Reducing the carbon intensity of Poland's coal-dominated district heating sector will boost demand for biomass and gas, but the transition away from coal will require a combination of these and other technologies to succeed.
Poland's district heating producers are increasingly incentivised to invest in renewables-based electrification, including solar-powered heat pumps, which could tempt them away from converting units to gas or biomass.
"If we go on the ambitious path of heat pumps and full decarbonisation, it will be easier for us to receive full public financing," Przemyslaw Budzynski, general director of the district heat producer in the town of Mragowo, told Argus. The producer invested in an 8MW wood chip-fired unit in 2022, but still operates more than 11MW of coal-fired heat production capacity. The utility is nearing a decision on whether to build a gas-fired combined heat and power (CHP) plant or more technically difficult but easily financed options such as a refuse-derived fuel waste-fired capacity or heat pumps.
Such deliberations are common among the approximately 350 district heat producers in Poland, which collectively account for more than 53GW of thermal capacity, according to Polish energy regulator URE. These plants supply hot water for heat to about half of the country's households, particularly in urban areas.
As of 2022, coal still accounted for more than two-thirds of the fuel used in these plants, with annual consumption of more than 13mn t/yr, according to URE.
Until recently, conversions to gas or biomass firing were the most popular alternative to coal for district heat generators, which consumed 410,000TJ of gas (around 114TWh) and 55,000TJ of biomass — equivalent to 3.2mn t of wood pellets — in 2022, according to URE data.
After European energy prices spiked in 2022-23, district heaters' determination to move away from coal strengthened. But these are typically small municipality owned entities that rely on public support for investment.
Polish state-owned environment fund NFOS provided 1.6bn zlotys ($390mn) of financing in 2019-21 to phase out coal district heating plants. NFOS said conversion to gas was the most popular technology in its scheme, but it also financed many conversions to biomass.
But NFOS excluded gas and biomass from its latest scheme in April-December — the main programme offering direct financial support to heat generators. It instead only offered funds for the development of heat pumps, geothermal and solar collectors. The scheme pledged more than 924mn zlotys to at least 16 projects, NFOS said this week.
Representatives of industry and financial institutions argue that a mixed bag of technologies — including gas, biomass and other forms of renewables — are needed for the transition away from coal. Biomass supplies alone would be insufficient to replace all the coal used in district heating, and a full-scale coal-to-gas transition would also be complicated because of security of supply and price volatility concerns.
Gas, biomass for larger utilities
Despite the narrowing window for gas and biomass in the smaller district heating segment, growth opportunities remain for these fuels at larger utilities that have higher financial capabilities and rely less on state funding.
Some Polish government-controlled utilities with district heating subsidiaries have adopted strategies that use a host of technologies. Energa is investing to replace coal with gas boilers at its heating plants in Ostroleka, Kalisz and Elblag, set to come on line in 2025. PGE also plans to complete 15 coal-to-gas conversion projects by 2030.
Orlen subsidiary PGNiG Termika is looking to partly convert to biomass at its Pruszkow CHP plant near Warsaw, with a 44MWt coal-to-biomass conversion to be complete within the next two years.
The utility also plans to restart co-firing biomass with coal at its Zeran CHP in Warsaw — with 494MW of gas and 298MW of coal-fired capacity — to reduce carbon emissions costs. Biomass classifies as a renewable source of energy and is zero-rated under the EU's emissions trading scheme.
Tauron, whose district heat subsidiary still has 65pc coal in its fuel mix, last week announced plans to fully exit coal by 2030, by investing in biomass, gas, heat pumps and other technologies.
