Polska Grupa Gornicza (PGG) is the largest mining company in Europe as well as the largest hard coal producer in the European Union. The company plays a strategic role for Poland’s energy security and employs 42,000 people.
As the largest coal producer, PGG sits at the center of the debate about energy transition in Poland. Can you briefly introduce the context of this transition?
As background, it is essential to point out that in 1990 coal accounted for as much as 98% of Poland’s energy mix. The maximum output of hard coal in Poland was around 200 million tones and now it’s more or less 60 million tones only. The employment has been reduced from 400,000 miners at the end of the 80's to around 80,000 today.
Over the past 30 years we have reduced coal use by 19%, a progress that is in line with what other countries in the region have achieved, such as the Czech Republic, Romania or Bulgaria. The difference is that our historical position was very different starting out.
Our country has experienced two transition processes in the past and there are valuable lessons to be learnt from them. In Lower Silesia the process was very quick and harsh, with tragic results for the region - reestablishing economic growth was very difficult and the impact is still noticeable today. By comparison, the transition in Upper Silesia had a slower pace and the present economic wealth of the region is comparable with other well performing parts of the country. This is an experience we should look at and draw lessons from as we are taking this new leap.
What are in your view the key factors to be kept in mind as this transition unfolds, in order to ensure it happens in a sustainable manner?
Firstly we should seek out ways to maintain a competitive value chain generated today by our coal industry. PGG hires 42,000 people, paid 50% higher than the average income in Upper Silesia. Our annual turnover is EUR 2,5 billion, yearly investments in technology and equipment typically amount to EUR 200 million and we generate EUR 800 million in taxes.
Thinking about energy transition we need to figure out how to maintain the health of this value chain, which is very challenging. We can liquidate mines but the question remains of what to place in their stead.
A second aspect is that of Poland’s energy independence. We can increase the use of natural gas but we should strive to lessen the dependence on Eastern partners, which have created certain issues in the past. If we gear up for diversification then we might be ready to take new next steps in this transition.
The vision set forth by the EU aims to phase out coal by 2050. Do you see this as a reasonable timeline for Poland?
I see it as a very ambitious policy. We wish to take new steps towards decarbonization but we also answer to our workers and existing ecosystem. What I find interesting is that the European Commission promised support to mining regions for this transition, but the value they advanced is EUR 4,8 billion. This should serve 41 mining regions for a duration of seven years, which means each region would receive less than EUR 20 million per year. To put this figure in perspective and understand how much help it truly is, EUR 20 million is the same amount PGG delivers to the market every three days.
We have to keep in mind the competitiveness of the European economy compared to other geographies. It is becoming increasingly difficult to compete with products from China for instance because they do not carry the burden of CO2 payments.
Natural gas and renewable energy (especially offshore wind) are commonly seen as possible replacements, and there is also an ongoing discussion about nuclear energy. What is your view on these alternatives?
Renewable sources will require huge investments. Take Germany as an example, it costs them around EUR 26 billion per year in extra taxes from households to fund RES. For Poland the amount sits around EUR 5 billion per year. We also depend on technical drivers as we do not know how much more efficient renewable sources will be in 2050.
I agree that Poland should explore the option of nuclear energy as well, but this too will require huge amounts of money. The country’s leading energy companies in our economy must be ready to answer how they can fund both alternatives.
What is certain is that demand for energy in Poland will continue to increase. In 2000 we needed about 145 TWh, and now we consume 178 TWh. We expect that in 2030 the country we will require around 210 TWh. What I see as the solution to maintain stability for the next 25-30 years is to focus on big installations with high degrees of efficiency and low impact on the environment, such as Polaniec or Opole.
You launched a pilot project for photovoltaic installations at Halemba mine. What is the strategy you have in mind?
This is an excellent example of energy transition. One thing that coal companies have now is money, and it can be used towards hiring engineers and focusing on new solutions. One goal we have with these installations is to open the door for news types of jobs, and also to create acceptance among local people for new technologies.
People are crucial for this transition and we are building a bridge towards modern solutions.We trust that if they see solar installations working in tandem with traditional sources, they will become more and more accepting of them.
What objectives are you pursuing with priority in the coming two to three years?
Our priority now is to understand what demand for coal to expect, so as to plan accordingly. European markets are changing very fast and any investments we make now will yield results in 2025-2030. We are working on an internal study that seeks to understand realistic demand schedules so as to plan future investments.
Other than this our ongoing objective is to create social acceptance for the changes that are taking place and play an integral part in showing our people that we hold the right solutions for current assets.
