PGE Intends to Set the Pace for Poland’s Transformation

A final investment decision on the construction of the Baltica 2 offshore wind farm is expected soon. It is the largest so-called Phase I offshore wind power project in terms of generating capacity, which is currently being developed in the Polish part of the Baltic Sea by PGE Group and Ørsted. The final investment decision means in practice that one of the Polish energy company’s flagship projects is very advanced and moving into the final stage of construction. Investors have the complete set of administrative permits and have secured all farm components along with funding for the project.

“Once funding is secured and a final investment decision is made, we will move forward with the physical construction of the farm. Baltica 2 will start generating energy in May 2027. All key contracts on project implementation have been signed. We have contracted key elements of the farm – foundations, towers, turbines, onshore power stations and cables. We are building a service port in Ustka, where we are investing more than PLN 120 million (about EUR 26.5 million at the current exchange rate) in infrastructure. We have signed an agreement to lease a wharf for an installation port in Gdańsk”, PGE CEO Dariusz Marzec said in October 2024.

Getting to this phase of the project has been a challenge as we are talking about an investment of PLN 30 billion. Baltica 2 will be built in the Polish part of the Baltic Sea between Ustka and Choczew, about 40 kilometres from the mainland. It will consist of 107 turbines with a capacity of 14 MW each, distributed over an area of about 190 square kilometres. The turbines will be mounted on monopile foundations. Four offshore transformer stations will be built for the offshore wind farm while the necessary connection infrastructure and an operations and maintenance base from which the turbines will be serviced will be located onshore. The Baltica 2 offshore wind farm will produce wind-based green energy for about 2.4 million customers, including homes, hospitals, schools, offices and businesses.

PGE’s offshore energy plans go beyond the Baltica 2 project. The corporation expects to launch Baltic Sea offshore wind farm projects with a total capacity of 7 GW, with their development being a key element of PGE Group’s strategy for the coming years. A strategy that places energy transformation at its core, aiming not only to achieve a low- and zero-carbon economy in Poland and Europe but also to maintain the competitiveness of the European economy against its Asian and American rivals, partly through access to affordable and clean energy.

“The transformation is mainly based on large-scale offshore wind farms and this is the direction that we should pursue in the coming years. This is the technology that must take over responsibility as the basis of Poland’s energy system, ultimately – in the long run – along with nuclear power. Offshore wind energy is state-of-the-art and environmentally friendly, does not have negative connotations and provides energy at an attractive price. In addition, there is money for offshore projects on international markets because they are simply ‘bankable’”, Marzec added.

European Union successes and challenges to overcome

PGE Group’s offshore energy projects are a very important point in its strategy and part of the key trends and processes taking place in the European energy industry. It is evident that the transformation, which has been actively pursued for over a decade, is beginning to yield tangible results.

A review published earlier this year by the organisation Eurelectric (PGE was one of its founders) shows that renewable energy sources accounted for 48 percent of the European Union’s power generation mix in 2024. In second place was nuclear power with 24 percent, followed by fossil fuels with about a quarter of the share. These include coal-fired power plants as well as the low-carbon gas units that already provide more energy than the former.

The RES segment is growing at an astonishing pace. European hydropower and photovoltaic-based energy grew by more than 40 TWh last year. This corresponds, for example, to about a quarter of the annual energy demand in Poland and the entire annual demand in Denmark.

The high and growing share of zero-carbon energy sources has resulted in the EU achieving the cleanest energy generation mix in history. Greenhouse gas emissions have been reduced by 59 percent compared to 1990 levels.

Importantly, as pointed out by Eurelectric experts, in 2024, the average wholesale price of electricity in the European Union in day-ahead contracts fell by 16 percent compared to 2023, supporting the thesis that it is possible to rely on decarbonisation of the energy sector and develop units based on renewable energy sources. The more carbon-neutral energy there is in Europe, the cheaper electricity will be.

The drop in energy prices in Europe would have been even greater last year had it not been for adverse developments that occurred in the fourth quarter. The high demand for energy and gas in the winter drove up the price of blue fuel, which was difficult to replace with RES electricity due to the large number of cloudy and windless days. As a result, several markets, including Germany, Hungary, Romania and Sweden, saw price spikes.

Another problem in the European energy industry is that, due to the lack of sufficient energy storage, the full potential of RES power generation is not being used. If it were, this would have a real impact on increasing the share of energy from renewable sources.

“Eurelectric’s data proves once again that investing in more renewable generation is the right path to a more competitive and decarbonised economy but it must be complemented by more stable and flexible generation capacity to offset volatility, reduce reliance on costly fossil fuels and stop price spikes”, comments Eurelectric Director Cillian O’Donoghue.

The successes, problems and challenges reported by Eurelectric have also been seen in the Polish energy market. There is a clear increase in the importance of RES. In September, the share of coal in electricity generation fell below 50 percent for the first time in Poland. A huge change, considering that back in 2000, it reached almost 100 percent, making Poland one of only a handful of countries in the world dependent on this fuel to such an extent.

“Similar results can be expected in 2025”, anticipates Marzec, adding that with the development of RES, there have also been challenges in integrating large quantities of variable power generation.

Lack of efficient energy storage means that a growing amount of energy generated from the sun is being wasted. According to preliminary estimates, Poland lost as much as 500 GWh of green energy last year. To maintain grid stability, Polskie Sieci Elektroenergetyczne (PSE) had to limit operation or completely shut down photovoltaic installations a record number of times.

The largest ventures on the continent

PGE is aware of the situation. That is why, at the beginning of the second half of 2024, the Group launched a tender for the design and construction, on a turnkey basis, of a battery energy storage facility of up to 263 MW and a minimum capacity of 900 MWh. The project will be located near PGE Group’s Żarnowiec Pumped Storage Power Plant in the north of the country.

“The PGE tender for the construction of Żarnowiec’s battery energy storage facility is another very important stage in the project to build one of the largest battery energy storage facilities in Europe”, Marzec stressed.

The Gryfino energy storage facility is yet another such investment planned by PGE. With a power capacity of 400 MW and a storage capacity of no less than 800 MWh, the unit will be able to supply electricity to more than 100,000 households. Both units participated in last year’s power auction for 2029, resulting in the award of multi-year power contracts.

Given the energy transition process, the management of surplus energy from RES will soon be one of the main challenges facing the Polish power system.

“As the largest power company in Poland, we are meeting these needs and consistently making investments in the area of energy storage”, the PGE CEO added.

Construction of the large-scale energy storage facility in Żarnowiec will make it possible to provide regulatory system services to the Transmission System Operator as well as balance PGE’s local onshore wind farms and future wind farms in the Baltic Sea. The project has received Poland’s first electricity storage stand-by arrangement and has a connection agreement with the national electricity system.

In the near future, PGE also wants to tender out a second large energy storage facility in the northwestern Polish town of Gryfino with a capacity of up to 400 MW. In addition, the company has consistently invested in smaller energy storage facilities. In August 2024, for example, it launched Europe’s largest tender for the construction of distributed electricity storage facilities. The project will establish 26 energy storage facilities with capacities ranging from 2 MW to 10 MW, a total of 107 MW and 214 MWh of capacity.

The Group believes it to be a market response to the demand of local distribution systems that want to be able to store surplus renewable energy and then use it when demand exceeds supply. A network of distributed energy storage facilities will not only support stable grid operation but will also help optimise prices on the energy market, thus supporting further development of renewable energy sources.

At the same time, investments in energy storage are a fairly obvious development direction for PGE Group. The company is already a leader in energy storage in Poland, with a nearly 90 percent share in pumped storage power plants.

“With the construction of energy storage facilities based on battery technology, we will strengthen our position and expand PGE’s portfolio of regulatory assets”, says Marzec.

PGE Group also supports the development of RES through consistent investment in the modernisation of electricity distribution networks. In 2023, it earmarked as much as PLN 3.8 billion for investment in the development of electricity networks and facilities. The large scale of investment continued last year, with numerous projects being underway this year as well. At the end of 2024, for example, PGE Dystrybucja received funding of more than PLN 337 million (EUR 74.2 million) from the European Funds for Infrastructure, Climate and the Environment (FEnIKS) programme for the construction and modernisation of the smart grid in five of its branches.

Poland’s largest gas-fired power plant

Ultimately, the Polish energy sector will use only nuclear power and renewable energy sources. In the interim, however, it is essential to put modern low-carbon gas units into operation. They can replace environmentally and climate-burdening coal-fired power plants, while being incomparably more flexible, something that makes them an excellent complement to renewable energy sources. PGE Group wants to be, and in fact already is, one of the most important players among Polish gas-fired power producers.

At the end of October 2024, the company commissioned Poland’s largest gas-fired power plant in Europe, which is also one of the most modern. PGE Gryfino Dolna Odra consists of two gas-steam units with a gross capacity of 683 MW each. The total capacity of the new power plant thus amounts to 1,366 MW, which is enough to meet more than 5 percent of the country’s electricity needs.

The nominal efficiency of PGE Gryfino Dolna Odra’s units exceeds 63 percent, more than 70 percent higher than old coal-fired units. The power plant has been designed to meet the most stringent emission limits under the BAT conclusions for gas-steam units. Emissions of dust and sulphur oxides have been reduced almost to zero, significantly improving future air quality in the region. The emission factor for the new plant is about 330g of CO2 per kWh of electricity generated, which is almost three times less than the coal-fired units of the Dolna Odra Power Plant that is also owned by PGE.

“The new gas-fired units will replace the worn-out and inefficient coal-fired units at the Dolna Odra Power Plant, thus aligning with PGE Group’s strategy for decarbonising its generation assets. At the same time, the new investment will strengthen Poland’s energy security as well as ensure stable energy supply for more than 3 million households. Thanks to its flexibility, i.e. the ability to quickly start up and change the amount of energy produced, the Gryfino project will help meet the demands of the market and stabilise the power grid in Poland as well as optimise the use of variable energy production from renewable sources”, explains Marzec.

In the southern Polish town of Rybnik, a subsidiary of the PGE Group is building the country’s largest single gas-steam unit at a cost of about PLN 4 billion (nearly EUR 900 million). Construction is progressing as planned and the 882 MW unit is expected to be operational by next December.

The great decarbonisation of Poland’s heating industry

PGE Group is more than a large-scale energy producer. It is also the largest provider of district heating in Poland, while undertaking significant efforts towards decarbonising this area of its business. Its goal is for 100 percent of the heat it generates to come from low- and zero-carbon sources by 2030.

To this end, for example, last year one of PGE Group’s subsidiaries commissioned a modern low-emission gas-fired boiler plant with a total capacity of 186 MWt at the Rzeszów CHP plant, making it possible to completely shut down two old coal-fired boilers. This reduced CO2 emissions by nearly 56 percent or about 19,000 tonnes per year. An ambitious project is also underway in Bydgoszcz where a coal-fired district heating plant will be replaced by five gas-engine-based cogeneration units with a total capacity of 52.6 MWe as well as a (gas and electrode) peak backup source with a total capacity of more than 70 MWt. The company is also preparing to build a large-scale heat pump in Rzeszów. These are just some of their investments. In the area of heat generation, PGE also wants to set the pace for transformation.

MK

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