A market and good resources do not seem enough to kick off geothermal development in Poland

Geothermal well at Zakopane, Poland (Source: Geotermia Podhalanska)

Alexander Richter 15 Mar 2020

A great article published in Poland this week, looks into why despite a market and good resources, geothermal energy development has not kicked off in Poland.

Attention, the article has been updated to reflect certain corrections provided by the Polish Geothermal Society.

So why do good geological conditions for geothermal energy utilisation and increasing interest in renewable energy not foster growth of geothermal development. There are several factors, as laid out in the article by Aneta Kaczmarek.

According to the data of the Polish Geothermal Society, at least 6,600 sq. km of geothermal areas with potential temperatures of 27-125 degrees Celsius are located in Poland. These resources are quite evenly distributed over a significant part of Poland and, importantly, regions with optimal geothermal conditions largely overlap with areas of high density of urban and rural agglomerations, highly industrialized areas and regions of intensive agricultural and vegetable growing. Areas with energy-rich geothermal resources include, among others cities such as: Warsaw, Poznan, Szczecin, Lódz, Torun and Plock. The Polish Geothermal Society is though careful in its estimation seeing the more realistic potential speficially in the Polish Lowlands and the Inner Carpathians mostly suitable for several types of direct use with heating as a priority.

Despite the wealth of geothermal resources in Poland, however, it still does not have a large share in energy production and no geothermal power production. There are 6 heating plants using geothermal heat. The facilities are Podhale Region ( Banska Nizna) – (40.7 MW geothermal and ca. 38 MW gas peak capacity), Pyrzyce (6 MW) geothermal, 22 MW total) , Uniejów (3.2  MW geothermal, 7.4 MW total)), Mszczonów (8.3 MW total, geothermal part in as 2.7 MW absorption HP and 1 MW compressor HP), Poddebice (10 MW), Stargard  (12.6 MW geothermal)

“Based on our many years of experience, it can be concluded that the profitability of geothermal installations, even with moderate geological conditions, is beyond dispute, and the installations themselves are very competitive in relation to other renewable energy sources. Of course, state support is required for this, but it is completely sufficient at the level corresponding to the support of other renewable energy installations”, says Arkadiusz Biedulski, president of G-Term Geotermia Stargard and vice president of the Polish Geothermal Society.

Operating the Stargard heating plant, Geotermia Stargard currently covers around one third of the city’s heat demand, and after completing the ongoing geothermal expansion program, this share will reach nearly 70 percent.

“Most importantly, the price at which we currently deliver and we will provide heat in the future is 25-27 PLN / GJ, i.e. very competitive to coal sources in current market conditions, which are characterized by high prices of coal and CO2 emission allowances.”, says Biedulski .

Cost effective and ecological

Geothermal energy is very competitive also to coal heating and provides an opportunity to eliminate the use of coal. This will be realistic assuming that geothermal energy is able to provide heat at a price acceptable to end users. The question is, is it possible?

“The answer to this question is unequivocal – yes, assuming state support at the level that other renewable energy sources receive. Importantly, geothermal energy also pays off from the point of view of the state budget, as the achieved ecological results are often greater in terms of the amount of support granted.” emphasizes Biedulski.

The ecological and environmental results of geothermal investments are counting on, among others local governments that reach for energy from the earth and see hope in it, including to improve air quality. Geothermal possibilities in this topic are also noticed by the government, which also wants to encourage entrepreneurs to invest in geothermal energy.

How geothermal can be helpful in fighting smog can be proved by the fact that thanks to the activity of Geotermia Podhalanska, which provides about 40 percent. heat used in Zakopane, residents and tourists can breathe cleaner air.

“Zakopane, which was still on the list of 50 cities with the most polluted air in Europe in 2016, was not included in the next list published by the World Health Organization in 2018.”, says Piotr Wozny, president of the National Fund for Environmental Protection and Water Management.

Financial support

Geothermal energy is currently one of the priorities of the National Fund for Environmental Protection and Water Management, which results in, among others the Polska Geotermia Plus program with a budget of PLN 600 million (around USD 158 million). Half of the amount was earmarked for subsidies for geothermal investments, half for loans.

The goal of the program is to increase the use of geothermal resources in Poland, and it allows for co-financing of the construction of a new, extension or modernization of an existing heating plant / combined heat and power plant / geothermal power plant based on a geothermal source; modernization or extension of existing sources of energy production by a heat / power plant / geothermal power plant based on a geothermal source; execution or reconstruction of a geothermal (non-research) borehole.

Until now, in the application process, which has continued since July 3, 2019 (the end of applications was extended to December 18, 2020), applications have been submitted for 8 projects, with a grant amount of PLN 86.8 million. The total investment cost is PLN 246 million.

Applications for co-financing under the Polska Geotermia Plus program have been submitted by:

• Bania Water Park – “Drilling of the Bialka Tatrzanska GT-2 geothermal well together with the expansion of the heating plant with compressor heat pumps”,
• Pharmaceutical Production Company HASCO-LEK – “Construction of a geothermal heating plant in Dzwirzyno”,
• Bachleda Hotel – “Drilling of the geothermal well Szymoszkowa GT-2 together with the construction of a substation equipped with heat pumps”,
• Przedsiebiorstwo Energetyki Cieplnej Geotermia Podhalanska – “Increasing the power of the renewable heat source PEC Geotermia Podhalanska through the construction and reconstruction of absorbent wells and the implementation of associated infrastructure”,
• Przedsiebiorstwo Gospodarki Komunalnej i Mieszkaniowej – “Increasing the power of renewable heat source PEC Geotermia Podhalanska through the construction and reconstruction of absorbent wells and the implementation of associated infrastructure”,
• Jurajska Renewable Energy – “Exploitation of thermal water resources for heating purposes and production of electricity in photovoltaic installations in the Karnice commune”,
• Przedsiebiorstwo Energetyki Cieplnej Sochaczew – “Construction of a geothermal plant in Sochaczew”,
• Geothermal Pyrzyce – “Modernization of geothermal wells in the geothermal system in Pyrzyce along with construction of a photovoltaic installation”.

For now, the applications are being processed – co-financing agreements have not been signed yet.

Three sources of financing

Geothermal Plus is one of the three priority programs of the National Fund for Environmental Protection and Water Management, under which you can apply for funding for geothermal investments.

Sub-measure 1.1.1 of the Infrastructure and Environment Program 2014-2020 is another funding channel that supports the development of renewable energy. As part of this sub-measure, it is possible to co-finance the following investments: construction of new or reconstruction of installations resulting in an increase in installed capacity of RES energy generating units related to the construction of new or reconstruction of energy generation units (electricity or electricity and heat in combination) using wind energy (above 5 MWe) , biomass (above 5 MWth / MWe), biogas (above 1 MWe), water (above 5 MWe), solar energy (above 2 MWe / MWth) or geothermal energy (above 2 MWth).

So far, under this tool, four contracts have been concluded for co-financing of geothermal heating plants for the total amount of co-financing of PLN 88.8 million at the total cost of PLN 174.8 million. I am talking about the following undertakings:

• Geotermia Torun – “Construction of a geothermal heating plant in Torun, using the existing TG-1 and TG-2 wells”,
• Bania – “Construction of a geothermal heating plant supplying heat and cold to the facilities of the Bania tourist complex together with pipelines and heat and cold distribution devices”,
• G-Term Energy – “Drilling geothermal wells in Stargard”,
• Przedsiebiorstwo Energetyki Cieplnej Geotermia Podhalanska – “Expansion of the geothermal system to increase the power of a renewable heat source for PEC Geotermia Podhalanska”.

In addition, two projects included contracts for the construction of heating networks that will be powered by geothermal heat.

On the other hand, as part of the fifth competition of applications (application round lasted from March 30, 2019 to June 27, 2019) announced under sub-measure 1.1.1, seven applications for co-financing of geothermal heating plants were received, for the grant amount of PLN 160.2 million subsidies. The total investment cost is PLN 370.1 million. Substantive evaluation of the applications is underway.

The following conclusions are undergoing substantive assessment:

• Bania Water Park – “Drilling of the Bialka Tatrzanska GT-2 geothermal borehole together with the expansion of the heating plant with compressor heat pumps”,
• Miejskie Przedsiebiorstwo Energetyki Cieplnej Konin – Construction of a Geothermal Heating Plant in Konin,
• Przedsiebiorstwo Energetyki Cieplnej – “Construction of a geothermal and biomass heating plant in Sieradz with the injection hole Sieradz GT-2”,
• Energetyka Cieplna – “Construction of a geothermal heating plant based on the reconstruction of two geothermal boreholes Skierniewice GT-1 and Skierniewice GT-2 together with the drilling of a new borehole Skierniewice GT-3 and connection of a new geothermal heating plant to the heat network of Heat Power Engineering”,
• Miejski Zaklad Energetyki Cieplnej – “Construction of a geothermal heating plant in the city of Kolo together with its connection to the existing MZEC heating system”,
• Geotermia Mazowiecka – “Exploration and recognition of thermal waters through the Mszczonów GT-1 borehole – construction of a geothermal borehole in Mszczonów, Zyrardów poviat”,
• G-Term Energy – “Drilling geothermal wells in Stargard – stage II”.

Recognize the potential

Among the activities implemented by the NFEPWM is a program on financing projects related to the exploration and recognition of geothermal waters. As part of the “Getting to know the geological structure for the country” program, five contracts were concluded in 2017: the commune of Sieradz (co-financing from the National Fund for Environmental Protection and Water Management in the amount of nearly PLN 10.5 million), the commune of Sochaczew (over PLN 10.4 million), the commune of Kolo (over 22 , PLN 1 million), the commune of Szaflary (nearly PLN 45 million), the commune of Ladek Zdrój (over PLN 18.3 million).

In turn, in the years 2018-2019, 4 contracts were concluded for co-financing projects related to the exploration and recognition of geothermal waters:

• Identification and documentation of thermal water resources from the Lower Jurassic boreholes in Tomaszów Mazowiecki – the cost of the project is nearly PLN 13 million (project completed, effect not yet achieved),
• TUREK GT-1 exploration and appraisal borehole for the purpose of receiving thermal waters in Turek – the project amount is nearly PLN 13.5 million (investment completed)
• Performing the Debica GT-1 geothermal borehole for heating purposes in the city – project amount over PLN 17.6 million (ongoing)
• The Sekowa GT-1 exploration and appraisal borehole for the purpose of capturing thermal waters in Sekowa – the project amount is over PLN 17.6 million (in progress).

In the last recruitment in 2019, four applications were submitted. They are in the course of proceedings at the NFEPWM. Obtaining funding is subject to a positive formal assessment.

Increase dynamics

The National Fund for Environmental Protection and Water Management does not stop at its current activities and plans to launch further ones that are to affect the development of geothermal energy in Poland.

“In March 2020, taking into account the need to significantly increase the dynamics of geothermal development in Poland and taking into account the previous experience in giving opinions on applications, a new priority program will be made available for ventures related to the exploration and recognition of thermal water deposits “Access to thermal waters in Poland”  says Donata Bieniecka-Popardowska from the National Fund for Environmental Protection and Water Management.

The new program was adopted by the board of the NFEPWM and is awaiting approval by the supervisory board. It assumes the introduction of significant facilitations in obtaining funds for the implementation of new geothermal wells by beneficiaries in such a way as to enable co-financing of projects for which the probability of identifying and documenting thermal water deposits will be as high as possible.

“One of the assumptions will also be more rational spending of funds and reduction of complications accompanying the preparation of geological works projects, while increasing the number of subsidized geothermal wells. This should allow for obtaining better results in the field of geothermal development, with lower financial outlays and a lower risk of making available thermal water resources.” explains Donata Bieniecka-Popardowska.

He adds that in connection with the application of the Chief National Geologist, the call for applications for co-financing projects related to the exploration and recognition of thermal water deposits has now been suspended until the launch of a new priority program in this field. The NFEPWM plans, however, that in March 2020 the new program will be made available to applicants.

Overcome barriers

While in Poland there are circumstances conducive to the introduction of geothermal energy, for geothermal energy to fully develop, it is necessary to create better conditions for the implementation of geothermal investments. According to Wojciech Ignacok, president of Geotermia Podhalanska, the largest geothermal energy producer in Poland, first of all we should start with increasing the knowledge of society and decision-makers in the field of geothermal energy resources.

“It is necessary to publicly and politically support the promotion, consideration and initiation of geothermal heating systems along with deepening the knowledge and awareness of decision-makers and politicians operating at various levels of local and regional administration, network designers, municipal plants and heating companies, which will facilitate decisions regarding support and approval geothermal projects.” says the president of Geotermia Podhalanska.

In his opinion, it is also necessary to improve funding opportunities at the investment stage – to separate funds for capital-intensive geothermal projects. As an example, it indicates the Polska Geotermia Plus program. “These types of funding programs should be maintained,” says Ignacok.

Another thing is the introduction of preferences, e.g. separate tariffs for customers who provide higher-than-standard cooling in the central heating system, the so-called delta T; higher coolings at heat recipients improve the operating parameters of the entire heating system, which translates into lower losses and new power supply options.

“Interest in geothermal energy would increase with the introduction of the possibility of lowering property tax rates on infrastructure for generating and transmitting heat from renewable sources. Current interpretations of UOKiK regarding de minimis aid allow, for example, to set a lower tax rate on buildings for the water and sewage network as not constituting public aid, whereas in the case of the heating network it is not possible to reduce the property tax rate – this is treated as unlawful public aid. Therefore, for energy-efficient installations using geothermal energy, it is necessary to create conditions for free shaping the tax policy of the local government, similarly to the water supply network.” says the president of Geotermia Podhalanska.

The last thing it indicates is the adoption of the transmission act, which regulates the issues related to the preparation and construction of the network and heating connections.

“Due to the long deadlines for obtaining consents and permits for the construction of the network, a law is necessary, thanks to which investors will be able to use simplified procedures and an accelerated path for obtaining decisions and permits. Without such an act, it is difficult to implement investments in the field of network infrastructure, especially with co-financing with EU funds. At the stage of submitting applications for co-financing, it is required to have full project documentation, its preparation under current regulations is very time-consuming and takes even several years.” says Ignacok.

Source: Portal Samorzadowy

Attention, the article has been updated to reflect certain corrections provided by Beata Kepinska and Maret Hajto of the Polish Geothermal Society. A country update for Poland has been provided as part of the proceedings of the World Geothermal Congress 2020. We assume it will be made public in the coming weeks, despite the postponement of the event from April 2020 to May 2021.