As part of work on the Baltic Energy for Poland 2025 , we have developed an update of the offshore wind energy and maritime industry development programme for Poland (January, 2018).
The merits of offshore wind energy (OWE) and its development have been discussed in Poland for a decade. Very high efficiency and stability of zero emissions renewable energy generated from this source, as well as relatively low operating costs and low level of social and environmental conflict make this sector one of the fastest growing in the global energy industry. By the end of 2017 17,6 GW has been installed, worth over 3 bn euro. Sadly, not in Poland.
Changes in legislation introduced in 2011 resulted in a peaking interest in this technology. Consequently, initial project concepts have been developed for the Polish Exclusive Economic Zone. Over a dozen location permits were issued, however, the Polish government did not launch an assistance program that could support investors’ decisions to continue with their projects. Despite the lack of clear political declarations to develop OWE in Poland, there is a number of projects in progress. Connection contracts have been signed with the grid operator that enable 2,2 GW of offshore wind energy to enter the grid by 2026. For three of these projects comprehensive environmental studies have been completed, and two of them received environmental permits in 2016 and 2017. Nevertheless, no further investment decisions have been made by 2018, which thwarted the possibility of first offshore wind farms becoming operational in 2020.
But despite all that, the topic of OWE development in Poland is still reverberating in conversations about the future of the Polish energy sector. A compelling factor that supports this technology and its further development is that it has direct links to the maritime industry. Manufacturing of offshore wind farm components and construction vessels, servicing farms in shipyards and ports – these are some of the major stimuli driving the process of modernization, and growth of the European, and Polish, maritime industry. Some Polish companies have already benefited from this opportunity. The CRIST S.A. shipyard in Gdynia built leading edge jack-up vessels that are used to install offshore winds farms (OWF). A new ST3 Offshore plant was built in Szczecin to make jacket foundations for OWFs, while other companies started specialising in steel structures and components of substations used for wind farms built in the North Sea. TELE-FONIKA Kable, a Polish cable manufacturer and global industry leader, has acquired JDR Cable Systems (Holdings) Ltd., thus becoming a major supplier of submarine bus and power cables for OWFs.
Foundation for Sustainable Energy (FNEZ) has been actively promoting offshore wind energy since 2009 as an example of a sustainable technology that respects social and environmental aspects of energy generation and brings clear economic benefits. In 2013, responding to the expectations of this emerging sector, FNEZ and EY – the global consulting expert – developed the „Program for the development of offshore energy and maritime industry in Poland” (the Program). In this document the overall potential of OWE was estimated for the first time in history. We also estimated generating costs, level of assistance expected by investors as well as economic benefits that this technology could bring if its development involved the Polish maritime industry. We indicated a reduction target for investment costs of 25% and for operating costs – 24% as a prerequisite for further development of this technology so that it could reach 6 GW by 2030.
Despite the fact that many experts deemed the goals listed in the Program ambitious but realistic, life had other plans. The world’s largest providers of offshore technologies, along with a number of countries that were keen on developing offshore wind, committed to even higher cost reduction targets – below 100 £/MWh by 2020. Introduction of auction schemes as a leading model to determine the level of state assistance for renewable energy sources in the EU turned out to be a very effective tool supporting the achievement of this goal. These aggressive goals translated into technology leaps. Bigger construction vessels, larger and more efficient offshore turbines, innovation in connecting technologies, and above all more streamlined logistics of supplies and construction along with growing competitiveness led to an average price forecast of 75 €/MWh in subsequent EU auctions. Additionally, some positive investment decisions were made for projects beyond 2020 without any support.
The Polish energy industry and economy are facing enormous challenges. Aging coal-fired capacity, the need to introduce more restrictive norms to curb emissions, limited room to grow the domestic coal output, higher utilisation targets for RES looming on the horizon, exhausted potential to grow onshore renewable energy and significant delays in the development of nuclear energy… All these factors are compelling us to start a serious discussion on Poland’s energy security in 2020-2030.
Offshore wind energy, which over the last 5 years has become mature and fully competitive from the point of view of technology and has shown considerable potential in the Polish marine areas, should be considered as one of the significant potential sources of energy for Poland. Especially given the wealth of positive experience and huge economic potential locked in our domestic offshore wind sector.
This is why FNEZ decided to update its original Program from 2013, using results of numerous studies performed recently and expertise accrued within the SMDI Advisory Group from the times when initial Polish OWF projects were developed.
This document is a summary of work that has been done so far and presents new estimates of the potential, costs and economic benefits represented by the offshore wind sector, taking into account existing progress and current market conditions.
We hope that our report will yet again stimulate a far-reaching discussion among industry players and politicians and that it will lead to a positive decision to develop the Polish offshore wind energy as an important tool to achieve energy security and an impulse to create a new Polish specialty – our own offshore wind industry.
Foundation for Sustainable Energy
Key outcomes and conclusions
- The real potential of Polish offshore wind is between 8 to 10 GW. The construction of the first OWF in Poland, with 600 MW, can start approximately in 2022. The first OWFs can be connected to the grid in 2025. By the end of 2030 we may have approx. 4 GW built, while by 2035 it could be 8 GW.
- 8 GW of offshore wind farms, in conjunction with parallel development of gas at the level of 4-5 GW and a cross border offshore transmission network with 1,5-2 GW capacity, can play a key role in providing energy security for Poland in the years 2025-2035, allowing for replacement of capacity deficits resulting from coal that is not compliant with BAT standards and securing the achievement of CO2 reduction targets as well as required proportion of RES utilisation.
- Offshore wind farms in the Polish marine areas will operate approximately 8050 hours annually (91,9%), out of which 5800 hours annually will fall into the ranges that allow for full capacity (66,5%).
- Offshore wind farms with 8 GW capacity are able to meet approx. 20% of domestic power consumption.
- The price of energy generated by Polish OWFs (LCOE) should fall somewhere between 71,6-80,7 €/MWh in 2025 and 66,6-74,8 €/MWh in 2030, provided that investors will bear the costs leading to grid connection. If, however, the operator should bear the cost of construction, these prices would go to 57-64,9 €/MWh in 2025 and 53,3-60,1 €/MWh in 2030.
- Offshore wind farms in the South Baltic area can be installed mostly with supplies and services rendered by the Polish offshore and maritime industries, while the offshore wind supply chain can become a key industrial specialty for Poland.
- Owing to the development of offshore wind energy, the Polish offshore wind sector can bring 77 000 jobs beyond 2025.
- Construction of OWFs in the Baltic Sea will be an important growth driver for Polish ports, among which Gdańsk, Gdynia, Szczecin and Świnoujście can become major construction centers for offshore wind farms in the South Baltic area, while Łeba, Ustka and Darłowo can turn into key service and maintenance centers for Polish OWFs.
- The Polish offshore industry, in partnership with the research community, has a chance to become a ground for innovation, specialising in the development of cutting edge construction and maintenance vessels, substations, cables, and steel structures, which will drive further growth of the offshore sector globally.
- To be able to take advantage of the sector’s potential, both from the point of view of energy and our economy, we need the following political decisions to be made urgently:
- Adoption of an ambitious and bold political goal – 6-8 GW of OWFs to be build by the end of 2035,
- Adoption, in 2018, of the offshore energy law that introduces the following systemic solutions:
- in 2019 – auctions that establish guaranteed energy price levels for 15 years for projects with granted environmental permits and connection contracts,
- in 2020 – auctions for projects with granted valid location permits specifying grid connection conditions, and guaranteed energy price levels for 10 years,
- in the areas designated for renewable energy in the zoning plan for the Polish marine areas – earmarking of borders for new projects that have no valid location permits, and in 2021 – auction/tender with respect to location and grid connection conditions.
- The grid operator needs to develop offshore transmission infrastructure, including cross border connections that will serve as connection points for offshore wind farms on the eastern slope of the Slupsk Bank and the Middle Bank. Cross border transmission can be vital to allow for energy import into Poland in periods of heightened capacity deficit. Such projects could use EU funding.
- Development of regulations and practices that will enable Polish companies to create the supply chain for OWFs built in the Polish marine areas. What we also need is a program supporting investment and procurement in the Polish maritime industry that will encourage international investors who are looking to participate in Polish auctions for offshore wind.
- Launching a broad educational program for future employees of the offshore sector, including both vocational and higher education.
- In 2018-2020 launching public funds for the expansion of potential, manufacturing and logistics capabilities, research and development, and implementation of the Polish offshore energy sector.
- The Program has been developed in line with Poland’s development directions described in the National Strategy for Responsible Development and it is aligned with the Strategy’s main objectives in such key areas as reindustrialization, innovative businesses, development of the SME sector, capital for growth, international expansion.
- If the abovementioned political and systemic decisions impacting the development of offshore energy in Polish marine areas are not made, this technology will not cease to grow altogether in Poland, however, its economic and social potential will remain untapped. Following this scenario, one can expect projects with maximum capacity of approx. 2 GW in years 2025-2035, and these projects will be executed after the technology has already become fully price competitive. One should also expect that due to the need to curb investment risks and costs, the supply chain for these projects will mostly involve technologies and services coming from established international players.
 McKinsey&Company, 2016. Development of offshore wind energy in Poland. Perspectives and assessment of impact on the local economy”