Poland may need to change its energy mix
The European Union (VGK) (EZU) (HEDJ) has been requiring Poland (EPOL) (SPOL) to cut its carbon emissions for some time now. According to the EU’s de-carbonization policy, emissions should be reduced by 40% by 2030 and by 80% by 2050, compared with 1990. This implies that Poland would have to change its energy mix where 81% of electric power is derived from hard (anthracite) coal at present.
Poland is the largest hard coal (KOL) producer in Europe, with companies such as Kompania Weglowa (WSE: KW), Jastrzębska Spółka Węglowa (WSE: JSW) (JASTY), Katowicki Holding Węglowy (WSE: KHW), and Lubelski Węgiel Bogdanka (WSE: LWB) actively engaged in coal-mining.
The lack of alternative energy sources and the presence of trade unions in the industry have so far prevented the economy from diversifying its energy sources beyond coal. Moreover, the economy in its current state is largely dependent on Russia (RSX) for its gas supplies.
Poland’s energy shakeup
This is set to change now as the government looks to shake up energy dependence and diversify its energy sources. According to Grzegorz Tobiszowski, Deputy Energy Minister of Poland, by 2030, nearly 60% of Polish energy will come from bituminous coal and lignite. Bituminous coal contains less than 86% fixed carbon while (anthracite) hard coal contains 86% or more fixed carbon.
“Within the next five years we want to lead to Poland’s full energy independence,” said Poland’s Deputy Prime Minister and Finance Minister Mateusz Morawiecki, who sees the economy becoming a gas distribution hub in the next 10 years. “Today we are bound to the Russian [gas] monopoly [Gazprom (OGZPY)] by a bad deal, we pay more for gas supplies than Germany (EWG),” Morawiecki added. State-owned oil & gas company, Polskie Górnictwo Naftowe I Gazownictwo aka PGNiG SA (WSE: PGN) (POGWY), says it pays more for Russian gas than Germany. Moreover, Russia has a history of using its gas and oil exports as a tool to exert political pressure on Poland
Poland energy shakeup: how Russia’s loss may be America’s gain
Poland is now looking towards the US (SPY) (IWM), as US gas is more competitively priced. Last month, Poland received its first shipment of US-produced gas from Cheniere Energy, Inc. (LNG).
With Poland taking its first steps towards clean energy generation and to diversifying its energy sources, US natural gas producers (UGAZ) (UNG) (DGAZ) stand to benefit. A long-term gas deal with U.S. gas producers such as Chevron Corporation (CVX), Sempra Energy (SRE), Cheniere Energy (LNG), Sunoco LP (SUN), and NGL Energy Partners LP (NGL), would definitely reduce Poland’s reliance on supplies from Moscow-based Gazprom PJSC (OGZPY). President Donald Trump’s recent visit to Warsaw is also seen as an attempt to bolster Poland’s efforts to move beyond Russia for its natural gas imports.
Polski Koncern Naftowy Orlen (WSE: PKN) (PSKZF), Grupa Lotos SA (WSE: LTS) (GPOLY), Lotos Petrobaltic S.A., Unimot SA (WSE: UNT), and PERN Przyjazn SA are other prominent energy players in Poland.