Strategy and business model in the context of climate and environment protection

For the energy industry, the climate impact includes both, the weather related occurrences, as well the as the regulatory changes and the shifts in customer attitudes. All of this is not without significance for the business model and the Strategy. TAURON Group monitors the regulatory changes and the changes of the financial institutions’ policies. The above determines the weight of the climate and environmental issues as well as the development of RES at TAURON Group. In accordance with the Strategy adopted in June 2022, TAURON Group will increase the share of the RES capacity in the Group’s generation mix to approx. 80% in 2030, which will allow for reducing the emissions from approx. 750 kg CO₂/MWh in 2021, to less than 160 kg CO₂/MWh, as shown in Figure below.

TAURON Group’s commitments are reflected in the CO₂ emissions planned to be achieved by 2030.

In the case the expected curbing of the temperature increase does not materialize, the measures and actions taken will have to be more radical, and their implementation will be significantly accelerated.

Based on the scenario assuming warming at a maximum rate of 2⁰C, the changes in the external environment will be evolutionary, as a result of the growing awareness of the society and businesses and the ever increasing availability of the new technologies. If the evolutionary activities cannot stop the temperature rise and the forecasts will be clearly indicating that there is a high probability of exceeding the average temperature rise by more than 2 °C above the value from the pre-industrial era, the changes in the external environment, in particular with respect to the regulations, organization of the power (energy) system and the power (energy) production model, as well as the customer awareness and behaviors will be deeper and faster.

The Group’s opportunity will be the growing energy awareness of the public, coupled with the rising cost of energy, which will result in a growing interest in energy efficiency, energy conservation (saving) and the production of electricity from the renewable energy sources (RES). A significant change in this regard was experienced in 2022 as a result of Russia’s aggression against Ukraine and the energy crisis triggered by this aggression, as a result of which countries, energy utility companies and societies in the European Union had to change their existing energy operating models. The war caused by Russia has further highlighted the need for energy independence, which can be achieved, among other things, through the greater use of the renewable energy sources. The social pressure and the EU regulations are causing Poland to introduce increasingly more stringent environmental standards and restrictions for the fossil fuels, including rising costs of the CO₂ emissions (charges for the CO₂ emissions). The high level of the CO₂ emission allowances prices is also associated with the use of the regulatory mechanisms leading to the reduced supply thereof. The EU’s commitments to reduce the emissions by 55% in 2030 (the new target of 57% is being agreed upon) will be implemented through the supply controls – that is why the development of the low- and zero-emission energy sources is so important. TAURON Group’s strategy responds to these challenges by increasing capacity in the renewable energy sources, investing in the distribution grids, remote readout meters, digitization and cyber security, as well as the lowering of the CO₂ emission levels.

In the long term, the negative impact of TAURON Group on the environment and climate will be decreasing, both due to the need to comply with the expected tightening of the environmental requirements and the climate policy, through the investments in the new, low and zero-emission energy sources, but also due to the permanent shutdown of the obsolete conventional power generation units or their spinning off from TAURON Group.

The Group’s transition towards the low and zero-emission energy will have an impact on the business model, shifting the place where the revenue is generated in the value chain.

More on TAURON Group’s Strategy in section TAURON Capital Group’s Strategy and its assumptions.