TAURON Group against the market backdrop – Europe

Regulatory environment TAURON Group against the market backdrop – Poland

All of the energy groups in Europe are seeing changes taking place in their environment. Currently the main trend is the broadly understood development of renewable energy sources. This is accompanied by decarbonization, electrification of the transportation, energy efficiency or decentralization of electricity generation as well as the improvement of the quality and security of electricity supply.

This is reflected in the European energy groups’ generation mixes and installed capacity.

Comparison of the generation mix and installed capacity among selected largest energy groups in Europe

*E.on operations in the distribution and supply segment.

 

Noticeable increase in installed RES capacity among European energy groups - mainly wind generation assets

Export to Excel
2018 GW EDF Engie E.on RWE* innogy Uniper EnBW Enel Endesa Iberdrola Vattenfall CEZ Fartum PGE TAURON Enea Energa
total 126.5 104.3 5.3 41.7 3.6 36.6 13.4 85.6 22.7 46.7 31.1 14.8 13.7 16.2 5.0 6.3 1.3
RES 31.6 24.8 5.3 4.3 3.6 3.6 3.7 39.2 6,5 29.2 11.7 1.7 4.9 0.9 0.4 0.4 0.5
solar 1.7 2.2 0.0 no data 0.0 0.0 2.4 0.1 0.5 0.0 no data 0.0 0.0 0.0 0.0
wind 8.2 5.4 5.3 no data 3.0 1.1 8.2 1.7 16.1 2.6 no data 0.2 0.5 0.2 0.1 0.2
water 21.5 16.5 no data 0.5 3.6 2.5 27.8 4.7 12.6 8.9 no data 4.7 0.4 0.1 0.1 0.2
2019 GW EDF Engie E.on RWE* innogy Uniper EnBW Enel Endesa Iberdrola Vattenfall CEZ Fartum PGE TAURON Enea Energa
total 122.3 96.8 43.4 3.6 34.3 13.8 84.4 23.4 52.1 30.5 14.6 14.2 17.8 5.2 6.3 1.4
RES 32.3 26.9 10.0 3.6 3.6 4.4 42.2 7.4 32.0 12.1 1.7 5.2 1.0 0.7 0.4 0.5
solar 1.8 2.6 0.1 0.0 0.0 3.1 0.4 1.0 0.0 no data 0.3 0.0 0.0 0.0
wind 7.8 7.4 8.6 3.1 1.7 10.3 2.3 17.8 3.0 no data 0.2 0.6 0.4 0.1 0.2
water 22.5 16.3 1.2 0.5 3.6 2.5 27.8 4.7 13.2 8.9 no data 4.7 0.4 0.1 0.1 0.2

 

*RWE’s installed capacity as of 31.12.2018 is the installed capacity including innogy (capacity excluding innogy stood at 36.6 GW, including 0.3 GW in RES).

Source: Proprietary compilation based on the annual reports of the European energy groups presented.

As compared to the European market, Polish energy groups are characterized by a large share of coal technologies in their generation capacity. Electricity production among the European energy groups presented is much more diversified. Generating units based on coal do not have a majority share in their fuel mix.

Analyzing the installed capacity over the years 2019/2018, the trend of investing in renewable energy sources and departing from coal is clearly visible. An example of this is Endesa or Iberdrola, whose installed capacity based on RES went up. In 2018 declined as compared to the previous year and, additionally, an increase in RES capacity was observed. Structural changes took place on the German market among the main energy companies in 2019, as a result of which the E.On group became a distribution and supply company.

The growing trends associated with capital expenditures in renewable energy sources and a greater focus on the customer and his/her needs are visible in the plans and strategic directions of the energy companies presented.

Summary of the plans and strategic directions of selected sixteen of the largest energy groups in Europe

Source: Proprietary compilation based on the annual reports of the European energy groups presented.

The main strategic directions of the European groups presented (for 2018) should be supplemented with those that were strongly emphasized in the reports for 2019, namely: environment protection, development of low- and zero-emission assets and a departure from electricity generation based on the coal fuel (carbon footprint reduction) towards achieving climate neutrality.

In Europe, out of 17 analyzed energy groups, 10 of them declare climate neutrality. Vattenfall plans to achieve full decarbonization in 2030, Uniper in 2035, CEZ, RWE and E.On plan to achieve this goal in 2040. The latter company wants to achieve climate neutrality by offering its customers green energy. Further energy groups: Enel, Endesa, EDF, Iberdrola and PGE declare climate neutrality in 2050.

In addition to the development of renewable energy sources, the activities related to the modernization of energy infrastructure through digitization and smart metering are gaining momentum. Currently, a common practice is to link investments in RES with PPAs (i.e. Power Purchase Agreements). The operations of the companies will focus on the customer and his/her needs, as well as electromobility. Along with the increase in the supply of renewable energy sources, including also small prosumer installations, the activity related to electricity storage is becoming more important.

TAURON Group is taking note of the trends in the power sector and taking active efforts in all of the areas presented, making changes and focusing on the challenges of the so -called energy of tomorrow, which was already reflected in the update of the strategic directions announced in May 2019, referred to as the Green Turn of TAURON.

EXPANSION OF RENEWABLE ENERGY SOURCES – DECLARATIONS OF ENERGY COMPANIES

As the environment is changing, energy companies are updating their plans and strategic goals. Below the declarations of the European power companies regarding capital expenditures and expansion of the RES assets are presented.

Declarations of the European power companies regarding capital expenditures with respect to new generation capacity based on the RES assets

Source: Proprietary compilation based on the annual reports of the European energy groups presented.

In 2018, an Italian company Enel had the highest installed RES capacity among the energy companies presented with 39.2 GW. In its strategic plans, it assumes allocating 38% of its capital expenditures in the years 2019-2021 for investments in renewable energy sources (it is approx. EUR 10.6 billion). The second group, whose installed RES capacity was 32.6 GW in 2018, is French EDF, that is planning to increase the installed capacity of its green assets to 50 GW by 2030. ENGiE Group, the second company operating in France, is planning to increase its capacity by 9 GW in 2019-2021 (from 24.8 GW in 2018 to 33.8 GW in 2021) and ultimately the expansion of RES to approx. 48 GW of installed capacity in 2025. Iberdrola, an energy company operating mainly in Spain, is planning to expand RES capacity from 29 GW in 2018 to approx. 38 GW in 2022. Swedish Vattenfall declares another 2.3 GW of installed RES capacity by 2020. Endesa, a Spanish energy group, had 6.5 GW of installed capacity in renewable energy sources in 2018. Its plans include an increase in capacity in wind and solar assets to 10 GW in 2022. By 2050, the group would like to produce 100% of its electricity volume from renewable energy sources. RWE, a company operating on the German market, after the acquisition of new RES assets, which took place in 2019, updated its strategic directions. It is aspiring to be the third company in Europe in terms of RES installed capacity. Therefore, they declared an expansion of their renewable energy generation fleet by 2-3 GW of installed capacity per year.

Taking into account the declarations, it is estimated that in 2030 RWE will have at least 26 GW of capacity in green assets. Innogy is planning an additional 7 GW of RES capacity by 2025. Another German energy group, EnBW, has declared an increase to approx. 7.2 GW of capacity in renewable assets by 2025. In 2018, Uniper had 3.6 GW of installed capacity in renewable energy sources and is one of the companies that are not directly declaring an increase in the renewable source capacity, but it has announced a gradual departure from coal and a reduction of the carbon footprint, and ultimately climate neutrality in 2035. A Czech company CEZ is planning to increase its assets to 2.1 GW by 2025, from 1.7 GW in 2018 to 2.1 GW of installed capacity. FORTUM Group is assuming an increase of the installed capacity in wind energy and photovoltaics in its plans.

On the domestic market, PGE Group had the largest installed capacity in RES in 2018, i.e. 2.2 GW. The Group is seeking to reduce the impact on the natural environment and reduce the emissions of its production by, inter alia, the expansion of the RES portfolio. The Group’s activities with respect to RES are mainly focused on the construction of offshore wind farms, photovoltaic farms and onshore wind farms. PGE’s ambition is to achieve approx. 8 GW of installed RES capacity, including 2.5 GW of offshore wind capacity by 2030. In 2035, the group is already planning approx. 10 GW of renewable energy capacity, and by 2050 it plans to achieve climate neutrality. According to the new 2019 strategic plan, Enea intends to increase its RES installed capacity to 2.5 GW in 2030 and 3.5 GW by 2035. Energa Group was incorporated into the structure of the PKN ORLEN fuel and energy group in the first half of 2020. The strategic investment of ORLEN Group in the energy sector is the construction of offshore wind farms on the Baltic Sea with a capacity of approx. 1.7 GW by 2030. With respect to onshore wind farms and photovoltaic installations, ORLEN Group plans to achieve a total installed capacity of 0.8 GW in 2030. By 2030, the total capacity of ORLEN Group’s RES assets will top 2.5 GW. The Group assumes achieving emission neutrality by 2050.

In the Update of the Strategic Directions TAURON Group declared an increase of its low and zero emission installed capacity to approx. 1.6 GW by 2025, and to approx. 3 GW by 2030. The Group is also considering its involvement in developing off-shore wind assets.

CO2 EMISSION REDUCTIONS – DECLARATIONS OF ENERGY COMPANIES

Power sector companies are adapting generating units to the requirements related to decarbonization and the transition to zero-emission electricity generation in their strategic declarations.

Declarations of the power companies related to the CO2 emission reduction targets by 2035

Source: Proprietary compilation based on the annual reports and presentations of the European energy groups.

Endesa Group has the most ambitious plans among the European energy groups, and its goal is to achieve 100% production of electricity with zero emissions by 2050. Pursuing this goal, the group is planning a reduction of CO2 emissions by 67% (as compared to the 2018 level) by the end of 2030. Another group planning a large reduction of emissions is Enel – a reduction by 66% in 2030.

RWE is planning a 54% reduction in emissions in 2030, and a full decarbonization of its generation assets portfolio in 2040. EDF Group has set itself the goal of achieving a zero-emission level by 2050, planning to reduce emissions. by 47% in 2030.

Among the Polish energy groups, TAURON Group is planning to reduce emissions by approx. 50% by 2030. PGE has declared a reduction of specific CO2 emissions by 68% by 2030, and Enea by 30%. ORLEN Group assumes a drop of emission in its energy line of business by 33% by 2030 (versus 2020).