The Energy Sector between the Past and the Future

Achieving energy independence by the middle of the century is a key element in defining the EU’s strategic situation. All indications are that the most developed EU countries will implement this strategy without looking behind at possible laggards from Central Europe.

Polish miners lost patience again. Nobody wants to buy their coal. Despite the assurances of politicians that it will be the basis of Poland’s energy security for the following decades, millions of tons are being dumped. Too expensive, too dirty, unwanted, and also clashing with the spirit of the times, when the tone of discussion about the future is marked by young people striking to defend the climate.

Polish miners also think about the future, but its horizon, just like for the French ‘yellow vests’ movement, is not defined by a vision of the end of the world and the climatic apocalypse, but by the spectre of the end of the month with bills to pay. This is why they scrupulously demand what politicians promised them. And politicians, fearing the miners, the best organised and most unionized profession, usually promise to deliver what miners demand. And the vicious circle closes.

Not only in Poland, but among all the countries of the ‘New Union’, thinking about energy and the energy sector is suspended between the legacy of the past marked by socialist industrialization and a future defined by belonging to the European Union and its modernization strategy. This future is increasingly and irrevocably shaped by the European Green Deal project. Its most important objective is to achieve climate neutrality by 2050, and reduce greenhouse gas emissions by 50-55 % by 2030 in the process (in January 2020 the European Parliament adopted a resolution recommending that the 2030 target should be ambitiously set at 55% emission reductions).

Polish politicians used every opportunity to emphasize the uniqueness of the Polish economy, where 75% of electricity comes from coal-fired power plants.

Behind this simple directive is the complex Great Green Transition program and a no less complex story. The first draft of the climate neutrality by 2050 strategy was presented by the European Commission in November 2018. The timing of the announcement was carefully chosen—in December, the UN Climate Summit COP24 was held in Katowice, at which the ‘rulebook’, i.e. a roadmap for the implementation of the Paris Climate Agreement adopted in 2015 and to be effective in 2020, was to be passed. The EU wanted to give a clear signal of its climate ambitions, especially when the United States, led by Donald Trump, began to effectively sabotage the climate process.

No Post-coal Future without a Social Component

At that time no one was talking, however, about the Green Deal, because in late 2018 commentators were more concerned about the ‘brown-shirt reign’ that was expected to prevail in Europe after the elections to the European Parliament in May 2019. The polls showed that the power of the extreme right was growing and the new balance of power in Strasbourg would be decided by people like Matteo Salvini. No one predicted, however, that Greta Thunberg would enter the stage. The young Swedish woman, like Joan d’Arc, appeared in Katowice and gave a short fiery speech to adults, rallying them to act. She repeated her appeal in January 2019 during the World Economic Forum in Davos, beginning with the poignant “Our house is on fire. I came here to say that our house is on fire. I want you to start panicking, to start being as scared as I am every day.”

Not much later, on 15 March 2019, the first global youth climate strike took place, and other climate movements, jointly called to the Extinction Rebellion, also came into being. One should not forget the ‘yellow vests’, who shocked France in the autumn of 2018 by delaying Prime Minister Édouard
Philippe, who had intended to appear in Katowice, in Paris. Instead of the French politician in person, the audience received the following communication: transition to a green, post-coal future must include a component of social justice. Without it, even in rich, sweet France, a revolution may erupt.

The signal from France was picked up by Polish politicians, who used every opportunity to emphasize the uniqueness of the Polish economy, where 75% of electricity comes from coal-fired power plants. This means that the transition in a country such as Poland must cost more than in France, which obtains about 75 percent of its electricity from nuclear power plants, by definition climate neutral. And the cost also means social costs here. Hence the idea for the Just Transition Fund first mooted in Katowice. A few months later, it appeared as an instrument of the European Green Deal with a budget of 7.5 billion euros.

Before the adoption of the Deal, however, May 2019 elections were held, in which the green wave defeated the brown one and the balance of power shifted contrary to the earlier concerns of analysts. A spectacular example of this shift is the political situation in Austria, where a coalition of the right and the extreme right was replaced by an alliance of ‘blacks’ and ‘greens’.

The new spirit already clearly hovered above the June EU summit in Sibiu, where EU leaders first brought up the issue of the commitment to achieve climate neutrality by 2050. Poland, supported by the Czech Republic, Hungary and Estonia, vetoed this formulation.

Central Europe’s Nuclear Option

Commentators interpreted this position of Central European countries as preparing the ground for the negotiations on a detailed strategy to be held at the EU summit in December 2019. It was known that Mateusz Morawiecki’s government wanted, among other things, to push through the idea of the Just Transition Fund, the new and additional financial instrument supporting the transformation of coal mining regions, i.e. mainly Polish ones.

The six months passed quickly and in December the new European Commission headed by Ursula von der Leyen presented the European Green Deal project as the official EU modernization by 2050 strategy. The Polish government again tried to block the negotiations, but it could no longer count on an alliance with other Central European countries. Resistance from Hungary, the Czech Republic and Slovakia was assuaged by acceptance of nuclear power as a means of decarbonization. This was an exception, because nuclear power, like gas-based power generation, was not included in the catalog of decarbonization solutions supported by the EU.

The Polish government could no longer count on an alliance with other Central European countries. Resistance from Hungary, the Czech Republic and Slovakia was assuaged by acceptance of nuclear power as a means of decarbonization.

As a result of the December summit, the European Union adopted the Green Deal and allowed Poland to remain outside the agreement until it found a way to achieve climate neutrality which would be acceptable to both sides. This does not mean that the EU objective of neutrality does not apply to Poland. Keeping the nuclear option for Central Europe worried Austrian Chancellor Sebastian Kurz, who tried to convince his Visegrad neighbours to give up the technology. After all, Austria, one of the most industrialized countries in Europe with one of the highest productivity rates, wants to achieve climate neutrality as early as 2040 and does not need nuclear power for this.

The Austrian persuasive efforts were of no avail. Slovak Prime Minister Peter Pellegrini replied that every country should have the right to define its optimal energy mix, so Slovakia would build two new units at the Mochovce nuclear power plant, and the atom that would be the basis for Slovakia’s energy security and for achieving climate neutrality. Czech Prime Minister Andrej Babiš said the same, claiming that it was impossible to close down coal-fired power plants without replacing the lost capacity with nuclear power. So a new unit will be built in Dukovany by 2036, and by 2040 the share of the atom in the Czech energy mix is to increase from the current 30% to 40%.

Implementation at the Lowest Possible Cost

This joint and passionate love for atomic energy in Central Europe does not mean that there is any joint energy policy of the Visegrad Four countries. They have too divergent interests, not only economic, but also political, which is exacerbated by different historical development trajectories, as can be seen today in the infrastructure inherited from previous decades. What these countries have in common is certainly the fact that, unlike Austria, they do not intend to take the lead in the green transition campaign, but want to implement it at the lowest possible cost. But this is where the convergence among the V4 ends.

Poland is a very special case within the group, because it also applied for the nuclear option, but has no nuclear power plant yet, although it has been trying to build one since the times of late communism. The ambitious goal still has not gone beyond the planning stage and coal remains the foundation of the Polish energy sector. The coal-based power industry is ‘cracking’, however, and does not satisfy domestic demand any longer, which means that an increasing amount of electricity is imported. Electricity from abroad is attractive not only due to its availability, but also the price. As Adam Grzeszak writes in a report for the Polityka weekly, a megawatt-hour on the energy exchange in Poland costs PLN 250, in Sweden and Germany PLN 162, and in the Czech Republic and Slovakia PLN 175.

The European Union adopted the Green Deal and allowed Poland to remain outside the agreement until it found a way to achieve climate neutrality which would be acceptable to both sides.

In light of this, abandoning coal as rapidly as possible seems to be the only reasonable solution. Unfortunately, the political position of the entire coal and energy sector is so strong that no government has been able to carry out any far-reaching reforms. Consequently, Poland operates in a landscape that is paradoxical to say the least. Due to the coal dogma, it maintains a coal-based power industry, which, however, cannot function exclusively on the basis of Polish coal, because it is too expensive and of too poor quality. As a result, the import of coal is growing, mainly from Russia, and in 2019 it exceeded 16 million tons. The same amount of Polish coal is lying on heaps, irritatingly for the miners.

A Blackout is a Greater Challenge than Climate Neutrality

While you can abjure social reality using political tricks, markets are more resistant to political arguments. And it was the markets that put a symbolic seal on the history of the development of the coal-fired power industry in Poland—its last stage was to be the construction of the Ostrołęka C power plant, but in February 2020 investors withdrew and the plant will not be built. It is also known, however, that Poland will have a problem with obtaining a 15% share of renewable energy sources in the mix, as follows from the EU commitments. And just as for the miners the vision of the end of the month is more of a problem than the vision of the end of the world, so for Polish politicians and power engineers the increasingly real threat of blackout in 2050 is a greater challenge than climate neutrality.

The energy and climate policy of Hungary is more consistent, although it arouses suspicion from the Polish perspective. It is based on cooperation with Russia, not only the main supplier of fossil fuels, but also the principal technological partner. Russia is to build more units of the Paks nuclear power plant in order to provide financing for the investment and supplies of nuclear fuel in the future. Although no tender had been announced for the contract, making Hungary dependent on Russia, against which the European Union has many reservations, the European Commission accepted the Hungarian decisions.

The energy and climate policy of Hungary is more consistent, although it arouses suspicion from the Polish perspective. It is based on cooperation with Russia, not only the main supplier of fossil fuels, but also the principal technological partner.

Each of the Visegrad Group countries has a unique energy landscape, and mutual relations, instead of a joint strategy, often assume paradoxical patterns. Thus, Poland and Hungary are linked by traditional, even sentimental ties of historical affection, which in recent years has been deepened by the political friendship between the regimes of Viktor Orbán and Jarosław Kaczyński. This friendship is not harmed by the openly pro-Russian bent of Budapest’s policy, diametrically opposed to Warsaw’s anti-Russian stance. It turns out that the common denominator is the energy coercion, which means that fossil fuels have to be imported from Russia anyway—it is more difficult to get rid of the legacy of imperial dependence under the communist system and Comecon than to change your political rhetoric.

The future will be defined more, however, at present by the strategic zeal of the European Union than the post-Soviet legacy. It is clear that EU political leaders take the Green Deal seriously, seeing it as a way not only to fight global warming, but also to deeply modernize the societies of the European Union. The key element of the Green Deal is to rebuild the resource and energy base so that climate neutrality will entail a bonus in the form of energy independence by mid-century.

Achieving it would be a key element in defining the strategic position of the EU not only in the energy domain, but also in the geopolitical sphere. And all indications are that the most developed EU countries will implement this strategy without looking behind at possible laggards from Central Europe. We will know it for sure already this year, when during the next EU summits detailed legislative projects and the EU Climate Change Pact will be submitted to serve as a new European social contract for green development.

It is clear that EU political leaders take the Green Deal seriously, seeing it as a way not only to fight global warming, but also to deeply modernize the societies of the European Union.