By Fitch Solutions

Key View

  • Offshore wind is poised to play a large role in the Polish power sector presenting a upside risks to our wind forecasts due to broad government support, conducive policy and a growing project pipeline.
  • The offshore wind project pipeline has developed significantly with widespread foreign involvement and a number of projects progressing, with key pre-development milestones achieved.
  • Despite the mounting support for the sector we hold a conservative forecast for offshore wind growth and see cooperative agreements and successful foreign involvement being key to unlocking Poland’s potential capacity growth.

Offshore wind is poised to play a large role in the Polish power sector. We currently forecast an additional 5.4GW of wind capacity to come online between 2021 and 2030 taking the sectors share of total generation to 15% by the end of the decade. This includes an additional but conservative 1.5GW of offshore wind capacity with a considerable upside risk mounting due to support for the sector and a growing project pipeline.

Wind To Play Ever Larger Role In Polish Power Market
Poland – Wind Capacity & Share Of Total Generation, MW & %
Source: EIA, Word Bank, IRENA, Fitch Solutions. e/f = Fitch Solutions estimate/forecast.

Over H2 2020 new legislation sought to fast track offshore wind projects already in planning; developers would be supported by similar mechanisms as seen in the UK with a two-stage Contract for Difference (CfD) model. 5GW of capacity will be selected by Poland’s energy regulators by the end of 2021, before a further 5GW of auctioned capacity across two tenders towards the end of the decade. Over Q121 Polish senators approved the bill to stimulate development of offshore wind capacity in the country. The bill, which became effective on February 1, envisages subsidising 10.9GW of projects in the Baltic Sea. The first phase of the support mechanism will see Poland allocating incentives for 5.9GW of new offshore wind projects, with power generation expected to begin in 2025. In the second phase, Poland will hold tenders for CfD for 5GW of capacity unlocking USD35.2bn of investments.

Further highlighting the positive momentum in Poland, in Q320 the Polish government signed major EU legislation – the Baltic Sea Offshore Wind Declaration – which aims to accelerate development of the sector in the region and to strengthen cooperation between participants, including Poland, Denmark, Estonia, Finland, Lithuania, Latvia, Germany and Sweden. The countries have agreed to cooperate in grid development, planning, capacity support mechanisms and to address regional sector development issues together.

The offshore wind project pipeline has developed significantly with widespread foreign involvement and a number of projects progressing and achieving key pre-development milestones. Poland currently has no operational offshore wind developments but our Key Projects Database demonstrates that a total of 5.1GW of projects are in planning. What our data demonstrates is the active involvement of experienced foreign project sponsors, equipment manufacturers, consultants and project managers. Over Q121 Baltic Power, a subsidiary of PKN Orlen, signed a grid connection agreement with the transmission system operator Polskie Sieci Elektroenergetyczne (PSE) for its 1.2GW offshore wind farm development. The wind farm will come up 23km off the coast of Leba and Choczewo in the Baltic Sea. Baltic Power is currently carrying out preparatory works for the facility and construction is expected to start in 2024. Furthermore, PSE also agreed the grid connection agreements for German firm RWE‘s 350MW FEW Baltic 2 and PGE‘s 1500MW Baltica 2 offshore wind farms in the Polish Baltic Sea. PSE has previously granted grid connection agreements for PGE’s 1045MW Baltica 3 and for Equinor and Polenergia‘s 1.2GW Baltyk 3 offshore projects.

Project NameSizeUnitCompaniesStatusConstruction StartConstruction End
Baltic Srodkowy II Offshore Wind Farm, Baltic Sea720MWPolenergia,MMT Group Holding AB,EquinorAt planning stage20232027
Baltic Srodkowy III Offshore Wind Farm, Baltic Sea720MWPolenergia[Sponsor]{Poland},MMT Group Holding AB[Consultant/Project Management]{Sweden},Equinor[Sponsor]{Norway}At planning stage2025
EW Baltica-2 Offshore Wind Farm, Baltic Sea1500MWOrsted A/S[Sponsor]{Denmark},Polska Grupa Energetyczna (PGE)[Sponsor]{Poland},Polska Grupa Energetyczna (PGE)[Sponsor]{Poland}At planning stage2028
EW Baltica-3 Offshore Wind Farm, Baltic Sea1000MWPolska Grupa Energetyczna (PGE)[Sponsor]{Poland},EOLOS Floating Lidar Solutions[Equipment]{Spain},Orsted A/S[Sponsor]{Denmark}At planning stage2026
PKN Orlen Offshore Wind Farm, Baltic Sea1200MWOffshore Wind Consultants Limited[Consultant/Project Management]{United Kingdom},PKN Orlen[Sponsor]{Poland},Northland Power[Sponsor]{Canada},OFFSHORE DESIGN ENGINEERING LIMITED[Consultant/Project Management]{United Kingdom}At planning stage2023
Heavy Foreign Involvement In Polish Wind Development
Source: Fitch Solutions Key Projects Database

Despite the mounting support for the sector we hold a conservative forecast for offshore wind growth and see cooperative agreements and successful foreign involvement being key to unlocking potential capacity growth. Currently the lack of a proven track record of successful offshore wind project development has weighed on our assessment of the realisation of the current pipeline of 5GW. This is due to the level of risk in developing projects in the market and the complex nature of offshore wind operations and development. Therefore, we see the heavy involvement of established industry leaders will stand in good stead in developing the sector for Poland. Out of the aforementioned project pipeline we highlight, Ørsted, Equinor and Northland Power as all taking a leading role in project delivery.

  • Ørsted has signed an agreement with PGE to form a joint venture to potentially develop two offshore wind farms totalling around 2.5GW in Poland. Under the agreement, Ørsted intends to acquire a 50% stake in PGE’s 1.5GW Baltica 2 and 1GW Baltica 3 offshore wind farms for PLN657mn (USD176.8mn). The transaction is subject to regulatory approval and is likely to reach closure later in Q121. Baltica 3 wind farm is likely to become operational in 2026, with Baltica 2 to follow later.
  • Canada-based Northland Power has agreed to join PKN Orlen as the strategic partner and acquire 49% equity stake in an up to 1.2GW offshore wind project in the Polish waters, according to a press release from Northland Power. Northland Power’s special purpose vehicle NP Baltic Wind is likely to invest PLN290mn (USD77.6mn) in the project in 2021 which will be inclusive of the purchase price and development expenses. The wind facility is likely to secure a 25-year contract for difference off-take agreement. At present, the agreement is conditional and is subject to anti-trust clearance. Construction on the wind farm is likely to begin in 2023, with operations projected to start in 2026.

Furthermore, experienced Spanish offshore wind developer and utility Iberdrola have taken a large stake in the Polish market. The company signed an agreement in Q420 to acquire a 50% stake in the developer Sea Wind who have access to a potential 7.3GW Polish offshore wind pipeline. Over Q420 Polish Utility Tauron Polska Energia SA signed a joint venture agreement with Portugal’s EDP and French Engie to cooperatively build out its offshore wind capacity.

We also note that Poland’s state-controlled utilities sign a cooperative agreement to work together to develop wind projects in the Baltic sea. The group includes PGE Polska Grupa Energetyczna SA, Tauron Polska Energia SA and Enea SA who will form a collaborative development group through a special purpose vehicle for the joint decision on future offshore wind farm siting and financing. We highlight that this will go some way to reducing the elevated project risks involved with such projects in Poland given the companies lack of experience.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. 

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