Modeling of Polish energy sector – tool specification and results

Abstract

The focus of this study is to specify different visions of the Polish energy sector development. The first is a traditional model based on existing coal and lignite resources complemented more or less by alternative technologies (wind, biomass, PV and nuclear power). The second is deeper and faster decarbonization of the Polish energy sector. And third an alternative approach where the economic impact of air emissions is considered. Here, the optimization criterion is based on maximizing social welfare, defined as the sum of consumer and producer surplus less the negative externalities associated with energy production. The paper presents the methodology used to forecast the development of the Polish energy sector. Both the IED standards and RES limits for ‘baseline’, additional limit of CO2 in ‘CO2’ scenario and high external costs for an ‘effective’ scenario force substantial changes in the structure of energy production. The extensive use of solid fuels in system power plants should be reduced and replaced by RES sources and nuclear energy. It has been proven that, in the case of system power plants, IED standards and RES limits are as effective as potential internalization of external costs, but if the external costs of CO2 emissions are higher (€65/Mg for CO2). Post-combustion technologies are economically efficient, but the scale of these investments must be correlated with the expected path of decommissioning coal-based technologies. The model results confirm that, in an ‘effective’ scenario, old coal-fired small heating plants should be completely replaced by gas technologies, small-scale geothermal heat plants and PV farms. All of these measures could improve social welfare by 4% as compared to the ‘baseline’ scenario and 6% in case of ‘CO2’ scenario.