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Revolution or evolution? How the experts see the future of Polish energy sector.
Report on the research findings from the participants of the seven Energy Forums
November 2012
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Introduction
There is no doubt that big changes are taking place in the Polish energy sector. We are already exploring for shale gas, we’re getting ready to build Poland’s first nuclear power plant, we are starting to work on smart grid solutions and considering the matters of renewable, eco-friendly energy solutions and CO2 emissions.
On the brink of these changes MillwardBrown and PBS research institutes are presenting findings from the first survey on the four most current themes for Polish energy. The survey was conducted among the participants of all the seven Energy Forums - the people who every day deal with energy issues in Poland and abroad.
This Report provides detailed survey findings which indicate a positive mindset among the Forum’s participants toward the changes underway in the Polish energy market. We have to remember however, that this survey was conducted among people with a deeper insight into the energy industry, including experts in the field. The respondents did not constitute a representative sample of the Polish public which most likely continues to be quite oblivious to changes in the energy market, despite the fact the implications of these changes will affect every Pole.
I strongly encourage you to read the report, analyze the data and draw conclusions from this survey.
I hope you will enjoy the attached reading.
Jarosław Wajer Partner Ernst & Young Business Advisory
Survey and respondent profile
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Survey profile
Survey has been conducted thanks to iniciative of the:
- PBS research institute
- MillwardBrown research institute
- Ernst&Young business advisory
- The Eastern Institute - Energy Forum organizer
Method: CAWI (Computer Assisted Web Interwiew), the self-filled questionnaire in 3 languages (Polish, English, Russian)
Scope: the participants of all the seven Energy Forums
Sample: 139 respondents
Time: November 2012
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2%
27%
18% 37%
15%
Less than 1 year
1-5 years
6-10 years
Over 10 years
I am not directly involved inpower engineering/ energyissues
55% 36%
9% Poland
East-CentralEurope
Western Europe
Sample: all respondents (n=139)
Respondents’ profile
How long have you been involved with the subject of power engineering/ energy-related issues?
What country do you represent ?
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5%
1%
1%
1%
1%
1%
3%
4%
5%
5%
8%
13%
13%
14%
42%
1%
1%
2%
3%
3%
4%
6%
12%
12%
14%
17%
18%
27%
Respondents’ profile
Energy expert
Scientist
Journalist
Economist
Manager, corporate executive
Environmental organization activist, expert
Businessman
Representative of consultancy firm
Municipal, local authority representative
Government official, minister
Opposition party politician
State administration official
Financial industry representative
Ruling coalition politician
Other
Energy company
Consultancy firm
Media/ press/TV/ radio
Non-governmental organization
University
Scientific institute
Municipal government
Federal government/ parliament
Supplier or IT solutions to energy industry
Energy industry-affiliated company
Fuel company
Other
Don’t represent any institution/ organization (unaffiliated
participant)
What occupation do you represent/ have represented as a participant of the Economic Forum/ Energy Forum:
What institution/ organization/ company do you represent/ have you represented at the Forum?
Sample: all respondents (n=139)
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73%
54%
47%
27%
27%
46%
53%
73%
Moderate Good
environmental issues related to CO2 emissions and the Climate and Energy Package
nuclear energy
shale gas in Poland
smart metering in Polish power engineering
Moderate: sum of Unsatisfactory, Moderate, Satisfactory Good: sum of Good, Very good, Excellent
Awareness of specific topics - respondents’ self-assessment
How do you rate your expertise about the subject :
Sample: all respondents (n=139)
Nuclear energy in Poland
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Preparations have been underway for several years now to build Poland’s first nuclear power plant. This is our country’s second attempt at using atomic energy. The first attempt ended in failure, with the construction work of a nuclear plant in the 1980s by lake Żarnowiec being halted and then abandoned in the early 1990s.
Nearly 20 years on, nuclear energy is once again featuring on the Polish government’s strategic agenda. The government appointed a Commissioner for Polish Nuclear Energy, and Polska Grupa Energetyczna have been chosen as the contractor. The Ministry of Economy, along with the Ministry of Treasury have drafted an amended nuclear power bill as well as legislation that will govern how nuclear power plant construction and related projects should be developed and deployed to make it possible to build and then run such power facilities in Poland. The Parliament adopted both these legislations last year. Work on translating these laws into administrative acts is nearing completion.
For many years, nuclear energy has been the subject of considerable public interest. The technology has adamant supporters, convinced it is the right thing to do and must be developed further. It also has a large group of opponents. As a result, the public is bombarded with more or less accurate technical data and numbers. Half-truths and stereotypes also prevail. All this means it’s very hard to form a balanced opinion about nuclear energy. Conversely, the complexity of the issue, particularly as regards its technical background, means only a small portion of the public is capable of objectively assessing the implications of a nuclear power plant being built in Poland by relying on published scientific data.
Nuclear energy - introduction
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Federal administration and the contractor are taking steps to provide the knowledge and information to the public essential for making an informed decision about nuclear energy. However, these steps are still in early stages and are very slowly yielding results, as evidenced by the public’s growing support for nuclear energy. This support is growing in spite of the bad publicity after the Fukushima Daiichi nuclear power plant accident in Japan and of the activity of various organizations who are against the construction of a nuclear power plant in Poland.
The findings of the opinion survey about nuclear energy presented below reflect a general trend underway in Poland. We have to bear in mind however, that this survey was conducted among people with considerable insight into power engineering technologies, including many experts in this field. Their views seem to indicate an existence of a moderately positive attitude toward the construction of Poland’s first nuclear power plant. This is a good sign that allows one to presuppose that the majority of experts in the field will be the project’s ambassadors. Still, we must not forget that these people are not representative of Polish society as a whole, the general public needs on-going education about atomic energy.
Nuclear energy - introduction
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Nuclear energy to merely compliment other energy sources
At the moment, three main directions for the evolution of nuclear energy in Poland and its role in the total balance of energy available to the country are being considered.
Please indicate which of these relate to you the most.
13%
65%
22%
Nuclear energy should not be pursued in Poland at all
In the future, nuclear energy should only supplement othersources of energy.
In the future, nuclear energy should constitute the main source ofenergy.
30%
54%
22%
Sample: respondents from other countries (n=63)
Poland
Other countries
Sample: respondents from Poland (n=76)
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If you were asked to take a clear position about the building of nuclear plants in Poland, would you be for or against the idea?
FOR
57% AGAINST
33%
If a nuclear plant was to be built in the area you live in, would you be for or against it?
FOR
35% AGAINST
42%
If a nuclear plant was to be built in the area you live in (i.e. in the same municipality) what would be its effect on your life and work?
32%
28%
NEGATIVE POSITIVE
Sample: all respondents (n=139), Poland n=76, other countries n=63
Nuclear power plant – ‘rather YES’, but not in my neighbourhood
66% POLAND
46%
40%
OTHER COUNTRIES
28% POLAND Non-Polish participants are less positive about the
prospect of building nuclear plants in Poland
OTHER COUNTRIES
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57% 29%
14%
Yes
No
Don’t know
15%
24%
33%
19%
9%
max. 10%11-25%6-50%51-75%76-100%Don’t know
Should the government (of the Republic of Poland) contribute to the cost of building a
nuclear plant in Poland?
What should be the government’s (of the Republic of Poland) share in the financing of such a project?
State as key investor in nuclear power plant development
Sample: all respondents (n=139)
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Strong support for using nuclear energy as an energy source is a sign of having understood the complexity of existing energy problems and the significance of nuclear technology going forward. It must be stressed, that respondents’ opinions in this regard correspond with the government’s plans for building two approximately 6GW power plants, which will not undermine the dominant role of the coal-based energy sector in Poland.
Dr. Przemysław Żydak, an Experienced Consultant, a Nuclear Energy Expert, Ernst & Young Business Advisory
More than half of respondents are in favor of a nuclear power plant being built, but if we modify the question slightly, and ask the same people if they would still be in favor if this plant were to be built in their area, the number of favorable responses drops from 57% to 35%. Continuing education is most definitely needed here. I definitely believe the State and power companies have a role to play here.
Jarosław Wajer, a Partner at Ernst & Young Business Advisory
It’s surprising to see support for the concept of the government helping finance the development of a nuclear power plant. Also the share of the government’s contribution (between 25% and 75%) is surprising. This may indicate a growing interest in the issues of energy security and energy costs as well the need to get the State to involve itself more in this strategic industry.
Dr. Przemysław Żydak, an Experienced Consultant, a Nuclear Energy Expert, Ernst & Young Business Advisory
Nuclear energy – experts’ commentary
Environmental issues
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In the 1980s, climate protection had become the subject of studies and analyses of the UN’s Intergovernmental Team on Climate Change. The findings from the first report published by the Team were used as a basis for formulating the UN’s Framework Convention on climate change (UNFCCC) during the 1st Earth Summit in 1992 in Rio de Janeiro. The Convention set out the rules of cooperation on climate protection, as well as the schedule of annual Conferences of the Parties to the Convention.
At the third Kyoto Conference in 1997, industrialized countries made binding commitments to reduce greenhouse gas emissions, mainly CO2. The average reduction target was 5.2% by 2012 versus 1990. Even though this reduction target had been set quite rationally, not all the countries (i.e. the USA) ratified the Kyoto Protocol, while Canada withdrew from it altogether.
Poland had committed to reducing its greenhouse gas emissions by 6%, however using 1989 as the base. Owing to the post-1989 efficiency-orientated transformation of its economy, Poland has managed to reach its reduction target ahead of schedule. Poland’s commitments in this regard covering the post-2012 time horizon have yet to be set. Discrepancies between different countries are great, and three consecutive Conferences of the Parties have ended in failure.
Environmental issues - introduction
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From its beginnings, the European Union considered ecology and climate protection to be its priorities. In order to steer reduction activity aimed at achieving the Kyoto targets, a European Union Emission Trading System (EU ETS) was put in place in 2003. It uses the ‘cap and trade’ rule i.e. sets greenhouse emission credits that may be traded at an ever decreasing level. Moreover, in 2007 the European Council, ahead of a global arrangement, adopted a very ambitious climate policy with goals set for 2020 – 3 x 20 – or a 20% reduction of greenhouse gas emissions versus 1990. 250 targeted reduction goals were also adopted. For the coal-based Polish economy, even achieving the 20% reduction is a serious challenge. The country’s economic development might come to a halt if this target is raised even further.
Environmental issues - introduction
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Is the implementation of the provisions related to cutting CO2 emissions and growing the share of renewable energy sources in
the European Union contributing to the reduction of global warming?
YES
49% NO
35%
Do you believe that the global rise in CO2 emissions is the main cause of global warming?
YES
40% NO
42%
What is the impact of the implementation of the provisions related to cutting CO2 emissions and growing the share of renewable
energy on the competitiveness of the European (EU) economy vis a vis other economies i.e. Chinese, American and Russian?
29%
62%
NEGATIVE POSITIVE
Moderate skepticism about climate protection objectives
Sample: all respondents (n=139)
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29%
19%
16%
9%
12%
5%
6% 3%
1%
Solar energy
Wind energy
Hydroelectricity
Geothermal energy
Biomass and biofuels energy
nuclear
combination of renewable energysources
other
don’t know
What source of energy should be emphasized in order to implement the adopted renewable energy shares in the total energy production balance?
Solar, hydro and wind energy should help balance energy industry
Sample: all respondents (n=139)
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70%
30%
always and often
occasionally or never
The provisions of the Climate and Energy Package are related to the macro level, yet their implementation should also involve changes in the behavior of individuals.
Do you take steps on a daily basis to limit your use of electric energy, heating or to cut down on fuel use in your car?
Forum participants use energy consciously
Sample: all respondents (n=139)
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Poles, as opposed to people from other countries, particularly in Western Europe, are more skeptical about the impact of EU’s ambitious climate protection plans on global warming. This may be down to a number of factors. I would expect to see questions of economy, and particularly the threat that the EU climate strategy poses to the economic development of different countries causing differences in opinions.
Stanisław Poręba, a Manager at Ernst & Young Business Advisory
Most energy experts agree that the European Union’s ambitious climate protection plans won’t help EU economies become more competitive. The direct costs of the climate policy are, in fact, staggering. Alternative costs in the form of lost market shares or lost jobs can prove even more devastating.
Jarosław Wajer, a Partner at Ernst & Young Business Advisory
Environmental issues – experts’ commentary
Smart metering (Smart Grid)
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Another key factor impacting changes in the electricity industry, is the deployment of a Smart Metering System, which can significantly alter relationships between power companies and electricity users.
An AMI Intelligent Metering System (in English called Advanced Metering Infrastructure) is a complex infrastructure that encompasses metering devices (electricity meters), communication protocols, IT networks and systems. It is used to obtain data about electricity usage and its parameters, and enables two-way communication between the power company and the end user. This in turn allows for remote controlling of the metering system.
The growing global interest in Smart Metering is driven by the anticipated benefits to be reaped following its implementation. These benefits include: increased energy efficiency of the end user, a reduction in the peak demand for electricity, and improved security of the power grid. The European Parliament’s and Council’s legislations and objectives have contributed to the idea of smart metering in Europe becoming popular. In practice, European legislation means the member-states are required to implement Smart Metering in at least 80% of user households by 2020.
Smart metering - introduction
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High optimism about Smart Grid implementation, lower optimism about its timing
Do you believe that the implementation of Smart Metering will help lower consumers’ energy bills?
YES
74% NO
10%
Do you believe investing in Smart Metering will pay off for Poland i.e. will bring about the expected benefits?
YES
68% NO
9%
Do you believe that the year 2020 is a realistic date for the deployment of intelligent electricity meters
in 80% of households in Poland?
YES
51% NO
36%
Sample: all respondents (n=139)
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Smart metering drives change in energy consumers’ behavior?
If in possession of a profile of your electric energy use, would you be inclined to change your behaviors relating to the use of electric
energy?
YES
82% NO
11%
Would you monitor electric energy use if this could be done via a website or a mobile phone?
YES
76% NO
11%
Do you believe that Smart Metering will really affect the behavior of Poles relating to electric energy use?
YES
67% NO
12%
Sample: all respondents (n=139)
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Prospective savings main reason behind conscious use of energy
What arguments in favor of a more conscious use of electricity and changing behavior in this area are the most compelling for you?
24%
58%
19% Ecology, environment-related
Financial, potential savings
Technical, energy security in thecontext of a potential energycrisis related to electricityshortages in the future
14%
68%
17%
35%
44%
21%
Poland
Other countries
Differences among Poland and other countries
Sample: all respondents (n=139), Poland n=76, other countries n=63
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The technology in itself does not guarantee that real benefits will be drawn from the implementation of smart metering. Such benefits typically stem from a change in electric energy usage. Such a change will only be possible among conscious users. Around 50% of experts questioned in the survey admit they don’t know enough about smart metering. At the same time, 70% of these believe it would be cost-effective to implement smart metering. This is an excellent illustration of the need to run educational or public awareness programs in this area.
Jarosław Wajer, Partner at Ernst & Young Business Advisory
I’m happy to see this level of optimism among respondents. Nearly 80% said they would use smart metering for monitoring their use of electric energy, if it were available. Experience from deployment of this technology in other countries shows that the interest in one’s energy usage is only high in the initial period following implementation while this extra functionality is still new to the user. Regrettably, as time goes by, the share of users who regularly monitor their electricity use (as represented by the number of website hits) gradually decreases.
Jakub Tomczak, Manager at Ernst & Young Business Advisory
Smart metering – experts’ commentary
Shale gas
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Shale gas - introduction
In recent years, interest in unconventional natural gas deposits (including shale gas deposits) has increased with the dynamic evolution of exploration and exploitation technologies. Global unconventional natural gas deposits significantly exceed conventional deposits and may represent a significant source of hydrocarbon energy.
Initial estimates say Poland possesses good prospects of having shale gas deposits (The National Geological Survey Institute puts these estimates in the range of 346 and 768 billion m3). At the moment, Poland’s unconventional gas deposits exploration and production industry is only beginning to evolve, albeit dynamically. This is confirmed, among others, by considerable interest expressed by national and international companies in obtaining exploration licenses, although this hasn’t translated into significant project spending as yet. By November 2012, only about 30 boreholes have been drilled and only several of these have been used in the process of fracturing which is essential for exploring for shale gas. Consequently, the size of unconventional gas deposits in Poland and the likelihood of them being mined commercially has yet to be confirmed. Credible data in this area will become available only if broad-scale exploration and reconnaissance boreholes are drilled.
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The money to be spent in areas covered by exploration and reconnaissance licenses will need to be in the range of hundreds of millions of Polish zlotys. If deposits are confirmed, the cost of exploiting them will skyrocket to tens of billions of Polish zlotys over the next dozen or so years. In order to attract this kind of money, Poland needs to offer investors stable, clear and cost-efficient conditions for operation. We must bear in mind, that oil & gas industry companies invest globally, meaning that Poland is competing with other countries for limited financial resources from investors. This is why it’s so important to ensure that Poland is an attractive investment partner for shale gas exploration. Exploration companies use three fundamental criteria when deciding where to invest – geological conditions, the tax model and the regulatory model (i.e. the rules of buying and implementing licenses).
At the moment, potential investors are encouraged by favorable geological and tax conditions and a neutral regulatory environment. However uncertainty as to the potential future changes in the tax and regulatory model are a cause for concern. This is why, a stable tax and regulatory system in the area of unconventional gas deposits should be a priority for the legislative branch.
Shale gas - introduction
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Definite support for shale gas exploration in Poland
Are you for or against the exploration for shale gas in Poland?
73%
9%
FOR AGAINST
It’s refreshing to see that nearly three quarters of respondents support work aimed at exploring for shale gas in Poland. Public support is incredibly important, because there are voices expressed across the EU to the effect that unconventional natural gas exploration and exploitation should be banned. Poland is currently a leader among EU states with the most advanced work done to assess its size of shale gas deposits and the cost-effectiveness of them being exploited.
Aleksander Gabryś, a Manager at Ernst & Young Business Advisory
82% POLAND
63%
11%
OTHER COUNTRIES
7% POLAND Non-Polish participants are less positive about the
shale gas exploration in Poland
OTHER COUNTRIES
Sample: all respondents (n=139), Poland n=76, other countries n=63
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39%
39%
29%
26%
13%
9%
12%
37%
39%
49%
63%
73%
76%
79%
Disagree Agree
The next 5 years will show what the further impact of shale gas will be on the national economy.
Extraction of shale gas in a given region will accelerate its development.
The extraction of shale gas will improve Poland’s standing on the international arena.
The extraction of shale gas will lead to a drop in prices for gas and energy in Poland.
The exploration and extraction of shale gas in line with Polish laws is fully safe for the environment.
The tourism appeal of a given region will suffer as a result of shale gas exploitation.
The exploitation of shale gas deposits will adversely impact the landscape.
Do you agree with the following statements?
% agree
Poland
79% 79%
76% 75%
82% 62%
72% 51%
55% 41%
38% 40%
29% 46%
Shale gas is good for economy, not so good for environment
Sample: all respondents (n=139), Poland n=76, other countries n=63
other countries
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As expected, an overwhelming majority of respondents believe that investing in exploration and exploitation of shale gas deposits will accelerate the development of regions richest in unconventional hydrocarbon deposits. The positive impact of such projects will be felt both in the amount of money going toward municipal budgets (i.e. via environmental taxes) and in job creation and increasing buying power of the regions’ inhabitants. However to fully utilize the potential positive impact of such projects on the given regions of Poland, investors need to be offered stable, cost-effective and predictable conditions of operation over a longer time horizon.
Marek Kamiński, a Partner at Ernst & Young Business Advisory
At the moment it’s difficult to estimate the impact of shale gas exploitation on the price of natural gas and electric energy in Poland. Firstly, it’s still unclear as to the size of Poland’s deposits and what share can be used cost-effectively. Moreover, the future price of natural gas in Poland will depend on a number of factors such as regulatory mechanisms connected with the implementation of the Gas Market Deregulation Program, or on the impact of the development of cross-border transmission power and the LNG terminal, which will give Poland a place in the European/ global gas market. The final impact of shale gas on the price of gas in Poland will therefore closely correlate with the production volume and the regulatory mechanisms applied to the sale of gas.
Aleksander Gabryś, a Manager at Ernst & Young Business Advisory
Shale gas – experts’ commentary
Thank you for your
attention