftogaz and Russia’s Gazprom, which will expire at the end of 2024 to a volume of 65 bcm in 2020 and 40 bcm in 2024. Some supporters of this solution believe the redress for Nord Stream 2 should include a “switch off” mechanism, which would allow Germany to stop deliveries via the contentious pipe in case of issues with transmission via Ukraine, guarantees Germany would invest in the natural gas and hydrogen sectors by the Dnieper, as well as other less specific conditions difficult to properly verify after the completion of the contentious pipeline. The most specific proposal is the amendment to the transmission agreement with Ukraine, and it is clear that under enough pressure from the West, Russia is actually willing to be flexible. The contract should protect against abuses from Gazprom, which may be also kept in check thanks to the EU gas directive, which is to encompass NS2.

A moratorium would ease the pressure of time in the dispute

However, first it is worth taking a step back and starting a discussion on Nord Stream 2 with clearing the atmosphere. Negotiating under the pressure of time exerted by Russians who are speeding up the construction, does not contribute to a constructive debate. This is why any talks about the contentious gas pipeline should start with a moratorium on the construction of Nord Stream 2, a solution probably unwanted by the German government, but demanded by the critics of the project, including some members of the ruling party in Berlin, e.g. Norbert Roettgen from CDU and the party’s potential future coalition member – the Green Party. Then, Ukraine, as well as other countries that are opposing Nord Stream 2, such as Poland and Lithuania, should be allowed to join the table.

Warsaw could offer constructive contribution to the negotiations, e.g. by sharing its knowledge on how Gazprom abuses its position when it comes to transmission contracts, which Poles learned about during the years-long dispute over the Yamal contract with Russians. This input could help to draft a contract for Ukraine that would not let Gazprom start a political game controlled by the Kremlin. Perhaps the European Commission should also join the talks as the appropriate representative of the interests of the entire European Union, not just some of its member states. Interestingly, Poles could support the Commission in this regard, as it has formally confirmed the Yamal contract included irregularities that could be abused, but it also refused to act as it did not have any impact on an intergovernmental agreement. The lesson of the Yamal contract shows that the scope of any agreement about Nord Stream 2 needs to go beyond an intergovernmental deal, to ensure the Commission has direct impact and is able to act as the natural arbitrator in case of disputes resulting from the contract.

After the moratorium is introduced, the talks will take place without the pressure exerted by the builders of Nord Stream 2, and after Berlin shows some good will, which will make it easier to make an agreement with the critics of the project. Perhaps the moratorium, which was so popular in the fall of 2020 when Donald Trump’s administration was considering further actions against NS2, is disappearing from the public debate for a reason. It is an alternative to extending the US sanctions, which could impact German companies. It’s Germany’s way to not lose face and get out of the deadlock caused by NS2. This is also a way to quickly stop the construction and avoid a scenario where the West is thinking what to do, but Putin is not waiting and finishes the pipe and yet again forces the parties to accept the policy of fait accompli, or, in other words, uses NS2 for political purposes, which is exactly what the project’s critics have been warning about.

Polish Marshall Plan will be green to offer as much support to the energy sector as possible (ANALYSIS)

Renewable energy sources take up the biggest chunk of the draft version of the National Recovery Plan, because those investments will be the most expensive and may also garner a lot of leniency from the European Commission, which will approve the green Marshall Plan for Europe – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Maxing out on the green

On the 27th of February the government presented a draft of the National Recovery Plan (NRP). It proposes a number of investments that will drive the economic recovery after the coronavirus. It will be bankrolled from the EU 2021-2027 budget and the Next Generation EU. Poland is to receive EUR 136.5 billion in subsidies and about EUR 34.2 bn in loans. The subsidies are non-reimbursable and are the most tempting to Poles, because they may decrease the cost of the energy transition.

First, it needs to be stressed that Poland would go through the energy transition regardless of the future of the Recovery Package. The changes that the energy sector is undergoing are technological and objective. Their pace and direction remains to be seen. The critics who maintain that the upcoming reforms are too ambitious, unofficially claim that Poland’s energy transition will cost PLN 1.6 trillion in total. Even if the costs turn out to be lower, it is worth minimizing their impact on energy prices in order to keep the economy as competitive as possible.

This is how the National Recovery Plan for the energy sector should be understood. The project includes propositions, which may make Poland’s ideas more attractive to the European Commission. The Plan suggests that the regulations on the RES sector will be liberalized. It also sets the stage for investments in innovative technologies to further decarbonize the economy, and in renewable gases: hydrogen and biogas. It is worth noting that 37 percent of the money from the NRP is to be spent on “green” targets.

“It will be a challenge to make the rules for awarding aid more flexible and to ensure better legislative stability with regard to RES regulations,” the NRP draft says. “It will be of utmost importance to what degree it will be possible to use hydrogen technologies (from production through transmission for application) for the needs of mobility, industry, power and heating. It is also a challenge to use the huge potential Poland has in the area of biogas – in the waste sector and the food and agriculture industry, estimated at about 7.8 bcm of biomethane,” the document says, and goes on to advise that “investments should be funneled into the ecological and digital transition, especially digital infrastructure, clean and efficient generation and consumption of energy and sustainable transport, which will contribute to the gradual decarbonization of the economy in, among others, mining regions.”
Poland wants to support the energy transition with the NRP through investments in offshore wind farms. The document talks about an installation port by the Baltic. It also includes specific investments:

• The capacity of installations that will generate low-emission hydrogen, including electrolyzers, together with accompanying infrastructure – 400 MW
• The number of fuelling stations, including hydrogen bunkering – 25
• The length of newly built or modernized transmission power lines – 379 km
• An installation and servicing terminal for offshore (operating permit) – 4th quarter of 2024
• The installed capacity of offshore wind farms – 2.6 GW – achieved by 2026.

“Due to the strategic character of offshore wind energy in Poland’s future energy mix (ca. 8-11 GW in 2040), the development of the so-called local content is an economic opportunity, and its key element is the construction of the offshore harbor infrastructure, which will be used to build and then operate offshore wind farms. Moreover, in order to properly operate the offshore wind farms and ensure their security, it will be necessary to either adapt waterfronts or build them in other ports to provide services to maintenance vessels. The investments are necessary to create an impulse that will drive the economy, and to ensure a high participation of Polish companies in the supplying of components and materials for offshore wind farms and in providing services to them. In order to fully use the potential of the Polish offshore projects it is necessary to create suitable harbor facilities in Poland, both when it comes to installing and servicing offshore wind farms. This will be the scope of support granted as part of the NRP, ” the authors explain.

Poles also want to use the NRP to bankroll the connection that will link the offshore wind farms and the National Power System, which is an important element of the investment as it generate huge costs. They also want to subsidize the IT system that will collect information on the market that is coming under increasing pressure from RES. “The Energy Market Information Operator (EMIO) will prepare and implement (and operate) the Central System of the Information Energy Market (CSIEM) by the end of 2023. EMIO is also important in the context of opening the energy market to the dispersed producers of RES and increasing the supply on the market,” the document goes on.

The NRP is to also support the development of RES installations that are built by energy communities, such as energy clusters, with special attention paid to the role of local governments. The first points of this type have been already set up, and new ones will be added.

• The development of hydrogen technologies is to cost EUR 797 million between the first quarter of 2021 and the third quarter of 2026.
• The development of transmission networks and EMIO is to cost in that time EUR 329 million.
• The support of large-scale investments in RES is to cost EUR 437 million at the time.
• The development of installations by energy communities is to cost EUR 97 million.
• That gives in total EUR 1.660 bn, which is about PLN 6 trillion.

Minimizing transmission costs

However, according to the government, all the money spent on green energy and decreasing energy intensity is to amount to PLN 27.4 bn out of 108 of the subsidies from the National Recovery Plan. The government wants to present this proposal to the European Commission before the 30th April after a month of social consultations. The negotiations with the Commission may take two-three months, after that in the second half of 2021 the subsidies will be mobilized to bankroll Poland’s energy transition. If its total cost is going to be PLN 1.6 trillion, then EUR 1.6 billion in the first five years of the process spread across two-three decades is enough to alleviate the burden on the citizens. The government is already suggesting it will revise the burdens caused by the investments in renewable energy. “Today the system plays the role of an energy storage. The question is whether the consumers currently pay enough for the service of storing energy, because that capability is actually limited,” the Government Plenipotentiary for Strategic Energy Infrastructure Piotr Naimski told me during the POWERPOL 2021 conference.

Is Poland able to join the big boy table to undermine Nord Stream 2?

The construction of Nord Stream 2 is to be resumed this week after it was postponed due to a storm. However, the brewing political storm makes it impossible to acknowledge the project as a done deal, despite the rumors about talks between the U.S. and Germany. And Poland has now found itself in its eye. This is an opportunity to test our ability to achieve our foreign policy goals and potential to play with the big boys in the major league of international politics – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Deal between America and Germany hangs in the balance

BiznesAlert.pl has reported that Germany’s Handelsblatt website found out that the German federal government was looking for a “package solution” that could help avert U.S. sanctions and assuage Washington’s concerns. According to the article, Berlin would like to propose a mechanism that would shut down Nord Stream 2 in case deliveries via Ukraine dropped. The idea is that this would make it impossible for Moscow to blackmail Kyiv.

Handelsblatt claims that Americans are open to talks, but Germans are reluctant to make this solution automatic. They are reportedly concerned that a dispute over gas deliveries could be provoked not by Moscow, but by Kiev. However, they may be open to making a political declaration that they would stop deliveries via Nord Stream 2 if the Kremlin used gas as a weapon against its neighbors. At the same time, Handelsblatt has warned that if the disputed gas pipeline receives permission to operate, it cannot be withdrawn, because it would put the investment at risk of claims for damages if deliveries were stopped. Moreover, Germany has reportedly voiced its objection to renegotiating the transit contract between Gazprom and Naftogaz, which stipulates the minimum amount of gas that Russia must transfer via Ukraine until the end of 2024.

The article also says that direct talks between Germany and the U.S. on Nord Stream 2 are not taking place now, due to the transition period after Joe Biden’s win. Only once all the nominations that are important to the relations between the two countries are completed, will it be possible to continue the talks on the topic. Handelsblatt has also learned that Americans are discussing what policy they want to pursue towards Nord Stream 2. Germany’s Greens argue that Berlin should abandon its plan to complete the contentious gas pipeline in exchange for purchasing LNG from the U.S., a scheme revealed by the Deutsche Umwelthilfe foundation.

The deal is shaky and the sluggishness of Joe Biden’s administration is visible, which my be characteristic of any transition period. Either way, U.S. senators demand that the announced black list of entities to be encompassed by American sanctions, be finally revealed. At this point the introduction of those restrictions is mandatory on the basis of the 2021 NDAA defense bill, but the formula depends on the State Department and that’s where the space for negotiations with Germany lies.

Poland to test its diplomatic prowess

The offer made by Germany is an opportunity to test whether Polish diplomacy, which so far has been successfully engaging in the dispute over NS2, has enough ability to achieve Warsaw’s interests by calling on Washington to impose the sanctions, expecting Berlin to change its position and consolidating the opposition to the project among Central and Eastern European states. Warsaw was successful at bringing Washington’s attention to our part of the world through military and energy agreements during Donald Trump’s transactional foreign policy era, but now it needs to find a new formula to engage with Joe Biden’s multilateral approach.

I have previously written that it is uncertain whether Americans would give up on the sanctions in exchange for vague promises made by Germany. It is worth going back again to the reveal made by the environmentalists from Deutsche Umwelthilfe who uncovered that already during Donald Trump’s presidency Germany proposed a deal on Nord Stream 2. They wanted to guarantee that if Washington agreed on Nord Stream 2, they would invest a billion euros in LNG that could be bought in the States. Back in 2019 this proposal could have already been a bluff, but today it has become even less likely considering the phasing-out of fossil fuels and the opposition from the Green Party (a future coalition party?) against those fuels, including the “dirty shale gas from the U.S.”. Germany has a plan for a long-term natural gas and later hydrogen symbiosis with Russia and Nord Stream 2. The minimum response to this scheme is to continue diversification in Poland and the EU, but a maximum response would be to convince Berlin not to enter such a dependency.

The offer made by Germany and disclosed by Deutsche Umwelthilfe, actually includes a topic that is very specific and interesting from Poland’s point of view. Berlin ensured about its support for diversification projects and even enumerated the Baltic Pipe, which received EU support despite the mounting criticism of gas as a fossil fuel in Germany and the entire EU. It is difficult to verify to what degree Germany caved in during the talks on Polish projects. However, it is worth admitting that an agreement between operators about the crossing of Baltic Pipe and Nord Stream 2 (completely owned by Gazprom) was reached, and that so far Germany has not undermined the investment either.

So what could be traded in exchange for Nord Stream 2? In 2015 I wrote that Poles should at least fight for support for their diversification projects, if the Russia-Germany gas pipeline was to be indeed completed. However, the discussion on this issue should not involve Berlin and Washington only, it should be multilateral, which has been already suggested by Sławomir Dębski, the Director of the Polish Institute of International Relations. Therefore, Poland should first do its best to be invited to the table. Second, Warsaw should seek support for its energy transition plan as specified in the Polish Energy Policy by 2040, which includes the construction of new gas and nuclear power plants, and development of renwables to phase out coal. Poles could trade Germany’s consent for an energy transition that is unique to Poland. So far, we have been successful at defending our approach to this issue, which is symbolized by the conditional consent to use the EU Recovery Package to fund gas investments. This success could be extended to the hydrogen sector, which, in the opinion of Poles should be technologically neutral, whereas according to Germans, green H2 from RES should have the priority.

Poland’s offer needs to be constructive

The international criticism of the Nord Stream 2 project makes it impossible to say it is a done deal. The U.S. sanctions have to be implemented in a new form, and it has not been confirmed that America is ready to accept Germany’s proposition. However, if talks on this issue do take place, Poland should bring to the table a constructive proposition. The efforts of the Polish diplomacy are often made easier by the sometimes awkward way in which Nord Stream 2 is justified. A good example is the recent defence of the project by Germany’s president Frank-Walter Steinmeier, which was interpreted as a form of reparations for the Russian Federation as the descendant of the Soviet Union. Articles about such blunders do not contribute anything of value to the dispute over Nord Stream 2.

Such gaffes should not be used to link this project with topics that unite Germans in their argument with Poland, such as the mentioned reparations for World War II. Instead we should use the rift in Germany to focus on specific activities that will benefit the Polish energy policy, but not only. We should also not give up on deliberate policy on this issue to counter the narrative that Poland sentenced itself to Nord Stream 2, because it did not want to implement this project in cooperation with Russia. Poles have their own plans for their energy sector, which are symbolized by the LNG terminal and the Baltic Pipe, which are gradually implemented in spite of the criticism from Russia, which is regurgitated by some Polish media outlets.

Nord Stream 2 goes against the Polish interests and in an ideal world it should not be completed. However, if for some reason it won’t be possible to stop it, Poland may test its diplomatic abilities by bargaining with such players as the U.S. and Germany for political and economic benefits, provided that it will be done professionally and according to a clear action plan.

France in the game for a nuclear contract in Poland. The final decision is close

The French are not giving up on their fight for a nuclear contract in Poland. The foundation of Poland’s 2040 energy strategy may be developed with their participation, and considering the favorable trends in Europe, a decision on this may be made soon – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

High-level talks about atomic energy with Nord Stream 2 in the backdrop

The Gazeta Prawna daily wrote that on the 2nd of February, the CEO of Frances’s EDF Jean-Bernard Levy will meet with the Government Plenipotentiary for Strategic Energy Infrastructure Piotr Naimski and the Minister of Climate and Environment Michał Kurtyka. According to the Polish Press Agency (PAP), the French ministry of trade also said that on the 2nd of February the French Minister of Trade and Investments Franck Riester will visit Poland to meet with the Climate Minister, the Secretary of State in The Ministry of Infrastructure and the Government Plenipotentiary for the Central Communication Port Marcin Horała, as well as the Undersecretary of State Robert Tomanek responsible for supervising state-owned energy companies. “France is hoping to tighten the Polish-French cooperation in the energy, IT and transport sectors,” the French ministry said in a statement quoted by PAP, which also reminded that Riester’s visit will take place almost a year after the French President Emmanuel Macron visited Poland.

Whereas, on the 1st of February France’s Minister for European Affairs Clement Beaune called on Germany to withdraw from the contentious Nord Stream 2 project, after the arrest of Alexei Navalny, the Russian opposition leader. According to Beaune, the current sanctions against Russia are not enough, but the decision on Nord Stream 2 belongs to Germany. “Today this decision belongs to Germany, because the gas pipe leads to Germany,” he was quoted by PAP. Even though this statement may be welcomed in Poland before the talks with the French, it does not represent a qualitative change in relation to the comments made by president Emmanuel Macron back in August 2020, when he said that Nord Stream 2 would increase reliance on Russia, which should be avoided. “I don’t think the approach that we ought to have with Russia should be one of naivety nor do I think it should be nourished by an increase in our dependence on Russia. This has always fuelled my reservations about the Nord Stream 2 project. The German chancellor knows it,” the French president was quoted by PAP. Despite these statements, France’s Engie did not back away from bankrolling the Nord Stream 2 project, even though it took such steps with regard to its partners, e.g. when it comes to LNG deliveries from the U.S. However, it is worth pointing out that western companies have already transferred the money to the Nord Stream 2 bank account, so withdrawing the financial support formally would not have any watershed importance for the investment, which is at more risk due to the U.S. sanctions that have impacted the pipe’s construction and go-live.

Technology or fuel?

France’s engagement in Poland’s nuclear project was indicated earlier. The talks with the French took place in Poland and Romania already in October 2020 and concluded with an agreement on developing nuclear power with the Romanians. This happened despite the fact that it was the Americans who signed a contract for modernizing, expanding and building the Cernavodă NPP, which we wrote about on BiznesAlert.pl. According to that cooperation model, companies from Canada and France are allowed to join the American contract. France’s Orano will be responsible for supplying, managing and recycling nuclear fuel. The company could play a similar role in Poland, even if France’s EDF is not selected to provide nuclear technology. One could also imagine a scenario where Poland buys the French technology, but is at the same time able to maintain the financial engagement of Americans, who could offer Poles a multi-billion loan that would make nuclear power as profitable as in Romania. In an interview for BiznesAlert.pl, EDF’s representative argued that the company’s large EPR reactors with a capacity of 1.650 GW are able tp provide more capacity in less time than America’s Westinghouse’s AP 1000 reactors. Probably because of the possibility to use reactors of various capacity, the Polish Nuclear Power Programme includes a statement about ensuring 6-9 GW of nuclear capacity by 2043 with the first reactor in 2033. Interestingly, even the questionable report commissioned by Germany’s Greens warns about the explosion of a reactor with a capacity of about 1.5 GW. In October Poles were clear about the fact that the race was still on and that apart from the American offer they had a plan B. Perhaps a tandem would combine proposals from both sides of the Atlantic and finally settle the future of nuclear power in Poland.

Poles may finally make a decision about going nuclear

Considering that the Polish Nuclear Power Programme has been endorsed and that the Council of Ministers is planning to adopt a resolution on the Polish Energy Strategy by 2040, which was included in the government’s work schedule for the 2nd of February 2021, it looks like the government is closing in on making a decision. These strategic documents should facilitate the in situ works, and the preparation of the financing model with a foreign partner or partners. “We are waiting for the environmental and location reports until the end of 2021, which will enable us to select the location. The most advanced research has been conducted in Pomerania. It looks like the location for the first nuclear power plant will be selected from among sites located by the seaside. Our partners from the U.S. are responsible for drafting a proposal. This is our plan for this year,” Tomasz Nowacki, the Director at the Nuclear Energy Department in the Climate Ministry, said in an interview with BiznesAlert.pl. The government plenipotentiary for strategic energy infrastructure, Piotr Naimski said in a radio program on Polskie Radio 24 that the State Treasury is now in the process of taking over shares in the company that will implement the PGE EJ1 nuclear program. In his opinion the process is time consuming, but later on it will make it possible to hand over 49 percent of the shares to the partner of the Polish nuclear program. The stock was supposed to have been transferred by the end of 2020, so we should expect the process to conclude in the coming weeks.

Nuclear power is gaining traction in Europe

It is worth stressing that the Polish approach to the energy strategy is becoming increasingly more popular in Europe. More countries are going back to nuclear energy, including Holland which is planning to build three to ten reactors in order to achieve climate policy goals, and at the same time not be reliant on imported gas, as its own reserves, including Groningen, are being depleted. Japan decided nuclear power was necessary to implement climate neutrality goals. Finally, France whose president had a short affair during the election campaign with the RES lobby, asked the EDF company to verify whether six new reactors could be built. That decision is to be made by the end of 2022. Poles perceive the atom in a similar way, because it is to become the pillar of decarbonization of the country’s energy sector. The strongholds against nuclear power are still holding up in Austria and Germany, but they are getting weaker in view of objective arguments for the atom and the harsh winter, which shows stable energy sources are a necessity.

Chernobyl on steroids in Poland or an election campaign in Germany?

Research should be done by scientists, but when the Green party in Germany raises alarm over nuclear power in Poland something is up. What? For instance an election campaign in Germany. It should be expected that if the Greens enter the government they will help Poland torpedo Nord Stream 2, but they will also undermine nuclear energy. Nevertheless at this point there isn’t much to talk about, because Poles have not yet formally decided whether to go nuclear or not – Wojciech Jakóbik, editor in chief at BiznesAlert.pl, writes.

The Greens campaign

According to a report drafted for Germany’s Green party, seven million Europeans, including Poles, would be exposed to radiation equal to or higher than one milli-Sv. 860 thousand European residents would be at risk of exposure to 6 or more milli-Sv, which is a limit of radiation to which students between the ages of 16 and 18 can be exposed while working with radioactive materials.

The authors of the report state that that or higher amount of radiation would affect about 400 thousand people in Poland, 112 thousand Germans, 127 thousand Russians from Kallinningrad, Lithuanians and Estonians, 113 thousand Danes and Swedes and 53 thousand Czechs, Slovaks, Ukrainians and Belarussians. A yearly maximum dose of radiation for people who are exposed to radiation due to their profession and in cases of emergency occupational exposure for the public is 20 mSv. The authors of the study predict that around 150 thousand European residents would be exposed to radiation higher than that in case of a nuclear disaster described in the report.

The threat of another Chernobyl may be used in any part of the world to make people afraid of a nuclear power plant (NPP). However, thanks to the safety standards in new facilities, the last catastrophe we heard about was the one in Fukushima. It was caused by a 12-meter high tsunami wave, a phenomenon hardly expected in Poland. The report on a potential nuclear disaster in Europe, commissioned by the German Greens, warns about contamination and the necessity to resettle thousands of Europeans. The authors should take a closer look at the assumptions they made in their document, and I know they are already doing it.

It is not very likely that a disaster of Chernobyl proportions would happen at a Polish NPP, as the technology and safety standards in the Polish facility will be a lot better than the ones used by the Soviets. This is a given considering the technological development we have witnessed over the years and the standards required by the European Union. In the report, the scientists used data on weather patterns from 2017-2020 and upon analyzing them concluded that a radioactive cloud from Poland would reach Germany (obviously). Up till now radioactive clouds were one of the scaremongering tactics used by Russian media, which enjoy writing about such clouds coming from Ukraine, or about secret iodine purchases made by European governments, as well as other legends that are then regurgitated by some western journalists.

Word on the street is that the report prepared for the Greens has already become a laughing stock among nuclear experts. The scale of the disaster it presents is not taken into consideration even by the International Atomic Energy Agency, because it is bigger than accidents in Chernobyl and Fukushima. In order to match the prediction made in the report, the Polish reactor would have to have a huge capacity, e.g. 1650 MW like the EPR reactor in France. Additionally, it would be best if it was built a few hundred meters above the ground and if the wind only blew west, i.e. in line with the weather forecast taken into consideration by the authors of the report. However, every kid in high-school knows that Poland is dominated by western winds (i.e. winds that originate to the west of the country), because of the pressure system with a permanent high-pressure pattern in the Baltic, the lack of a mountain range that would split Poland longitudinally, and the low pressure patterns in the East European Plain, as well as the flat landscape of the country. By the way, these weather conditions are used as arguments supporting the development of offshore wind power in the Polish waters of the Baltic.

A lot of fuss over nothing

It is worth considering the context in which the report was published. The fall parliamentary election is coming, which means German conservatives will have to again steal “green” platforms to undermine the result of the party that commissioned the controversial report. An attack on nuclear power in Poland is a great way to attract huge media attention during the campaign. However, the Greens’ ability to impact the Polish plans is limited, which is evidenced by the conclusions they themselves made from the report. They are mostly calling on making sure that the facilities in Poland are held up to the highest standards. However, the biggest enemy of the Polish project is not a German report, but the lack of decisiveness in Poland, which is still mainly talking about atomic energy, but has not been able to start a single project for over a decade. Poles are still deliberating about the financial model, in which Americans could participate, so for now the German Greens can rest easy and build political capital on questionable reports.

Has Nord Stream 2 construction resumed? That depends on who you ask

Source: Gaz-System

Has Nord Stream 2 construction been resumed despite U.S. sanctions? Are Russians no longer afraid of them and are thumbing their nose at Joe Biden while continuing the construction in Danish waters? The interpretation depends on which agency one asks, the quality of the translation and one’s trust in sources – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Construction ahead of or of Nord Stream 2?

The construction of Nord Stream 2, a gas pipeline from Russia to Germany that has provoked controversy for political, economic and regulatory reasons, is at risk due to U.S. sanctions, which have hit, among others, the Fortuna barge responsible for the work on the Danish waters that need to be conducted for the pipe to be finished.

On Sunday the 25th of January news on the boat has emerged. Its interpretation depends on the translation and trust in the sources. Reuters has reported: „A pipe-laying vessel has started work in Danish waters ahead of the resumption of construction of the Nord Stream 2 gas pipeline”. Whereas the story in Russia’s TASS has been that „Трубоукладочная баржа „Фортуна” возобновила укладку газопровода „Северный поток – 2”, ведет укладку трубы в водах Дании.” The agency also stated that „Судно „Фортуна” в коридоре строительства в водах Дании начало работы по возобновлению строительства газопровода „Северный поток – 2”.” This means the following: “the pipe-laying vessel Fortuna has resumed the construction of the Nord Stream 2, it is laying pipes in the Danish waters” and “the Fortuna ship is in the construction area in the Danish waters and has started work on resuming the construction of the Nord Stream 2 gas pipeline”. The second sentence sounds a lot less confident than the headline, which announces a fact that had purportedly already happened.

Therefore, one needs to ask what has been actually resumed – the preparatory works before the construction of the pipe, or the assembly of the Nord Stream 2 pipe itself. New information will emerge soon enough, so we will be able to answer this question. However, at this point the difference between the reporting of the generally trustworthy Reuters and Russia’s TASS, which has more often than not smuggled Kremlin’s propaganda in seemingly neutral news, is very apparent.

We do know that the Akademik Cherskiy vessel arrived on the 23rd of January to the Wismar harbor in Germany after its voyage to Kallinningrad. It is worth stressing that it remains unclear whether the ship has been properly modernized, and whether it has acquired the necessary certificates to build Nord Stream 2, as Mariusz Marszałkowski has rightly pointed out. It would take 300 days for the Fortuna to build the section in Danish waters, which would give the U.S. plenty of time to react, but it would also offer space to Angela Merkel to hold talks with Washington, which she had previously suggested. The data from the the MarineTraffic portal suggest that the Fortuna is accompanied by other ships – the Baltic Researcher, Weni and Katun are in the construction area, the Murman vessel remains in the vicinity as well. Another factor that may potentially slow down the construction and thus give the U.S. more time to clarify or extend the sanctions is the protest started by environmental organizations against the permission issued by a German regulator, which is necessary to connect the Danish section to the existing pipeline. Germany has admitted that stopping the work for the duration of that proceeding may significantly delay the project.

Time for America to react

If the construction has been indeed resumed it means Russians are serious about challenging America, so it is time for Washington to react in accordance with the legislation on the sanctions, which encompasses “any activities related to pipe-laying”. It is worth monitoring the activities of the Fortuna barge to determine what is really happening in the Danish waters. Perhaps Russians have already come to terms with the sanctions hitting their barge, but even if that is true, their western partners may not have. I have previously written that the project is becoming untouchable and problematic for companies that are trying to maintain their credibility on the market. In theory the American sanctions that are reminiscent of the restrictions imposed against Iran or Venezuela may erase those kinds of entities from the market. It remains to be seen whether they will receive the insurance and certification necessary for further work. Moreover, the reaction of regulators in Denmark and Germany is also unknown, but so far they have green-lighted all applications.

Despite that, Russians may count for a delayed reaction of Washington, as only a few days have passed since Joe Biden took over the presidential office. The State Department, which has been taken over by Anthony Blinken who confirmed he had supported the Nord Stream 2 sanctions during his confirmation hearing, will issue guidelines on the way they should be implemented. That document will determine how Americans will react to the actions of the Fortuna barge, which is on the list, and whether there will be space for talks with Germany.

Fait not accompli

When it comes to Nord Stream 2 the ball is still in the game and the media participate in the play as well. The fate of the project has not been determined yet, but Russia’s TASS is yet again trying to convince the public opinion that resistance is futile and Putin’s pipe that divides Europe must come into being. Despite this policy of fait accompli pursued by the Kremlin, that particular ‘fait’ has not been accomplished yet.

Poles are challenging the hydrogen rainbow in a battle for access to EU coffers

Poland has revealed a draft of its hydrogen strategy. It wants to utilize various technologies, even though Europe puts preference on green hydrogen, which is generated from renewable energy sources. In a move to maintain their access to the EU coffers, Poles have proposed a more neutral classification in comparison to the popular hydrogen rainbow – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.

Hydrogen road map

The draft, titled “Poland’s hydrogen strategy by 2030 with a perspective until 2040” has been submitted for public consultations. “Poland has the opportunity to use the scientific potential and expert experience in hydrogen technologies based on its own innovative technologies,” the authors of the report claim. “The strategy’s vision and overarching goal is to grow a hydrocarbon industry in Poland by, among others, developing domestic patents and hydrocarbon technologies, as well as using them to achieve climate neutrality and maintain the competitiveness of the Polish economy.

The strategic goals include, among others, bringing into use a 1 MW power to gas installation based on Polish technologies, opening a facility where hydrogen is produced using, among others, electrolysis from biomethane, waste gases, natural gas with the usage of CCS/CCU, or using pirolysis and other alternate technologies of hydrogen production, owning electrolyzers with 2GW capacity that run on renewables in 2030.

A legal framework is necessary to achieve this. “It is of utmost importance to create a legislative framework for hydrogen as an alternative transport fuel, draft regulations for the functioning of a hydrogen market and, later on, prepare a legislative hydrogen package – regulations which will define the details on how the market should function, and which will implement the relevant EU regulations, as well as introduce a system of incentives to produce low-emission hydrogen,” the strategy says.

The document includes a thorough description of the actual situation in the EU hydrogen industry, hydrogen strategies of selected EU states, as well as of Japan and Australia. These last two sates are especially pertinent examples, because they reach for solutions other than green hydrogen. Poland wants to follow a similar approach. “The ability to use the potential of renewable energy sources (RES) is limited by technical and weather conditions. It will be possible to generate economically competitive hydrogen from nuclear sources once the first nuclear block is opened, which according to the plan is to take place in 2033. For years Poland has been researching technological solutions for the hydrogen industry. Hence, today the country already has solutions of high technological readiness. In order to commercialize them, the industry needs to receive support to develop in a dynamic and stable way by 2030,” the document states. This is why the value chain described by the strategy authors includes, among others, hydrocarbon steam reforming, coal gasification, separating coke-oven gas as well as HTR (high temperature reactor technology).

Replacing the hydrogen rainbow with an emission criterion

Poles have a proposition that stands in contrast to the European Commission’s rainbow terminology, as it allows hydrogen to be generated from various sources. So far, hydrogen has been classified on the basis of the source from which it was produced: green hydrogen is produced from renewables, blue and turquoise from gas, violet from nuclear power, grey from refining and black from coal. Poles prefer an approach, which in their opinion will be less discriminatory.

Enter the term “conventional hydrogen”, i.e. one that is generated from fossil fuels. Thanks to it, today Poland ranks 5th on the European ranking of hydrogen production. The annual hydrogen production in Poland is about one million tons. The gas is produced by, among others, the following companies: Azoty – 420 thousand tons, Lotos – 145 thousand tons, Orlen – 145 thousand tons, Jastrzębska Spółka Węglowa – 75 thousand tons. Conventional hydrogen is the cheapest, but also generates the highest amounts of emissions, which is why it goes against the EU climate policy and is under pressure from new regulations. The second new term is “low-emission hydrogen”, which is generated from non-renewable sources, or renewable sources with a small carbon footprint suggested at a level lower than 5.8 KG CO2/kg H2. “We should replace the arbitrary process of assigning a ‘color’ to hydrogen depending on how it was generated, with a precise, numerical definition of hydrogen’s emissions level. The amount of CO2 generated per one kilogram of hydrogen in the entire production chain should be the criterion. Such an indicator would allow producers to adjust their technology to meet the desired standards,” the strategy proposes. “A cost-effective solution would be to use the hydrogen generated as a byproduct of chemical processes (the so-called waste hydrogen), which was qualified as low-emission, because the emissions were generated during different processes, in which they were inevitable,” the authors add, suggesting that grey hydrogen from refineries should be utilized. The third kind of hydrogen is “renewable”. It is generated in the process of electrolysis thanks to energy from renewable sources and an emission level under one kilogram of CO2 per one kg of hydrogen. “Today Poland’s ability to use the potential of renewables to generate hydrogen is limited, because of the lack of adequate facilities, and low commercialization of the existing technologies. The system solutions dedicated to managing the surplus of energy from renewables where hydrogen is generated in the process of electrolysis when demand for power drops, does not work either. The main reason for this is the high cost of installing electrolyzers and the high demand in the system for power from renewables,” the authors admit. Together with the development of renewable energy in Poland the potential of renewable hydrogen will expand, but changing the definition will make it possible for H2 to grow also thanks to nuclear energy, because violet hydrogen (from nuclear power) is to become equal to the green one (from renewables). “The competitive advantage of hydrogen generated in nuclear power plants is based not only on the lack of emissions, but also on the possibly of large-scale production (economies of scale). It is one of the cheapest ways to generate hydrogen. “Producing hydrogen in nuclear power plants makes the most sense during the so-called night valleys, when NPPs may be forced to lower their capacity, which has a negative impact on their efficiency,” the strategy authors explain. They also add that the plan includes HTR technology, which is to be developed in cooperation with Japan, which was included in the report as an example in the review of existing hydrogen strategies for a reason.

“It is also pertinent to incorporate the strategies of Polish companies that may be based on other ways of hydrogen generation. It was important to include a rule that widens the possibilities of using hydrogen from electrolysis, but also one that depends on the emission levels of grey hydrogen. This will be an important change, one that we will fight for on the EU level in line with the European principle of technological neutrality, so that as big a number of entities as possible could take this opportunity,” Michał Kurtyka, the Minister of Climate and the Environment, said in an answer to BiznesAlert.pl during a conference on which the hydrogen strategy was presented.

The game to tap into the EU coffers

In response to questions from BiznesAlert.pl, the Ministry of Climate and Environment explained that on the 9th of December the representatives of ministers for climate, energy and the environment – COREPER, met to negotiate how the EU hydrogen strategy should look. Poland’s proposition to support hydrogen technologies depending on their emissions level was adopted. The conclusions on this topic were adopted during the meeting of ministers for energy of the Council of the European Union. “Those technologies that generate no or low emissions and thus will bring Europe closer to climate neutrality will be promoted. Green projects will have the biggest support, but thanks to this classification we are not excluding the HTR technologies,” Ireneusz Zyska the Deputy Minister for Climate and Environment told us. “We are just starting. We will speed up after 2030. In the current decade we will develop the market and prepare the framework for further growth. The entry threshold, prices and availability of technologies force us to first clear the trails. In the next decade hydrogen technologies are to become common and cheaper,” he argued.

“The EU bankrolling low-emission technologies, not just green hydrogen, offers an opportunity to Poland, as well as other states with large industries, such as Germany. It also makes it possible to develop competencies and a hydrogen market with the existing assets, and enables a gradual move to hydrogen that causes less emissions, as well as H2 generated with power from large renewable facilities, such as offshore wind farms,” Zyska summed up.

This means that if the EU maintains its support for various kinds of hydrogen, the EU funds, e.g. the Connecting Europe Facility, which was used to bankroll innumerable projects that were important for Poland’s energy security (e.g. the LNG terminal and Baltic Pipe), could be used for hydrogen projects, for instance as part of the EU goal to adapt the gas infrastructure to transport hydrogen and other renewable gases, such as biomethane. Thus, Poland could keep its access to EU money for energy transition, despite the fact that it wants to use gas and other transition technologies (apparently in the hydrogen sector as well), which are increasingly more often penalized in Europe, like in the high-profile decision of the European Investment Bank, which decided to stop supporting gas projects. Polska Hydrogen Ready wants to keep on receiving funds from the EU despite the peculiarities in its energy and hydrogen strategies, by marking individual projects (e.g. Baltic Pipe) as endeavors that facilitate the transition.

However, the success during the COREPER meeting should not be treated as the final battle. “This position was adopted by the Council and it determines how hydrogen should be handled in the EU legislation. It will impact the Council’s position with regard to drafting specific regualations. It should also have some effect on the approach of the European Commission. It refers mostly to what is included in the plan determined by the EU hydrogen strategy from July 2020,” Paweł Wróbel, CEO of Gate Brussels explained. “We should remember we are in the midst of building a hydrogen market, which has been stressed by the EC as well. This is why at this stage there is room not only for green hydrogen, even though this kind of hydrogen is to be the target one as it is generated with RES. When analyzing how the future legal and financial EU framework will handle various hydrogen technologies, one should also take into consideration the position of the European Parliament. I expect that it will argue for limiting hydrogen other than green as much as possible. The document adopted by the EU Council in December las year is not a legal act, it’s only a conclusion. The future of hydrogen will be determined during the negotiations on specific regulations and directives, so it is still an open question,” the experts argued.

To be continued

The game for access to the EU treasury with hydrogen as leverage will be continued. Poland wants to stick to its specificity, similarly to the energy sector. This approach is balanced and I have called for it in my other articles. According to the hydrogen strategy, at the turn of 2021 and 2022, a legislative package for the gas is to be drafted. It will include regulations that will implement the EU legislation, regulate the mechanics of the hydrogen market, and provide a system of incentives to produce the gas. Whether Poland will be able to use the full potential of its hydrogen economy depends on the administration in Warsaw. The government will either use the upcoming opportunities to develop new industries and reach for the potential of RES and green hydrogen, or sit on its laurels and use a diversified hydrogen mix to protect the status quo in the energy sector. If the various hydrogen technologies are approved, Poland will have to face changes that are not as revolutionary, but it should not be an excuse to perpetuate the status quo, which does not strengthen the competitiveness of Poland’s economy.