energy

Poland demonstrates the changing economics of renewable energy

There’s a lot of bad news about the climate out there, but one story that’s gratifying to follow is the economics of renewable energy. Because renewable energy has no fuel, it is essentially free at the point of use. There is no charge for the wind or the sun. Once they are are installed, renewable energy can always beat fossil fuels on price, a process I’ve described in more detail here.

The expensive bit of renewable energy is the installation, and that’s partly been a problem of scale. As the wind and solar power sectors have grown, costs have come down. The technology has become more efficient, meaning it’s easier to get a return on your investment. In country after country, renewable energy is now cheaper than fossil fuels. And once it’s cheaper, nobody needs to make the case for it. It doesn’t need subsidies, or even a supportive government. As long as you give it space, it will flourish.

Poland is a good example of this. The electricity supply is dominated by coal, and with both the coal industry and the power sector largely state-owned, there’s a strong sense of lock-in. The government bailed out the coal industry this summer, and has consistently stood in the way of EU action on climate change. It negotiated an exemption from the EU’s net zero by 2050 targets. When Poland hosted the 2018 climate talks, they were sponsored by the national coal companies and their pavilion featured a display celebrating coal power. Like the UK, the Polish government had blocked onshore wind power and failed with a gamble on fracking.

With the exception of domestic solar, it’s been a largely negative policy environment for renewable energy, but it is still growing fast in Poland. Over the last five years, 8.6GW of wind and solar power has come online, reducing coal power from 80% to 70%. This was mostly privately financed, because renewable energy just made more sense and it’s where the big opportunities were.

The economics of renewable energy, with a big push from EU trading on emissions, is forcing the government to catch up. This week the Polish government announced an update to its energy strategy that includes large investments in offshore wind power in the Baltic Sea, first steps into nuclear power, and a more ambitious timetable for reducing coal use.

To be clear, this doesn’t put Poland on a sustainable footing. It all needs to happen so much faster, and there is nothing about the economics of renewable energy that makes it inevitable. But what we can see is that excuses for inaction have eroded dramatically. The Polish government has always insisted that renewable energy is too expensive and it cannot afford the transition. That is no longer the case, and many other countries that are holding out for fossil fuels may find the business case slipping away.

A large part of the story in Poland is EU regulations around emissions, which are designed to make dirty fuels more expensive. But the same dynamic can be observed the United States, where President Trump’s vocal support for the coal industry has failed to arrest its decline. Plenty of countries are still betting on coal, especially where they have a local supply. But with every passing year the economics tilt further in favour of the wind and the sun.

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