The green direction in PGE’s new strategy will certainly accelerate – says Wojciech Dąbrowski, newly appointed President of the Management Board of PGE, Poland’s largest energy sector company, in an interview with PAP (Polish Press Agency).
He adds that the economic changes caused by the coronavirus pandemic motivate the company to increase the pace of work on the new strategy.
How should we understand the first declarations of the new PGE Management Board about heading in “the green direction while respecting the baseload conventional power generation. Will the coronavirus pandemic be a factor inhibiting or facilitating changes?
Moving in the green direction while respecting the conventional power generation in baseload should be understood as meaning that we are aware of society’s expectations towards PGE in terms of climate action, because we are an element of the social ecosystem and we shape the quality of life of Poles. We are also aware of the goals of climate neutrality by 2050 and emission reduction by 2030 set by the EU climate policy. Our primary task is to ensure Poland’s energy security. Without the baseload conventional power generation, the development of RES and the simultaneous assurance of stable energy supplies would not be possible.
We are continuing the announced review of our projects in terms of their rationale, profitability, efficiency, and usefulness for the Group. We are looking for opportunities to make savings because we respect cost-efficiency. We are focused on our core business and will reduce the scope of projects that are not related to what we are meant to do. The old strategy is still in place, and in order to develop a new one, we need to know, among other things, the directions of Poland’s Energy Policy until 2040. I believe that, especially today, we should respect and appreciate knowledge, because it allows us to propose solutions based on factual data and analyses, which is important for us and our shareholders. Changes in the economic environment, also those resulting from the coronavirus pandemic, persuade us to intensify works on the new strategy of the PGE Capital Group. We will show a vision for the years to come, a vision of a modern company providing its shareholders with stable benefits. Undoubtedly, we will accelerate our green direction.
We have recently conducted asset impairment tests and made significant write-offs. These are non-cash, accounting, as it were, paper-only operations, but they show that in the future, conventional power generation assets – because they are mainly affected by these write-offs – will generate less profit than it was assumed in earlier periods. Write-offs themselves do not determine the strategy. Nevertheless, the reason for the write-offs in the conventional generation segment is a decline in their income value, which, in turn, is a result of global and EU climate policy trends. In this context, the write-offs should be perceived as a reflection of changes taking place in the market environment on the company’s balance sheet. This further strengthens our determination to change the company’s strategy. I’d like to underline that the implementation of the green direction will be carried out with due respect paid to the baseload conventional power generation, with the participation of social partners, and for the benefit of the Polish economy.
To what extent will the new strategy take into account the ideas of the New Green Deal and the recent proposals of the European Commission?
As I have already said, we are fully aware of both society’s expectations and the climate goals – climate-neutrality by 2050 and anticipated higher CO2 emission reductions by 2030. For various technical, social, and economic reasons, it is impossible to switch from coal-based power generation to renewable sources within 10 years. My position is clear and I expressed it already at the beginning of March this year. I am against a strict tightening of emission targets, because it is simply not possible for Poland to achieve them from a technical, economic and social point of view. But I sustain my opinion that the future of the power generation sector is in the green direction meaning the growing share of RES. We are ready to contribute actively to the achievement of ambitious EU climate goals by investing in low emission power generation technologies – this is evidenced by both our actions and our plans. However, appropriate support is needed. The European climate law, together with provisions for even more ambitious targets, should include the principle of a proportional increase in financing within the scope of the EU ETS for Member States with low GDP per capita.
What directions of development will be particularly important for the PGE Group?
The Group will be developing in the green direction, and this means the position of the leader in offshore and onshore wind power generation in Poland. We are advanced in terms of preparing investment projects on the Baltic Sea. We also have 550 MW of installed capacity in onshore farms, and soon we will increase it by another 97 MW. We are also interested in acquisitions of wind farms. If there appears an attractive opportunity to acquire wind assets on the market, the Group will be interested in them.
We want to strengthen and develop our heat generation operations, and to maintain our leading position on this market. We see this market as an opportunity for PGE Group to generate stable revenues in the coming years. We are at the stage of advanced negotiations concerning several acquisition projects; we are also interested in acquisitions of distribution grids , especially in cities where we already generate energy .
We will increase the number of thermal waste treatment plants; they allow the production of electricity and heat from waste and at the same time solve the problem of waste disposal. At present our portfolio includes one such plant in Rzeszów, with a capacity of over 100,000 tonnes/year. It allowed us to diversify the fuel mix in the Rzeszów Cogeneration Plant, and to generate electricity and heat, simultaneously solving the problem of waste disposal in the Podkarpackie region, and also, partially, in the other regions of the country. We are currently at the stage of preparation for the building of the second technological line in the thermal waste treatment plant in Rzeszów. It is to be commissioned in 2023, which will allow us to increase the capacity of the whole facility to 180,000 tonnes/year. We are also analysing other potential locations for the construction of further thermal waste treatment plants.
Besides green energy from RES, we also focus on energy storage and the utilization of coal combustion by-products (CCB), which means that we will seriously work towards a circular economy.
We intend to develop a strategy for the construction of energy storage facilities, mainly in the vicinity of renewable energy sources. They will store energy when it is cheap, and give it back to the system when it is expensive. We believe that this is the future; we want to be a strong player on this market. Today’s technologies are not yet satisfactory in terms of efficiency and reliability. We will work on this, also in the area of research and development. As the Management Board, we take this very seriously. We plan to use energy storage facilities commercially as a source of energy system flexibility, which in the coming years may provide us with additional revenues from regulatory system services for TSOs and DSOs, as well as the industry. A number of regulations regarding the operation of energy storage facilities and new rules for the functioning of the balancing market need to be clarified at the national level. We want to participate in this legislative process and offer our input as a State Treasury Company through our activity in such organizations as PTEZ, PKEE, TGPE.
We focus on the utilization of coal combustion by-products (CCB) because we see a great business potential in these activities. As part of the reorganization of PGE Capital Group, we have separated the CCB area, thus strengthening its position in the Group. The use of CCB in many sectors of the economy allows us to reduce the extraction of natural resources, limit environmental degradation, and reduce CO2 emissions. We see business opportunities here and additionally a contribution to the creation of a circular economy. We have two companies in the Group, which together account for 40% of the CCB market in Poland. Ultimately, we want to merge them, because the functioning of two entities within one group is irrational from the business point of view.
What will it mean for PGE GiEK if it is granted a concession to extract lignite from the Złoczew deposit?
Receiving such a concession will not be equal to an investment decision. The final investment decision will be made taking into account the regulatory environment in Poland and in the EU. If a concession is issued, we will start analytical work. We have to take into consideration both social concerns and hopes, as well as the economic aspect, potential gains and losses. We will also consider potential investment projects from the perspective of security and stability of energy supply. This is a very serious decision. In general, we have to wait and see what the economic situation will be like after the pandemic.
What is the current status of the nuclear project from the Group’s point of view?
As far as this project is concerned, we are conducting an analysis of the special purpose vehicle PGE EJ 1, which carries out location and environmental research, and commissions analyses necessary for the preparation of a report on the environmental impact of the project and a location report. The final decision to continue these activities will be influenced by the final shape of the updated Polish Nuclear Energy Programme, decisions on the technology selection formula, developed economic, organizational, and legal solutions, together with an estimate of the costs of implementing such solutions.
You are probably the first CEO of a large power company in Poland to meet the director of Greenpeace. Did this meeting bring any results?
I wanted to see how it really is, because .I In the media we are sometimes presented as a company that does not work for the sake of green energy and Greenpeace activists are sometimes presented as outright ecoterrorists.
For me, it was a very good and interesting conversation. We found that we shared opinions on many things. Actually, we agreed about the future, that is green and an increase in the role of RES is something natural. And for both parties it is obvious. But there are some differences with respect to time necessary to reach common goals. I believe that in such a short period of time as Greenpeace expects, it is not possible to phase-out conventional power generation. But we agreed precisely on the future of offshore wind power generation, and Greenpeace even declared that it would support us in that. We also agreed that we would meet in the future to share our experiences and opinions.
How does a large power company operate during a pandemic?
First of all, I would like to thank all our employees. Everyone is doing what they should be doing, and for that, I owe them my special thanks. We work under special procedures; we meet every day in crisis teams and monitor the situation in particular plants. It is not comfortable for us, but everyone acts responsibly; we work without any disruptions, we have reserves to generate even more energy. Certainly, energy consumption has fallen, mainly due to the reduction of production operations in various industrial plants. But we generate electricity and heat without interruptions.
Our employees also act as volunteers, help with the National Health Fund call centre service, contact senior citizens, especially former PGE employees. It is very encouraging that in such a difficult situation we are able to act for the benefit of others.