Narrowing upside for gas, biomass in Polish transition

: Biomass, Electricity, Natural gas
24/12/24

Reducing the carbon intensity of Poland's coal-dominated district heating sector will boost demand for biomass and gas, but the transition away from coal will require a combination of these and other technologies to succeed.

Poland's district heating producers are increasingly incentivised to invest in renewables-based electrification, including solar-powered heat pumps, which could tempt them away from converting units to gas or biomass.

"If we go on the ambitious path of heat pumps and full decarbonisation, it will be easier for us to receive full public financing," Przemyslaw Budzynski, general director of the district heat producer in the town of Mragowo, told Argus. The producer invested in an 8MW wood chip-fired unit in 2022, but still operates more than 11MW of coal-fired heat production capacity. The utility is nearing a decision on whether to build a gas-fired combined heat and power (CHP) plant or more technically difficult but easily financed options such as a refuse-derived fuel waste-fired capacity or heat pumps.

Such deliberations are common among the approximately 350 district heat producers in Poland, which collectively account for more than 53GW of thermal capacity, according to Polish energy regulator URE. These plants supply hot water for heat to about half of the country's households, particularly in urban areas.

As of 2022, coal still accounted for more than two-thirds of the fuel used in these plants, with annual consumption of more than 13mn t/yr, according to URE.

Until recently, conversions to gas or biomass firing were the most popular alternative to coal for district heat generators, which consumed 410,000TJ of gas (around 114TWh) and 55,000TJ of biomass — equivalent to 3.2mn t of wood pellets — in 2022, according to URE data.

After European energy prices spiked in 2022-23, district heaters' determination to move away from coal strengthened. But these are typically small municipality owned entities that rely on public support for investment.

Polish state-owned environment fund NFOS provided 1.6bn zlotys ($390mn) of financing in 2019-21 to phase out coal district heating plants. NFOS said conversion to gas was the most popular technology in its scheme, but it also financed many conversions to biomass.

But NFOS excluded gas and biomass from its latest scheme in April-December — the main programme offering direct financial support to heat generators. It instead only offered funds for the development of heat pumps, geothermal and solar collectors. The scheme pledged more than 924mn zlotys to at least 16 projects, NFOS said this week.

Representatives of industry and financial institutions argue that a mixed bag of technologies — including gas, biomass and other forms of renewables — are needed for the transition away from coal. Biomass supplies alone would be insufficient to replace all the coal used in district heating, and a full-scale coal-to-gas transition would also be complicated because of security of supply and price volatility concerns.

Gas, biomass for larger utilities

Despite the narrowing window for gas and biomass in the smaller district heating segment, growth opportunities remain for these fuels at larger utilities that have higher financial capabilities and rely less on state funding.

Some Polish government-controlled utilities with district heating subsidiaries have adopted strategies that use a host of technologies. Energa is investing to replace coal with gas boilers at its heating plants in Ostroleka, Kalisz and Elblag, set to come on line in 2025. PGE also plans to complete 15 coal-to-gas conversion projects by 2030.

Orlen subsidiary PGNiG Termika is looking to partly convert to biomass at its Pruszkow CHP plant near Warsaw, with a 44MWt coal-to-biomass conversion to be complete within the next two years.

The utility also plans to restart co-firing biomass with coal at its Zeran CHP in Warsaw — with 494MW of gas and 298MW of coal-fired capacity — to reduce carbon emissions costs. Biomass classifies as a renewable source of energy and is zero-rated under the EU's emissions trading scheme.

Tauron, whose district heat subsidiary still has 65pc coal in its fuel mix, last week announced plans to fully exit coal by 2030, by investing in biomass, gas, heat pumps and other technologies.

By Tomasz Stepien

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

25/03/21

Low snowpack, rain may lift Italian summer power prices

London, 21 March (Argus) — Low snowpack and hydro reserves in Italy may increase the call on gas-fired power plants this summer, likely supporting power prices in days when renewable generation is weakest. Hydro generation from run-of-river installations, pumped-storage plants and hydroelectric reserves accounted for almost 20pc of the power mix on average over 2020-24 in the third quarter — the second-highest share after the second quarter at 22.2pc — compared with gas-fired generation covering 45pc. But prevailing conditions suggest that without unusually wet weather this summer, Italian rivers could be drier than normal, limiting scope for hydro output and potentially opening more space for gas in the power mix, driving up electricity prices. Snow water equivalent — or the estimated water content of snow — moved back to a deficit to last year's levels on 23 February after showing signs of improvement over the first three weeks of the month, according to Italian meteorological association Cima. Snowpack was at a deficit of 57pc to the 2011-23 average as of 8 March, narrowing slightly compared with a 58pc deficit around the same time in February. The deficit in the Po basin, which accounts for almost half of Italy's snow water resource, is currently at a 44pc deficit to the seasonal norm, Cima data show. In the Apennines, the Tiber basin is at a 95pc deficit to the long-term average, marking the worst balance of the last 13 years. And hydro reserves have been at a consistent deficit to last year since January and moved to a deficit to the five-year norm in the middle of February. Rainfall in Malpensa and Paganella, in the north of the country, was at an average deficit of almost 2 mm/d and 1.6 mm/d, respectively, to the seasonal norm over November and December last year. While precipitation picked up in January and moved to a surplus to the norm of 1.9 mm/d in Malpensa and 1.4 mm/d in Paganella, minimum temperatures were 1.6°C above the long-term average in Milan, reducing snow accumulation. The latest data show that hydro reserves have picked up for the first time this year in week 11, reaching 2.1TWh and narrowing their deficit to the 2020-24 average to 0.8pc compared with 5.2pc a week earlier. Still, they remain 6.6pc below last year, with the deficit standing even wider at 9.1pc, when compared with the 2015-24 average. Looking ahead, forecasts indicate that minimum temperatures in Milan will hold around 2°C above the 10-year norm until the end of April, possibly leading some snowmelt to support run-of-river generation early in the second quarter, when power demand is typically at its lowest. But this would also leave less snow to melt later in the summer, when cooling demand peaks and drives up overall demand for electricity. While solar capacity increased steadily by over 500MW a month last year, the share of the power mix covered by solar output in the third quarter of 2024 remained almost unchanged from the same period in 2023. Assuming a similar monthly growth in photovoltaic (PV) capacity this year, the solar load factor is expected to increase by 1.8 percentage points to 17.8pc in the third quarter of 2025 on the year. This means that even if solar capacity and output continue growing, it may not be enough to offset a lack of hydro generation in the third quarter of this year, and thermal generation may still need to cover a significant amount of residual demand. The third quarter of 2025 has averaged €135.85/MWh ($146.83/MWh) so far this quarter, well above an average €91.60/MWh seen over the same period last year. Clean spark spreads for 55pc-efficient gas-fired units for the third quarter of 2025 have averaged around €19.60/MWh since the start of the year, compared with an average of €15.50/MWh over the same time last year. As solar and wind capacity is set to increase over the coming years to reach a national target of 110GW by 2030, renewable output will cover an increasing share of Italian electricity demand — estimated to reach 335TWh in 2028. Thermal plants may become less economically viable and will likely be decommissioned unless they are kept operating through ancillary services. But turning on gas-fired plants from cold and with a stop-start operation would lead to exaggerated costs and higher maintenance prices, Argus heard on the sidelines of the KEY25 Energy Transition Expo in Rimini earlier this month. This could lead to electricity prices spiking in periods of scarce hydro availability, as hydro-run-of river is Italy's largest single source of renewable generation, accounting for 17pc of the power mix last year compared with less than 5pc of hydro-pumped storage and reservoirs. By Ilenia Reale Italian hydro stocks TWh Gas and hydro output, hydro reserves GW, TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Canada needs more oil pipelines: PM Carney

25/03/20

Canada needs more oil pipelines: PM Carney

Calgary, 20 March (Argus) — Canada needs to build more oil pipelines to reduce its dependence on foreign supplies while opening up new trade corridors for exports, prime minister Mark Carney said today, amid an escalating trade war with the US. "It's about getting things done. It's about getting, yes, getting pipelines built, across this country, so we that can displace imports of foreign oil," Carney said while in Edmonton, Alberta. A US-triggered trade war has sparked an urgent need across Canada to diversify its trading partners and limit the country's reliance on the US. This has lifted public support for getting pipelines and other infrastructure energy projects built. The prime minister envisions the federal government "using all of its power" and new legislation to expedite such projects, adding "additional levers" will be discussed when he meets with provincial premiers on 21 March. "We need to do things that had not been imagined or had not been thought possible, at a speed we haven't seen before," said Carney. "That's the nature of the time." TC Energy's current chief executive along with 13 other executives from the country's largest oil and gas companies urged the federal government this week to declare a "Canadian energy crisis" to expedite infrastructure projects. General election soon Carney is expected to call a general election soon with his Liberal party riding high in the polls. Despite the Liberals' recent track record on energy infrastructure, Carney is looking to appeal to Alberta voters eager for pipelines who typically vote for the rival, pro-oil patch Conservatives. A combined C$280bn ($194bn) of Canadian oil and natural gas projects have been cancelled over the past decade, according to the Canadian Association of Petroleum Producers. Of this, C$164bn in the form of LNG projects, C$63bn in pipeline projects, C$30bn in oil sands projects and C$22bn in refinery projects. TC Energy's 1.1mn b/d Energy East pipeline is commonly referenced by industry as a nation-building project that, proposed in 2013, would have supplied Albertan oil to eastern Canada but was abandoned because of changing regulations. There was still no clear indication of when a decision by the federal government could be obtained when TC Energy cancelled it in 2017. Energy East would have piped oil as far east as Irving Oil's 320,000 b/d refinery in Saint John, New Brunswick, which relies on foreign imports, while also giving shippers an outlet to export to Europe and beyond. Canada imported 490,000 b/d of crude in 2023, according to the Canada Energy Regulator (CER). Of this, 355,000 b/d came from the US, 63,000 b/d from Nigeria and 53,000 b/d from Saudi Arabia. Canada meanwhile produces about 5mn b/d, sending about 80pc of that to the US. Carney's infrastructure push includes the proposed Pathways Alliance project in Alberta, which entails a C$16.5bn carbon capture and storage hub that could remove up to 22mn t/yr of CO2 by 2030. Generally, Carney wants to pursue energy and trade corridors and trade including potentially from Alberta to either the Canada's Arctic coast in Nunavut or to Hudson Bay via Churchill, Manitoba. Or both. The subject of trade and pipelines was front and center during a meeting with Alberta premier Danielle Smith earlier in the day, who has criticized the federal Liberals for years. "Albertans will no longer tolerate the way we've been treated by the federal Liberals over the past 10 years," said Smith in a statement, adding a specific list of demands, including "unfettered oil and gas corridors to the north, east and west". The Nunavut project, called the Grays Bay Road and Port Project, is a proposed deepwater port that would cater to critical mineral exports. The proponent, West Kitikmeot Resources, told Argus earlier this month that it had not yet had discussions with Alberta about developing crude capabilities. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Brazil central bank raises target rate to 14.25pc

25/03/20

Brazil central bank raises target rate to 14.25pc

Sao Paulo, 20 March (Argus) — Brazil's central bank raised its target interest rate by 1 percentage point to 14.25pc amid accelerating inflation in a decelerating — but still heated — economy. The hike in the target rate, announced Wednesday, was the fifth in a row from a cyclical low of 10.5pc at the end of September last year, partly prompted by accelerating depreciation of the currency, the real, to the US dollar. Brazil's annualized inflation hit 5.06pc in February and is poised to keep accelerating. The bank's Focus economic report increased its inflation forecast to 5.7pc for the end-of-year 2025 from 5.5pc in January, when the bank's policy-making committee last met. Brazil's current government has an inflation ceiling goal of 3pc with tolerance of 1.5 percentage point above or below. The bank has recently changed the way it tracks the inflation goal. Instead of tracking inflation on a calendar year basis, it now monitors the goal on a rolling 12-month basis. The bank cited heated economic activity and a strong labor market as factors that have contributed to rising inflation. But the bank forecasts "modest GDP growth" for Brazil of almost 2pc in 2025, down from 3.4pc growth last year. Further tightening will also be linked to global economic uncertainty prompted by US president Donald Trump's aggressive trade and other policies and the monetary policies of the US Federal Reserve , according to the bank. Brazil's target interest rate is expected to keep rising at the bank's next meeting in 6-7 May, albeit to "a lesser extent" as the contributing factors are set to moderate, according to the committee. By Maria Frazatto Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Canberra backs Li battery projects in Western Australia

25/03/20

Canberra backs Li battery projects in Western Australia

Sydney, 20 March (Argus) — Australia's federal government will partly underwrite four lithium-ion battery projects in Western Australia (WA), boosting the state's energy storage capacity by 2.6GWh from late 2027. Canberra is supporting the projects through its Capacity Investment Scheme (CIS), which sets a revenue floor on big battery projects for up to 15 years. The government has not revealed the specific revenue floors linked to the newly underwritten projects. Australian renewable energy developer PGS Energy will build the largest of the four newly-underwritten batteries, a 1.2GWh energy storage system in Marradong. The company's Marradong battery will be co-located with a solar farm and connected to WA's South West Interconnected System (Swis), a grid stretching across its most populous regions, once it becomes operational. French energy producer Neoen is also developing a 615MWh project just outside Perth, under the scheme. The company has been building large batteries across Australia, with public support, for multiple years. Its Collie Battery Energy Storage System is connected to Swis, and has been storing and discharging 877MWh of energy since October 2024. The two other batteries underwritten on 20 March are smaller, with a combined capacity of 780MWh, and located in rural parts of the state. The Australian government's latest funding announcement comes just months after it on 11 December 2024 underwrote eight other Australian battery projects capable of storing 3.6GWh of power under the CIS. Those projects were scattered across the country, covering three states but excluding WA. Canberra will also underwrite another set of batteries, with a combined capacity of 16GWh, in September. Over 100 projects, with a combined capacity of 135GWh, have applied to be part of CIS' September funding round. By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Australia must rethink gas strategy: Grattan

25/03/20

Australia must rethink gas strategy: Grattan

Sydney, 20 March (Argus) — Australian think-tank Grattan's Orange Book 2025: Policy priorities for the federal government report suggests redesigning Canberra's future gas strategy, coordinating a shift away from gas for households and some industries while changing market control mechanisms. Australia's next federal government must act to address a shortfall of gas in the country's southeastern states by creating a demand response mechanism for the national gas market and bringing together stakeholders to permit initial LNG imports in mid-2026, according to Grattan. Australia has always been both an exporter and importer of LPG, proving it is possible to build infrastructure to ship gas to the nation's south for the next 3-4 years in line with expected shortfalls, director of Grattan's energy program Tony Wood told a Sydney forum on 19 March. Building or expanding gas pipelines would be expensive and inefficient as the nation decarbonises, Wood said, with less gas forecast to be used as Australia targets net zero emissions by 2050. Canberra should institute a working group involving producers, users, traders, terminal owners, governments and the Australian Competition and Consumer Commission — which reports on market supply — to achieve seasonal imports of LNG in winter months, according to the Grattan report. A rule change to create a demand response mechanism akin to that under national electricity market rules would assist in meeting small shortfalls, such as during severe weather or unexpected supply outages. Demand is expected to rise on the back the closure of coal-fired power stations in the 2030s, according to Canberra's future gas strategy released in 2024. Gas-fired power demand may double in the decade to 2043 because of the need to support a solar and wind-heavy grid. This requires a reworking of the future gas strategy to specify plans to reduce demand and clarify future gas requirements outside of power generation, Grattan's report said. Assistance for households and industries to electrify processes is also needed, together with optimising infrastructure to ensure residual users in power generation and industry can access gas supply. The main controls on east coast gas grids, the Australian Domestic Gas Security Mechanism (ADGSM) and code of conduct , should be revised to allow for interstate transfers of gas, Grattan said, likely from Queensland's Gladstone-based LNG projects to the southern states. The code of conduct, which mandates an A$12/GJ ($8/GJ) price on domestic gas, came into effect in 2023 amid booming global gas prices but must be reviewed in 2025. Australia's energy and climate change ministerial council met on 14 March but declined to decide on expanding the Australian Energy Market Operator's powers, to enable it to address the gas shortage possibly through underwriting LNG import terminals. More analysis will be commissioned ahead of a decision at the next meeting in mid-2025. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more