Polluting Giant Turns to Green Energy to Escape EU Carbon Risk

Photo: bloomberg


Central Europe’s third-largest polluter plans to almost triple its clean-energy capacity as emission costs surge.

Tauron Polska Energia SA is preparing to add at least 700 megawatts of clean, regulated power to “improve” its portfolio after carbon permits almost tripled over the past year, Chief Financial Officer Marek Wadowski said. That’s the equivalent of half a modern nuclear reactor and echoes moves by European utilities from Enel SpA to Vattenfall AB to boost their clean power generation.

“We’re turning in the direction of more renewable sources,” Wadowski said in an interview this week. “The rising cost of CO2 makes the profitability of coal-fired plants significantly less profitable.”

The state-controlled utility is negotiating the purchase of a 200-megawatt wind park from In.ventus wind sp. z o.o. and will make a final decision on the deal this year, he said. In addition, the company may develop as much as 150 megawatts of solar power, build the 400-megawatt gas-fired Lagisza heat and power plant and invest in offshore wind in the longer term.

Tauron is following the government in a quick shift of energy strategy as the ballooning cost of carbon, boosted by the European Union’s climate policies, becomes a burden — especially for coal-reliant countries such as Poland.

The ruling Law & Justice party recently pledged to cut the use of the dirty fuel for electricity generation to 50 percent by 2040 from 80 percent, bringing its previous goal forward by a decade. It also sees room for more gas-fired and offshore capacity, while proposing an alliance between coal and renewables.

Yet Poland’s second-biggest utility, the region’s most polluting after PGE SA and CEZ AS, still plans to build a 910-megawatt coal-fired plant in Jaworzno as it waits for the results from a capacity mechanism auction this year that will decide on subsidies for its aging generation fleet.

The capacity payments would keep the company’s existing plants running, while the investments in wind, solar and gas would help it diversify the risk once the power price on the market no longer covers the cost of emitting carbon dioxide.

“Key to all investment profitability analysis is the correlation between the CO2 and power price — once it’s gone in the future, everything will change in the models,” the CFO said. “The energy mix will change in Poland and the wholesale electricity price will decline and will be less dependent on CO2. It won’t happen in two or three years, but surely in a longer perspective.”

  • In offshore, Tauron needs to secure a spot in the Baltic Sea for future investment or find a strategic partner with a permit
  • Gas-fired projects are looking “significantly better” with rising carbon prices; co. needs to decide on Lagisza project
  • In solar, Tauron is considering 5 potential projects with capacity of 74 megawatts to 150 megawatts
  • 700 megawatts of renewables isn’t a limit for Tauron
  • “It’s too early to say what would be the ideal mix”
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