May 22, 2017 / 4:06 PM / 2 months ago

Poland will rely on coal for next 15 years: PG Silesia

WARSAW (Reuters) - Poland will remain dependent on coal for the next 15 years due to a lack of alternative energy sources and as trade unions retain their grip on the industry, the head of the country's biggest private miner, said.

Poland currently generates more than 80 percent of its electricity from burning coal produced by its state-owned mines - a level miner PG Silesia doesn't see changing any time soon.

"Focusing on coal is the only model in Poland. There is no other way, unless you want to close the economy," Michal Herman, the head of PG Silesia, said in an interview at the Reuters Central & Eastern Europe Investment Summit.

Despite European Union requirements to cut carbon emissions, Poland has vowed to stick to coal, saying it is its only accessible source of energy and switching to others in a short time would be too costly.

Poland says it needs new coal plants to avoid blackouts and to keep its economy on track, but EU proposals on energy market reform could make it even more difficult to build new plants.

Herman also doubts Poland will move forward with plans to build a nuclear power plant in the next 20 years as the country lacks the technical expertise to achieve this goal.

"I think there will be no nuclear power plant built in the next 15 years, I would even say not in the next 20 years. There is no expertise, no know-how, but there are discussions right now," he said.

Local media quoted the energy minister as saying last week that Poland would have to spend around 200 billion zlotys ($54 billion) to reduce the share of coal in its energy mix to 50 percent by 2050.

Since winning parliamentary elections in October 2015, the pro-coal Law and Justice party (PiS) has restructured the troubled coal mining industry with the help of state-run listed utilities, which injected cash into the mines. It has also decided to shut down most loss-making mines.

"Poland will defend coal, because of the mining traditions, the trade unions are strong, around 1 million voters are connected to coal," Herman said.

Poland has always subsidized its coal mines, but in the past two years there were big changes to the industry with the two biggest coal mines merged and capitalized by state-run utilities.

That has created strong competition for smaller private miners like PG Silesia, which is owned by Czech utility EPH. They have breathed a sigh of relief that coal prices have rebounded in the past year and there has been an unexpected coal deficit in Poland.

"It is not as bad as it looked at first glance (when the biggest coal miner received financial help from state-run utilities amid a coal surplus), let's say a year ago," Herman said.

He said PG Silesia will probably increase its coal output to around 2 million tonnes this year, from 1.4 million in 2016, and he expects coal and power prices in Poland to rise in the coming years.

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($1 = 3.7255 zlotys)

Reporting by Agnieszka Barteczko, Barbara Lewis; Editing by Michael Kahn and Susan Fenton

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