Audit no. P/23/014/KGP
Year-long delays in developing the strategy for the protection and management of energy reserves and not fully effective implementation of the existing coal sector restructuring programmes – these are main irregularities found by NIK in the area of domestic energy reserves. Besides, the national energy balance – which should take into account key objectives of the EU energy policy pursued in the national energy transition process – was not developed. The absence of this balance made it difficult to optimally use the existing thermal coal reserves and maintain the required level of replacement investments with regard to mining phase-out. A spectacular failure in the area of energy transition was the project to spin off coal generation assets and transfer them to the National Energy Security Agency. The project was not finalised, though, due to unreliable supervision by the Ministry of Assets. As a result, the project was not selected and the protection of strategic energy reserves essential for Poland’s energy security was not implemented. The lack of protection of documented mineral deposits and the absence of rational management of those reserves may irreversibly prevent their extraction.
Energy security is one of key elements of the state security. Legal acts governing this issue include the Energy Policy of Poland until 2040 (EPP2040), adopted by the Council of Ministers in February 2021 and the State Raw Materials Policy, adopted in March 2022.
As pointed out in EPP2040, the domestic raw material capacity allows independent coverage of the coal demand. Most of the demand for natural gas and oil needs to be secured with import, though. A very important aspect of energy security is the protection of documented mineral beds and economic management of raw materials, considering the finiteness of resources, economic and ecological aspects.
The NIK audit of the state’s raw material economy revealed there was no plan in place and no principles of managing mineral deposits. As a result of year-long negligence and lengthy works carried out by the government administration, significant tasks related to effective management of mineral deposits were not completed. First of all, the list of strategic mineral beds was not created. Also, deposit extraction plans and instructions for their protection against developing the surface above the deposit were not prepared.
This audit was to verify if the measures related to the protection and use of domestic energy reserves take into account the needs under the state’s energy policy. The audit particularly concerned implementation of a specific objective of the EPP2040 Optimal use of domestic energy reserves, including the protection of documented mineral deposits as well as rational and economic raw material management. The audit covered the Ministry of Climate and Environment and the Ministry of State Assets from 2019 to 2023 (30 April).
NIK stands in a position that activities of the government administration related to the protection and use of domestic energy reserves were unreliable and insufficient.
Sluggishness and incomplete regulations
Preparation of strategic documents concerning the protection of energy reserves for the needs of the economy was significantly delayed. For 8 years, the state's energy policy was not prepared or updated. The State’s Raw Material Policy was adopted only in March 2022, i.e. four years after the deadline. NIK points out that the analyses prepared for the needs of the EPP2040 did not provide for the demand for fuel for heating plants.
The regulations protecting energy reserves were also implemented with delays. Already in 2010, the government programmes highlighted the need for such protection. By the end of the NIK audit (30 April 2023), no proceedings were initiated to issue a decision to consider the mineral deposit as strategic. According to NIK it is essential to clarify and develop transparent rules of conduct in internal procedures.
Ineffective implementation of strategies and programmes
Due to the lack of effective supervision by the Minister of State Assets, key measures listed in the lignite and hard coal restructuring programmes were not conducted. E.g. in the area of lignite mining:
- processes related to obtaining concessions for lignite mining in selected locations were not completed (the deadline was set for 2020),
- no directional decision was made regarding the construction of new fuel and energy complexes based on lignite (until 2019),
- no demand for new lignite-based capacities was specified (2019).
The country's energy balance in the area of hard coal mining was not prepared, either. That is why, the objective to optimally use the existing thermal coal deposits and maintain necessary level of replacement investments in the mine phase-out period has not been achieved to date.
After three years of EPP2040 being in force, most of the tasks were not completed. In NIK's opinion, a realistic schedule of implementation activities needs to be established to indicate the priorities of activities and specific deadlines for their implementation.
Failure of the National Energy Security Agency (NABE)
The Minister of State Assets unreliably prepared the concept of spinning off coal generation assets and has not planned all essential activities for NABE to operate effectively. The companies’ internal reorganisation and ensuring the operational capacity of the separated companies, which was to be completed by the end of 2Q2022, was carried out with over one-year delay. In order for the spin-off of NABE to be finalised, it was necessary to cover NABE's liabilities with State Treasury guarantees. That could be done by adopting a legal act, but the Minster of State Assets noticed that necessity only in 2H2022. Since the legislative work on the Act on the principles of granting these guarantees was not finished, the process of establishing the National Energy Security Agency and providing it with coal assets was suspended. It needs to be emphasised that the responsibility for monitoring the implementation of the NABE project rested with the Minister of State Assets.
Forecasted demand for energy reserves
The natural gas reserves disclosed to date are not sufficient to cover domestic demand for this raw material – the demand for natural gas until 2040 was estimated at 22.2 billion m³, while the volume of industrial reserves in the fields developed in 2022 was 51.5 billion m³. Lignite and hard coal reserves imply the possibility of covering the demand of the Polish energy sector with its own reserves to a significant extent. However, this requires effective action to protect existing reserves.
According to NIK's analyses, as at the end of 2022, lignite exploitable reserves totalled nearly 614 million tonnes, while the demand for this raw material by 2040 reaches almost 598 million tonnes. The demand for hard coal of 225.2 million tonnes, could be covered with domestic reserves (484.2 million tonnes – planned extraction in 2022–2049). The estimates made by mining companies, considering the mining phase-out schedule by 2049, indicate that approx. 862 million tonnes of exploitable hard coal reserves will remain in deposits after the mines are closed.
NIK points out that a significant risk factor in providing Poland's energy security may be a delay in launching nuclear energy, as it will require a longer operation of sources based on fossil fuels. This makes it all the more important to protect them.
