|The cost of building Poland's first nuclear power plant is estimated at zł.30-50 billion|
Poland will need to decide whether to pursue an energy policy based on nuclear power or on shale gas, the chief executive of state-owned utility PGE said last week. The country’s treasury minister meanwhile hinted strongly that Poland will choose to focus on hydrocarbons, at the expense of nuclear, while the prime minister said the two shouldn’t preclude one another.
PGE has been tasked with overseeing Poland’s nuclear power program, and is also involved in searching for shale gas, which is believed to exist in large quantities beneath the country’s surface. Poland is seeking to reduce its dependence on supplies from Russia, which delivers most of its gas, and on highly polluting coal.
“These two programs cannot be successful [at the same time], one excludes the other,” PGE chief executive Krzysztof Kilian, told a power sector seminar.
“You cannot drive on the left and on the right at the same time, because it will have serious consequences,” he added.
Treasury Minister Mikołaj Budzanowski told parliament last Wednesday that “the priority for Poland is research into and production of hydrocarbons.”
He explained that “investments launched today in the energy sector in Poland may lead to a situation in which Poland will have an energy surplus by 2020,” the Polish Press Agency reported.
He said that a final decision on whether to scrap the nuclear power program will be made no sooner than 2014-2015.
Diversification the priority?
Prime Minister Donald Tusk then served to muddy the waters, saying later in the week that the country’s priority is to diversify energy sources, and that both programs are therefore key.
“Polish state companies will, as far as the law allows, fulfill the government’s strategy, which is based on the diversification of energy sources to guarantee Poland full security and independence from outside suppliers,” Mr Tusk said.
“This means continuing the development of the nuclear program and an intensive implementation of the shale gas program,” he told reporters.
Moreover, Hanna Trojanowska, the government commissioner for nuclear energy, told WBJ that diversification should be the focus, rather than a single-track energy policy focusing on one of nuclear or shale.
“Atomic energy is not a panacea for all of our energy problems. … Poland needs a diversified fuel mix,” said Ms Trojanowska, adding that this should include gas and clean coal as well as nuclear.
“To produce more energy and simultaneously meet EU conditions concerning the reduction of CO2 emissions, Poland needs efficient and clean sources,” she said. “Those are the kinds of zero-emission nuclear power plants which are built these days.”
She pointed out that nuclear power pollutes less than energy produced from natural gas – an important consideration given that Poland is under pressure from the EU to reduce CO2 emissions.
“Moreover, without verifying [the presence of] domestic shale gas resources and the profitability of its production, declaring it as a fuel source for power generation is definitely premature,” she added.
C. David DeBenedetti, a partner at the DeBenedetti Majewski Szcześniak Law Firm who specializes in shale gas issues, broadly agreed that diversification is the best strategy for Poland.
“It seems to me that the best strategy for energy security would be to choose “all of the above” and to develop both nuclear and gas along with other sources of energy. ... Poland has extensive energy needs in the next 20 years and there is no reason why one should exclude the other,” he said.
Łukasz Cioch, an energy expert at the Tischner European University in Kraków, stressed, however, that such an approach might lie beyond Poland’s current capabilities.
“There are great reasons why nuclear technology makes sense but today’s ‘let’s have it all’ approach in Poland is sadly reminiscent of far more fundamental issues which need to be addressed first – lack of focus, coordination and credibility, in a political, economic and technological sense,” he said.
Speculation has been building for some time now that Poland might shelve its nuclear energy plans, especially since a major policy speech delivered by Mr Tusk in early October failed to mention the nascent nuclear program. Instead, Mr Tusk focused on shale gas, saying zł.55 billion would be spent on shale gas investments, with zł.5 billion coming from Polish firms and the rest from foreign entities.
“The prime minister’s skipping of the nuclear topic in his recent expose is most likely not an accident,” said Mr Cioch. However, he pointed out that the government is sending out a number of mixed messages on the issue.
|Treasury Minister Mikołaj Budzanowski appeared certain that Poland's energy|
Courtesy of the Treasury Ministry
The announcements by the treasury minister and PGE’s chief executive “clearly [represent] a turnaround and puts shale gas as the number-one energy project for Poland,” said Robert Maj, an energy analyst at KBC Securities.
“It shows the Treasury is becoming more realistic about what it is able to achieve financially … and sends a message to the market that the state believed it had been over-optimistic about the capacity of state firms and the budget,” he added.
PGE itself plans to spend zł.330 billion through 2035 on energy projects – and that doesn’t include its nuclear plans – while many of Poland’s largest state-owned firms have committed significant sums for the exploration and extraction of shale gas.
The state had been planning to build two nuclear power plants with a combined capacity of 6,000 megawatts (MW) by 2035. Construction work on the first block was expected to start at the turn of 2015 and 2016, with completion scheduled for 2023. The cost of building the first plant was seen at between zł.30 billion and zł.50 billion.
“There was no clear view about how to finance the nuclear project,” said Mr Maj.
Politics will also likely play a key role in helping the state to decide about its energy strategy, experts said.
“Since 2009, the government has invested more politically in shale than it has in nuclear, constantly talking about the potential for shale gas,” said Mr Maj. “It sees it as a form of opposition to Russia, opposition to Gazprom, and as a way of increasing Poland’s energy independence,” he added.
Poland has granted 111 shale exploration licenses to foreign companies and state-controlled firms including PGNiG and PKN Orlen.
Moreover, since the Fukushima nuclear disaster in Japan last year, public enthusiasm for nuclear energy has waned. “Nuclear technology has become extremely pricey and has terrible PR, both globally and in Poland,” said Mr Cioch.
Shale gas investments also provide a broader base for economic development and energy security, experts say.
“Shale gas investments may cover areas of Poland most in need of economic development with basic jobs: similar to rural Pennsylvania or East Texas a few years ago, modern oil wells need support infrastructure (roads, pipelines, storage facilities) and access to market or customers who can use the gas,” said Mr DeBenedetti.
“Thus, the potential for economic development through shale gas investments goes through several layers of the economy: preparation for extraction (creating an infrastructure), extraction, storage, transport, and finally, use or export, while nuclear power projects just focus on the development of the ‘use’ of such energy,” he added.
Nevertheless, it’s not at all clear whether Poland’s unconventional oil and gas reserves will be sufficient to meet the country’s energy needs.
The initial excitement about the potential for shale gas has faded, on the back of disappointing estimates.
According to the Polish Geological Institute, Poland’s shale gas reserves likely stand at between 0.35 and 0.77 trillion cubic meters, much lower than the 5.3 trillion cubic meters estimated earlier by the US Energy Information Administration.
“If, in four or five year’s time, it becomes clear that shale gas in Poland can’t be exploited on a commercial scale, then the government might say: ‘OK, let’s go back to nuclear’,” said Mr Maj.
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