We reached out to one of our Lex Mundi partners and a well-known expert in Poland in the energy and legal industries to get his thoughts on the current energy climate.
Radosław Wasiak is a Senior Associate, Energy Sector Practice Group, with Wardyński and Partners. He
specializes in e
nergy and real estate projects in addition to mining and natural resources.
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Senior Associate, Energy Sector Practice Group
Wardyński and Partners
How is the COVID-19 pandemic affecting the energy sector in Poland?
As of today, the Polish economy faces no greater challenge than COVID-19. It is clearly evident that a halt to the pandemic itself will only be the first stage of dealing with the crisis that this virus has caused. Nearly all sectors of the economy, including the energy sector, confront an economic slowdown.
The state of epidemic introduced in Poland in March has resulted in complete suspension or significant limitations on activity in numerous sectors of the economy. Retail trade and services have suffered the most. A domino effect, however, has been felt throughout the economy. In response to the situation, Poland adopted a series of regulations commonly referred to as anti-crisis shields. They have also included provisions addressed to the broadly defined energy sector.
Regulations adopted in connection with or for the duration of the epidemic primarily concern: extended deadlines for duties arising from winning bids for the sale of energy from renewable sources ("RES"); extension of grid connection contracts terms; a streamlined process for compensation to energy intensive enterprises due to an increase in energy prices or extended permit periods; and, in particular, concessions. Additionally, new regulations have limited the ability of power companies to suspend power supplies to customers with payment arrears. This temporary regulation serves to protect energy consumers (both individuals and corporates) exposed to a loss in financial liquidity against risks associated with cut off power supplies and suspension in ongoing business.
The economic crisis that may arise as a result of the epidemic will not spare the energy sector in Poland. This sector is undergoing a transformation in the form of gradual departure from high emission sources to a more balanced model that COVID-19 may accelerate.
The transformation process was vigorously halted until now by the present ruling administration unwilling to move away from coal power providing approximately 80 percent of the Polish energy mix. This model is nevertheless proving to be more and more costly. This mainly stems from growth in coal prices and emission allowances. This trend appears to be permanent and may accelerate as a result of the New Green Deal strategy announced by the European Commission. Further maintenance of the present energy market model will result in higher energy prices. This, in turn, will affect costs and decreased competitiveness in the entire economy that cannot be allowed in a time of economic crisis.
In light of the above, it can be assumed that Poland will have to continue a high-level investment in energy. In particular, this will concern investments in renewable energy sources, primarily offshore wind farms. It cannot be excluded that regulations hindering the construction of new onshore wind turbines will be amended. Further growth should also be expected in the PV sector. Additionally, the construction of new gas blocks should not be excluded. Poland is making great efforts to free itself of dependence on Russian gas, expand the LNG re-gasification installation, as well as continue the project of gas pipeline from Norwegian reserves. Plans to build the first Polish nuclear power station may also move forward.