Polish bituminous coal market faces huge changes to find its place in the EU’s climate policy and at the same time to guarantee Poland’s energy security in both economic and ecological aspects.
With output of 70.4m tons in 2016, Poland is the European Union’s leading producer of bituminous coal with share in excess of 80% of the EU market estimated at about 87m tons. However, compared to the 1990s, the output is more than two times down.
Coal output is down
There are a number of reasons. Primarily, the exhaustion of shallow deposits forces the exploitation of increasingly deeper ones, often with worse geological features and higher methane hazard. Poland’s bituminous coal deposits are estimated at 21.1 billion tons, but less than 3.6 billion tons can be mined in an economically viable way. And even the growing productivity cannot stop the decline in output. In 2016, a statistical miner produced 827 tons of coal a year, 12% more than in 2014 (706 tons) and almost 25% more than in 2010 (671 tons).
The domestic demand for coal is also significantly down, mainly from the power generation sector which in recent years has decommissioned or modernised the oldest units that consumed huge amounts of coal. The use of renewable energy sources is also slowly growing. Thermal renovation of residential and industrial buildings means a lower demand from CHPs, and coking plants show a higher demand for the “hard” type coal the output of which in Poland has been decreasing steadily in recent years. Individual and municipal consumers also shift to ecological coal which Polish mines cannot supply in sufficient amounts.
And we must not forget that the European Commission and some member states treat coal as a dirty fuel which should be eliminated by 2050 at the latest. The EU policy provides for the decarbonisation of the energy sector which in a longer timeframe might mean significantly higher CO2 emissions costs. The Commission also puts pressure on member states to close down unprofitable mines.
Prices are on the decrease
The difficult situation of the Polish mining sector is also caused by falling coal prices on world markets. In comparison to 2013, the average bituminous coal price has fallen by 21%. The decrease of mining costs per ton of coal is encouraging (15% less than in 2013), but it does not make up for reduced prices.
As a result, Polish mines are struggling to be profitable. The restructuring processes begin to bear fruit. The average subsidy to each mined ton of coal was PLN 63.9 in 2015, and only PLN 4.5 last year. So chances are that the Polish mining sector sees brighter days soon.
Polish mines are restructuring
The cabinet’s mining restructuring programme launched in 2015 provides for establishing strong entities which should be profitable and capable of competing on foreign markets. The key to the plan is launching the Polish Mining Group (PGG) which is to include mines that have prospects to be profitable. The formation of the PGG core was completed in 2017 as Katowicki Holding Węglowy S.A. joined the group. There are also different programmes for Jastrzębska Spółka Węglowa and Bogdanka mine.
The country’s coal deposits are a huge advantage for the economy, mainly in terms of energy security and independence. Coal is also a fuel for the Polish industry, and giving up coal totally as a basis of the energy mix would be a mistake. To face up to the challenges related to the stability of energy supply and the climate policy, the energy sector should reach for modern technologies which would allow it to achieve goals in terms of capacity and effectiveness without an adverse impact on the environment. Immediate investment in renewable energy sources, including distributed prosumer power generation, is also a must. Only this can ensure a sufficient level of energy security without conflicting the EU institutions over the climate policy.