The consultations over the government draft plan for distribution of CO2 emission limits for 2008 – 2012 continue. The document assumes a considerable reduction of emission limits for the power sector.

There were statements in the press that our sector will be given less emission rights, because it have not done much, if anything, for modernisation and environment protection. We were given the example of other industry sectors which have better achievements and for that they will be awarded with limit allotments higher than their needs.

Has the power industry been truly idle for all those years? We are going to present how this problem looks in PKE’s plants (interview with President Henryk Tymowski) and in the whole sector (article by President Jan Kurp).

Enjoy your reading!

In January, Gazeta Wyborcza published an interview with the Minister of Environment, Professor Maciej Nowicki, about distribution of CO2 limit allotments. In that interview, the Polish power industry was accused that it had not done anything in the recent years as opposed to other industries participating in the allotment, which invested hundreds of millions in modernisation and environment protection. As someone who has worked in power industry for over 30 years and managed large power plants for many years, I cannot agree with the thesis advanced by the Minister whom I respect and hold in high regard otherwise.

THOSE ARE THE FACTS

Over the last dozen years, the Polish power industry has reduced the emission of sulphur dioxide by 40%, dust by 60% and nitrogen oxide – by 27%. We managed to improve the average energy production efficiency by 10%. For example, in 1990, the Power Plant Jaworzno III, a member of Południowy Koncern Energetyczny, emitted as much as 100,046 tons of SO2, 15 years later – only 18,718 tons, i.e. five times less! In 1990, 9,606 tons of dust came from that plant’s chimneys; in 2005 it was 312 tons, so 30 times less! Other domestic energy producers can boast with similar results.

Naturally, there would be no reduction in pollution without investments. Since 1990s the Polish power plants have made a huge financial effort to carry out modernisation programs. Their activities include inter alia the construction of blocks and flue gas desulphurisation installations, replacement of electrostatic precipitators, reduction of NOx emission, improvements in production efficiency and extension of units’ life. Thanks to the investment programs, in a dozen years we have managed to close many old blocks which had had a bad impact on the environment and increased the production potential by 10%. The experts estimate that the domestic production capacities were modernised in over 40%.

The technical and ecological level as well as potential of power companies has significantly improved, inter alia due to the construction of new blocks in: Turów, Siersza, Jaworzno II, Opole, Pątnów, Bielsko-Biała, Power and Heat Plant Katowice, Power and Heat Plant Żerań, Power and Heat Plant Nowa Sarzyna, Power and Heat Plant Lublin Wrotków, Power and Heat Plant Rzeszów, Power and Heat Plant Zielona Góra, Elcho Chorzów, Power and Heat Plant Gorzów, Power and Heat Plant Gdańsk, Power and Heat Plant Poznań, modernisation of existing units inter alia in: Bełchatów, Konin, Kozienice, Dolna Odra, Połaniec, Rybnik, Łaziska, Jaworzno III, Łagisza, Siersza, Jaworzno II, Pomorzany and Power and Heat Plant Kraków, and putting in operation the flue gas desulphurisation installations in: Bełchatów, Jaworzno III, Turów, Opole, Konin, Kozienice, Dolna Odra, Pomorzany and Połaniec.

Let us not forget that over a month ago the LCP Directive, which limits the sulphur emission, entered into force. The power industry has been realised this a few years earlier and started appropriate preparations, so many power plants (Pątnów, Rybnik, Jaworzno III, Połaniec) are now completing the construction of new, very expensive flue gas desulphurisation installations.

The estimates – in my opinion, undervalued – show that the professional power plants alone have spent about PLN 35 bn on modernisation over 15 years. This required a huge financial effort – energy producers invested their own funds, bank credits, but also from the so called ecology funds from Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej (National Fund for Environment Protection and Water Management) as well as from Ekofundusz (Ecofund). We are still repaying those loans. It seems that this ‘nothing’ was very expensive.

THIS IS STILL NOT ENOUGH – LETS’ BUILD!

We have done a lot. However, this is still not enough if we consider the growing demand for energy, Poland’s ecological covenants assumed in the Accession Treaty and increasingly severe environment protection law in the EU. For years I have been advancing the thesis that with lack of reinstatement investments, Poland will soon run out of domestic energy. This problem was noticed first in Poland’s Energy Policy to 2025, whereby the government representatives were obligated to develop mechanisms to boost investments, and later in the Electric Energy Sector Program of 2006, where it was stated correctly that we need 800-100 MW of new capacities every year. Unfortunately, good ideas remained on paper, not followed by the next step. Those who not so long ago still governed the country and its economy decided not to create any pro-investment mechanisms for the industry.

Meanwhile, it is not possible to carry out expensive modernisation and reinstatement programs without external funding, mostly from the banks. But who is going to lend the power industry any money, if Poland has not had any economic stimuli to build new power capacities for many years? Government-controlled energy prices have not guaranteed any ROI; moreover, some experts were expressing opinions in mass media that we have too much power capacity and there is no point in building more. This is why only very few dared to invest (‘dared to’ is the best term to use in a situation where the energy selling price at the producers’ was around PLN 100 for 1 MWh, net of excise tax, for many years, while the investments’ break-even point was about PLN 140) – only those who against all odds decided to enter into protracting negotiations with the banks and prove to the bankers that production of energy in modern blocks was going to become a very profitable business in several years and as a such was worth investing. Naturally, the loans required many guarantees and excessive collaterals.

As a result of those efforts, just a dozen days ago we have been celebrating the 460 MW block being put into operation in Power Plant Pątnów; in 2009 we will launch a 460 MW unit in the Power Plant Łagisza, and in 2010 – a 860 MW block in the Power Plant Bełchatów. All of them very ecological, based on modern technologies, with efficiency higher than 45%.

Now we face decisions on new undertakings. We need to and want to build. I believe, however, that such a radical cut in the CO2 emission limits for power industry will cause that the price of our products will increase considerably, which will affect the customers, but bring no profits for the industry. More, it seems that by buying additional emission allotments on the market we will support West Europe’s power industry that now has appropriate limits ensured. As a consequence, we will have even less money to invest in new blocks, but we will be the source of an additional inflow of funds for investments in Europe. Is this how it was meant to be?

***

Due to the administrative decisions on limit allotment, Poland is facing the risk of complete crash of the electric energy system. We still can prevent it! Therefore, our industry advocates for fair distribution of emission limits, reducing them proportionally among the individual economy sectors. On this occasion, it is worth analysing how did the prices of energy and the prices of products offered by companies from other sectors interested in CO2 limits allotment increase.

We hope that our government will not stop in its efforts to increase those limits. The new EU regulations in preparation require the Polish authorities to take immediate action, because in 2016 our economy will face a horror. This is really not about the power industry alone, but about the whole economy!

Jan Kurp

We spent over 2 billions

Interview with Henryk Tymowski, Vice-President of the Executive Board of Południowy Koncern Energetyczny SA.

Tightening regulations and emission standards force power companies to invest into purer technologies or deeply modernise the existing infrastructure. The production resources, which become older every year, require more and more expenditures on repairs. To maintain the production capacities on the current level, we need to invest in the construction of new blocks.

Since PKE’s establishment, all plants – aside from repairs necessary to maintain the output abilities - carried out various modernisation works. Which undertakings would you consider the most important?

Maintaining the infrastructure in the appropriate technical condition requires continuous investments and modernisation work. Since the foundation of PKE SA, we have assigned considerable funds to modernisation and reinstatement of production infrastructure. The most important, and at the same time the largest task is unquestionably the reinstatement of production capacities, i.e. the construction of 460 MW power block in Łagisza. Apart from this, the most important investment and modernisation tasks in the last several years include the improvement in efficiency of production infrastructure in Siersza (completion of reinstatement of the Block No. 2), construction of the installation for bone meal combustion in fluidic burners in the Power Plant Jaworzno II, modernisation of the turbo unit 13UP55 in the Power and Heat Complex in Bielsko-Biała and the modernisation of GAVO 2 in the Power Plant Łaziska (heat exchanger for IOS in power blocks Nos. 11 and 12). Naturally, we cannot omit here such tasks as the construction of industry sewage treatment plant in the Power Plant Łagisza, modernisation of water purification plant in Siersza, modernisation of feeder bays in 110 kV switchboard in Siersza, Halemba and Jaworzno III power plants as well as the modernisation of deslagging installation with slag separation system in Łaziska.

The investment tasks carried out in the framework of structural funds’ subsidies are in progress. Those include work in the Power Plant Jaworzno III – IOS modernisation and construction of the third line for desulphurisation and slag tank. Also the integration of block No. 5 into the existing flue gas desulphurisation installation in the Power Plant Łagisza, modernisation of the cooling system and reduction of noise emission in the Power Plant Łaziska as well as investments aimed at obtaining the integrated permit in Siersza fall within that category of tasks. Upon their completion we will receive a subsidy in the approximate amount of 25% of the incurred expenditures.

How much exactly we have spent on modernisation since our concern was founded?

By the end of 2007, so in as little as seven years, the investments and modernisation costs us PLN 2.143 bn in total. It must be stressed, of course, that PLN 1.130 bn was used for construction of the new block in Power Plant Łagisza.

Most modernisation undertakings are aimed at improving the ecological aspects of energy production. What effects does this bring?

Presently, we are building a third desulphurisation line in the Power Plant Jaworzno III, which will bring the annual reduction of SO2 emission from Blocks Nos. 3 and 4 by over 90%. By June, the investment in the Power Plant Łagisza should be completed, allowing for directing the flue gases from the burner in Block No. 5 to the existing IOS for Blocks Nos. 6 and 7, this considerably limiting the emission of SO2 to air. Once those investments are complete, by mid-2008, as much as 78% of the PKE’s gross available power will be desulphurised.

At the same time, in connection with the obligation to increase the share of renewable fuels in the electric energy production, we assigned significant funds to adjusting infrastructure for bio-fuel co-combustion in power burners in Siersza and Łaziska power plants. Similar activities are planned for the Power Plant Jaworzno III and the Heat and Power Plant Katowice. Also the expansion of installation in Łaziska will be continued.

It must be stressed that our investment activities have the highest efficiency.

What lies ahead?

The investment program for 2007-2019 foresees the reinstatement and construction of new production capacities with high effectiveness as well as maintenance and improvement of infrastructure parameters and fulfilment of the conditions stemming from the legal regulations concerning environment protection. The most important investment and modernisation undertakings planned for the nearest future include completion of the 460 MW block in the Power Plant Łagisza, launching the program of construction of new generating units with respective output of 460 and 910 MW as well as construction of a heating block in Bielsko-Biała. We also plan to modernise the burners in 200 MW blocks to ensure that the NOx emission does not exceed 200 mg/Nm3, which is dictated by the guidelines contained in the Directive 2001/80/EC concerning the reduction of NOx; our plans include also the modernisation of 200 MW blocks to enable their operation after 2025.

Thank you.

Interview by:

Dariusz Wójcik