Last month we learned of extra “Covid-19 recovery” funds to keep the Green Deal on an even keel. They included an additional €32.5bn for the Just Transition Fund (JTF). But is it enough? This is the question at the heart of our online event next week. The JTF is part of the Just Transition Mechanism (JTM) which, in turn, is the part of the Green Deal funding plan and is aimed at supporting Member States and regions “most affected by the Transition”. States exemplified by Poland where approximately 75% of electricity comes from coal. To set the scene, Energy Post talks exclusively to Mr. Wojciech Dabrowski – CEO of the Polish Energy Group (PGE) – and keynote speaker at our online discussion to hear how the JTF might transform the energy mix and help all regions on their way to achieve climate neutrality by 2050.
What’s the JTM?
While the European Green Deal Investment Plan looks at how to support the Green Deal as a whole, the Just Transition Mechanism is specifically targeted at the regions most affected by the transition. According to the Commission, this will ensure that “the transition towards climate-neutrality works well for everybody”. The JTM is estimated to be worth €150 billion overall.
The Just Transition Mechanism is structured around three pillars of financing:
- Just Transition Fund: The new Fund will be equipped with its own envelope within the EU budget, which the Commission proposes to amount to €40 billion on top of its long-term budget proposal. In practice, Poland will receive approximately 20% of the benefit of the JTF. The fund is covered by a new legislative proposal presented alongside the European Green Deal Investment Plan. These resources from the EU budget will be further complemented by national co-financing according to cohesion policy rules.
- Dedicated just transition scheme under InvestEU to mobilise up to €45 billion of investments. It will attract private investments that benefit those regions and help their economies find new sources of growth. InvestEU will be focused on the Just Transition objectives
- Public sector loan facility with the European Investment Bank backed by the EU budget to mobilise between €25 and €30 billion of investments. It will be used for concessional loans to the public sector, for example for investments in energy and transport infrastructure, district heating networks, and renovation or insulation of buildings
At next week’s Energy Post discussion one of the biggest energy utilities in Poland will be represented by Mr. Wojciech Dabrowski, CEO at state-owned electricity utility PGE.
That combined with the fact that PGE delivers electricity to 5.5 million households accounting for 43% of actual electricity generation in the country means Mr. Dabrowski is ideally placed to reflect the concerns of Eastern Europe where most of the “most-affected” States are situated.
Date: JUNE 17, 2020 – 13.00 to 14.00 CEST
13.00 – Opening remarks: Wojciech Dabrowski, CEO PGE (Poland)
13.05 – Introduction to panel: Andrei Marcu, ERCST (Moderator, Brussels)
- Jerzy Buzek MEP and Just Transition Rapporteur ITRE Committee (Poland)
- Henrike Hahn MEP for the Greens (Germany)
- Corinne Zierold, Senior Policy Advisor IndustriALL (European Trade Union)
- Aleksandra Tomczak, energy expert/member of the cabinet for Executive Vice President of the Green Deal (Brussels)
13.30 – Q and A
13.55 – Moderator’s summary
PGE’s current emissions reduction plans
Energy Post (EP): If the JTF is increased as you hope, will Poland/PGE continue to invest in coal, rather than RES or gas, as a means of generating power?
Wojciech Dabrowski (WD): “PGE is ready to actively contribute to EU climate ambitions by investing heavily in low- and zero-carbon generation, as evidenced by our investment plans.
“As the energy transformation leader in Poland, PGE is developing a project aimed at construction of offshore wind farms in the Baltic Sea with a capacity of up to 2.5 GW by 2030. Additionally, PGE is carrying out a PV programme to achieve capacities equal to, again, around 2.5 GW by 2030. PGE will also build new CCGT units in its existing power plants as well as new CHP plants based on best available gas-fired technologies. Replacement of older coal-fired units with new gas-fired ones ensures 3 times less CO2 emissions per megawatt hour. However, we will need adequate support in the process.
“PGE is ready to actively contribute to EU climate ambitions by investing heavily in low- and zero-carbon generation…however, we will need adequate support in the process”
“The pace of transformation in ‘the green direction’ in PGE’s new strategy will certainly accelerate. We have no alternative other than a green transition [and] this has to take into account the technical limitations resulting from [our] conventional assets which are needed to meet our energy demand. However, without significant support from EU funding mechanisms like the JTF, this transformation will become disproportionally more expensive for Poland’s industrial customers and citizens because Polish GDP per capita remains far below the EU average. We cannot simply pass all green transition cost onto our customers”
New jobs must be in the local area
EP: What does ‘re-skilling the workforce and creating replacement jobs’ mean in practice?
WD: “Retraining employees is a great challenge for energy companies across Europe. The PGE Capital Group is the third largest employer in Poland, providing stable employment for approximately 42,000 people throughout the country. In some of the regions we are proud to be the key economic entity responsible for the development of local economies and the well-being of many families. As many people rely directly or indirectly on the current and future job opportunities, which our company is able to create, there is a great sense of responsibility for each decision we make.
“We all know that successful re-skilling is challenging when you need to create viable employment options in the same local area at the same time. We see both as two sides of one coin. In order to be successful, we must be able to prove to our employees that with new skills come new job opportunities in their local area. If we were not, people would naturally fear to be left out. Whereas we genuinely want our employees to become an integral part of a successful energy transition of our company.
“Through investment into renewables with JTF funds we want our employees to install these devices on our current sites. This is the most tangible way of decreasing gaps between the regions with different starting points”.
Significance of EU ETS funding mechanisms
EP: Would a satisfactory outcome for you on the JTF in the coming budget see Poland sign up to the 2050 climate policy?
WD: “My position is clear. I am against a strict tightening of emission targets, because it is simply not possible for Poland to achieve them overnight from a technical, economic and social point of view. But I maintain my opinion that the future of the power generation sector is in the green direction meaning a growing share of RES.
“The higher carbon price does not accelerate our green investment strategy – it makes it more challenging to implement because of the additional funds needed to cover increasing operational costs of the existing units to be replaced.
“The higher carbon price does not accelerate our green investment strategy – it makes it more challenging”
“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. But, again, appropriate support is needed. In addition to a substantial JTF dedicated to coal regions, European climate law should include the principle of a proportional increase of the EU ETS funding mechanisms for Member States with low GDP per capita levels in line with a higher level of ambition.
“Moreover, we need to tackle the future principles of the EU ETS, which is the main tool to decarbonise industrial sectors of the EU economy. We cannot simply agree to additional costs without transferring a proportionally increased Modernisation Fund for the new generation investments – much needed to replace the existing units. We believe that the principle of solidarity now included in the Commission’s proposal should be fleshed-out further in this direction”.
“Experience of rich neighbours shows Commission underestimates cost”
EP: The Commission calculates that with the additional recovery funds following the Covid-19 impact, the fund is already on course to support heavily fossil-fuel dependent nations through to a successful transition. You disagree. Where is the misunderstanding?
WD: “From our past experience with the EU, we know that there is no silver bullet solution to a problem as complex as the energy transition that involves as many moving parts that have to work together. Protecting the well-being of local communities is one, overcoming the economic challenges is another, dealing with both whilst ensuring security of supply at all times is a completely different ball game. For each of these problems you may get a different solution. But the true genius is marrying them all together successfully.
“By looking at our richer neighbours, who embarked on their decarbonisation journey much earlier than us, we clearly see the financial resources and time necessary to accomplish the task go far beyond what the Commission is offering us today.
“We are willing to continue our decarbonisation effort but to be successful we need time and the relevant support from EU funds to avoid negative consequences for the economy and for the Polish society”.
Energy Post was talking with Wojciech Dabrowski, CEO of the Polish Energy Group (PGE), in advance of next week’s online discussion: “Will the Just Transition Fund deliver the Green Deal?” Date: JUNE 17, 2020 – 13.00 to 14.00 CEST REGISTER HERE
Tables from PGE’s own website – PDF “PGE in Transition” available here