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Poland's PGE OKs $3.78 billion expansion of Opole coal-fired plant

  |   Jan. 10, 2014 at 12:04 AM
OPOLE, Poland, Jan. 10 (UPI) -- Construction will begin next month on 1,800 megawatts of new coal-fired generating capacity at Poland's Opole Power Plant, owner PGE announced this week.

A statement released Thursday by the state-owned power producer said its management board had approved a program of internal financing to build two 900-megawatt generators in a $3.78 billion expansion of the Opole plant, to be designed by the French multinational Alstom.

The move came two months after PGE's former chief executive, Krzysztof Kilian, quit his job heading Poland's biggest utility amid reports the company was being politically pressured to proceed with the expansion despite rejecting it in April as unprofitable.

Now led by Marek Woszczyk, the company now says the financing will allow construction to begin as scheduled Feb. 1, with the first unit to be completed in 4 1/2 years and the second less than year later.

In reaching its decision, the company said it will proceed despite low wholesale energy changes due to "directional changes in the energy sector -- not only in Poland but also in Europe" in recent months.

These included "systemic changes in the energy market," such as plans by the Polish government to introduce a so-called capacity market this year, under which energy providers are paid for their capacity rather than how much electricity they actually produce. This, it said, would "limit risk in conventional power."

Also part of the decision, PGE said, was an announcement by the government last week it had sent a draft of a new law governing the renewable energy sector in the country following a dispute with the European Union, ending uncertainty on how it would affect conventional power.

The Economy Ministry said it had completed its work on the draft law on renewable energy sources and had sent it to the Council of Ministers with a request for urgent action, the Polish news agency PAP reported.

The draft law, ministers said, is designed to comply with the obligations of EU climate policy for the share of renewables in the energy mix while also reducing the costs of these sources.

It would scrap the current system of subsidizing the renewables in favor of an auction set-up under which providers who offer the lowest prices for renewable energy would receive a purchase guarantees of up to 15 years.

Officials said they assume the renewables law will come into effect at the beginning of 2015, with auctions for the purchase of green energy to be held at least once a year.

PGE also cited changes implemented in the EU's carbon emissions trading system in July, under which rock-bottom prices for allowances due to oversupplies were bolstered by a decision to delay the release of new permits for 900 million tons of carbon.

The Opole expansion last year became the subject of a political battle over whether it made economic sense.

Kilian, considered a strong ally of Prime Minister Donald Tusk, left the company over the dispute, contending low wholesale energy prices made the project untenable, Polish Radio reported.

Tusk, however, deemed the project important to Poland's energy security and necessary to avoid future energy shortages as demand rises.

Topics: Donald Tusk
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