12:04 23 June 2022
Post by: Warsaw Business Journal


Dr hab. Mariusz Ruszel, associate professor of Rzeszów University of Technology and chairman of Ignacy Lukasiewicz Energy Policy Institute (IPE), believes that Poland is energy safe and was properly prepared for the Russian gas supply cut-off. He adds that the EU will return to coal, benefiting the Polish mining sector. BY NIKODEM CHINOWSKI


WBJ: What is the current level of Poland's energy security? Is cutting off the gas supply from Russia a big blow to our economy and society?

Dr hab. Mariusz Ruszel: So far, we have imported 8.5 billion to 10 billion cbm of gas from Russia annually. Now supplies from the East have been completely cut off, so we must cover this deficit of natural gas. However, I believe that we are prepared for it. Let’s not forget that Poland had previously declared that it would not extend the Yamal contract, so regardless of the war and Moscow's decision, Poland was prepared to stop importing gas from Russia. Over the last few years rather several years, we have implemented many energy infrastructure projects, which today allow us to effectively implement the policy of diversifying natural gas supply sources.

First of all, we already have an LNG terminal in Świnoujście ready, which allows us to receive 6.2 billion cbm of gas annually. Its target capacity is 8.5 billion, even 10 billion, cbm of gas. Secondly, we extract gas ourselves. This domestic production is the cheapest and covers the demand for approx. 4 billion cbm of gas annually. In addition, the construction of the Baltic Pipe gas pipeline is being completed, which will allow gas supplies from Norwegian fields, including those with PGNiG as the concessionaire. Ultimately, this gas pipeline will allow us to import approx. 10 billion cbm of gas annually. Our next security pillar is the gas connection with Lithuania, which allows us to import 1.9 billion cbm of gas from the LNG terminal in Klaipėda, Lithuania. Interconnectors with Germany in Lasów and Mallnow and with the Czech Republic in Cieszyn are also in reserve.

It is also worth noting that we have modernized the domestic gas pipeline network. Until recently, the main gas compressor station in Jarosław pumped gas from the east to the west. The new gas compressor station in Goleniów serves the north-south direction.

Therefore, taking into account that Poland's annual gas demand amounts to approx. 20 billion cbm of gas, I believe that we are secure and that imports from Russia will be stopped. 

All right, but the Russian gas was simply the cheapest, wasn’t it?

The provisions of the gas contracts are secret, so we do not know how much individual countries pay for gas from different sources. We can only estimate the price of Russian, Qatar, or American gas. However, the price is not always the most important criterion in choosing a supplier. It is important, for example, that the contracts with Qatar and the USA for gas supplies to Poland do not contain prohibited trade clauses. The Russians were famous for introducing "take or pay" clauses – i.e. charges for uncollected gas – as well as prohibiting the re-export of gas.

So we should expect a further increase in gas prices in Poland, both for industry and individual customers?

All the premises indicate that a further upward trend in gas prices should be taken into account. This is due to several factors. Firstly, the old gas contracts with a price formula indexed to the prices of petroleum products are still in force in the European market. So if in March the price of a barrel of Brent crude oil jumped to $100-120, the price of gas, which is delayed to react to oil prices, will increase at the end of 2022. Secondly, with the cut-off of supplies from Russia, we are dealing with a reduced supply, so the price of gas delivered to the European Union from Norway, the USA, Qatar, or Algeria, following the market rules, will increase. Moreover, speculative actions in the gas market cannot be ruled out. Russia has many underground gas storage facilities owned, directly or indirectly, by Russian commercial law entities. It is in Russia's interest to have the gas price as high as possible, so they can use this tool as another element of the market game.

To what extent can photovoltaics be an alternative to the conventional energy market?

First of all, it should be emphasized that the production of electricity from gas and photovoltaics has a fundamental difference — gas production is more controllable and stable. These conventional final energy sources are independent of weather conditions and easier to balance daily. Photovoltaics and renewable energy sources, in general, are in the right direction when it comes to supporting the main production system and at least partial independence from external countries. But as long as cheap, capacious, and efficient electricity storage facilities are not built, it will not be possible to rely on renewable energy as the main source of electricity production. And technology remains a barrier in this matter, but if such options appear, they will certainly accelerate the process of energy transformation in the world. Another important issue limiting the possibilities of photovoltaics as the energy foundation of Poland is our grid infrastructure. Our energy transmission system is designed in such a way that it distributes energy from the south of Poland, where we have production installations like combined heat and power (CHP) plants and other power plants. If we want to change the architecture of generation capacity, we need to expand and modernize the transmission network, the current age of which is sometimes up to 40-50 years. This is a huge infrastructural challenge, but necessary in the long term if we want to see renewable energy as a viable alternative to gas and coal.

However, I understand that this barrier in the form of grid infrastructure does not apply to prosumers?

Yes, definitely. In the area of individual households, photovoltaics is applicable. People who have decided to install solar electricity panels in their homes will certainly not feel the effects of the increase in energy prices so sorely. So, from the perspective of an individual household, photovoltaics is the right direction. What’s more, the government has introduced several incentives for the installation of solar panels.

Can the Polish coal industry be a beneficiary of these reshuffles in the global energy market? Can coal again play such a role in the world as it did in the first half of the 20th century?

Such a conclusion that coal will again be the main energy resource may be too far-reaching. However, we should assume that in the short and medium-term coal-fired power generation will benefit from the current situation in the global energy market. Let’s not forget that the whole world needs steel and [one of] the largest deposits of iron ore is in Ukraine, from which imports will be impossible for some time. And only coking coal can be a substitute for iron ore. Coal also has a prosperous period ahead of it as an energy source. Taking into account that in 2021 Germany increased the use of coal while increasing the thresholds for CO2 emissions, this is a signal for the entire EU that coal consumption may increase in the near future.

Europe is well-prepared for coal: we have the appropriate mining, processing, and transport infrastructure and we have the know-how. I think that shortly the EU will return to debate on changes in the emissions trading system and the energy and climate package. Especially since the sanctions against Russia are to be permanent, so the EU should forget about Russian coal, oil, and gas. Increasing the use of coal can also count on the support of the US, which can export this raw material to Europe. The Polish mining sector may benefit from this in the coming months, as the market expects an increase in domestic coal demand.

dr hab. mariusz ruszel

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