Hydrogen law, regulations & strategy in Poland

Explore reliable legal information about hydrogen energy in Poland

1. Current State of Hydrogen Projects in Poland

Hydrogen has been recognised as having a key role in the Polish energy transformation. There is significant opportunity for the development of hydrogen projects in all relevant sectors, such as industry, electricity and heat generation, as well as for energy system management and in transport. The relevant stakeholders’ plans are ambitious and apply to a range of sectors, however, as discussed below. As well as facing technical barriers, they are also confronted with an underdeveloped legal framework and lack of clear financial support mechanisms.

Poland currently has a substantial hydrogen market and Poland is the fifth largest producer of hydrogen worldwide (with the annual production of hydrogen equal to approximately one million tonnes). Poland produces 14 per cent of all hydrogen produced in Europe, which is used predominantly in industrial processes. Currently, hydrogen is primarily used in the petrochemical processes or as a side product generated in the processing industry. Grupa Azoty S.A. (“Grupa Azoty”) – the largest chemical consortium in Poland – is currently the biggest producer of hydrogen in Poland, producing approximately 420,000 tonnes of hydrogen annually and it will be increased when the new Polimery Police Project is into operation. The new installation will produce pure hydrogen in the process of propane dehydrogenation. Hydrogen will be a by-product of this reaction and hydrogen will be of very high quality, reaching the level of 99.99% purity.

Grey hydrogen is also generated by PKN ORLEN S.A. (“PKN ORLEN”) – the biggest player in the Polish fuel market – for production processes and as a side product in the process of chlorine generation for the production of polyvinyl chloride. PKN Orlen is producing approximately 145,000 tonnes of hydrogen annually.

As in mid-2021, the development of dedicated hydrogen projects in Poland is limited, though there are hydrogen generation, transportation and storage projects in planning stages, as detailed below. For future projects, most of the planned decarbonised hydrogen projects expect to use hydrogen for transport and in electricity grid management (by storing surplus energy generated by renewable projects in the form of hydrogen).

At the same time, hydrogen still represents an insignificant part of the worldwide and EU energy offer, although there are dynamic perspectives related to the development of that area throughout Europe. At the turn of 2020 and 2021 many European countries announced that they were adopting national strategies/plans for the development of hydrogen technologies.

2. Polish Hydrogen Strategy 2030

As specified above, as one of the main hydrogen producers in the world, Poland has set ambitious goals related to the planned development of hydrogen technologies. These goals and the manner of achieving them were defined in detail in the draft Polish Hydrogen Strategy 2030 with the prospects to 2040 (the “Strategy”), published by the Ministry of Climate and Environment on 14 January 2021. The Strategy has  been officially adopted  by the resolution of the Polish government passed on 2nd November 2021. However, at the date of publication this Guide, the final version of the Strategy has not been published yet in the Official Journal of the Republic of Poland. For the purposes of preparing this Guide it has been assumed that the final version of the Strategy is compliant with the draft. 

The Strategy is meant to respond to the changes taking place in the European and global energy environment, resulting in a shift from conventional fuels to low-carbon solutions. Hydrogen can play a significant role in the decarbonisation process.

Therefore, future actions envisaged by the Strategy are focused on the development of green and low-emission hydrogen economy, and the Strategy itself refers to three sectors enabling the use of hydrogen – energy, transportation, and industry. The Strategy also addresses the methods of producing hydrogen, its distribution, and necessary legal changes for the creation of a stable regulatory environment and rules for financing hydrogen technologies.

The priority areas adopted within the Strategy refer to the concept of combining sectors, which provides for: an increase in the use of electric energy from Renewable Energy Source (“RES”) and its consumption by specified sectors of the economy (such as the transportation sector, various industry sectors and the heating sector – heating of buildings) in order to minimise the dependence on fossil fuels contributing to greenhouse gas emissions to the environment. If renewable hydrogen and the concept of sector combination are implemented, the emission reduction potential in 2050, as compared to 2020, will be approximately 68 per cent.

The Strategy also complies with the actions presented in the draft Polish Energy Policy 2040 (“PEP 2040”), outlining the directions for the energy sector development, taking into account the tasks to be performed in a short-term perspective, which also cover activities related to hydrogen.

The authors of the Strategy also refer to the European regulations and assumptions, which are aimed at achieving climate neutrality by 2050, in line with the EU vision presented in the European Green Deal and the Paris Agreement.

The Strategy emphasises that the hydrogen economy may be developed by establishing the entire value chain and constructing infrastructure which will facilitate its use. Achieving this requires the development of electrolyser installations, a hydrogen distribution network, including creating the relevant transmission and transportation infrastructure, hydrogen storage facilities, refuelling infrastructure, production of fuel cells used in energy, heating, transportation, and other sectors of the economy. The overarching objective of the Strategy is also to create a Polish branch of hydrogen economy, amongst other ways by developing and making use of national patents and hydrogen technologies. The Strategy emphasises the need to use Polish research and development potential in the area of hydrogen technologies and to become a supplier of electrolysers, pyrolysis installation, fuel cells and hydrogen storage tanks, reactors and catalysts for methanation (Power to Gas or “P2G”), or for Power to Liquid (“P2L”) technologies and other components.

The authors of the Strategy are of the opinion that implementing the above assumptions requires planning legal solutions supporting the development of hydrogen use. It is crucial to support demand, and specifically to create appropriate technical conditions and incentives for companies, as well as to secure the financing of hydrogen technologies from the EU leverage package, which will contribute to their further development.

As was mentioned above, the goals formulated in the Strategy relate to three priority areas of using hydrogen: energy, transportation, and industry, as well as its production and distribution, and the need to establish a stable regulatory environment.

The Strategy also assumes the development of a broad range of competence for the hydrogen economy. The main task within that scope is to prepare qualified personnel to create, construct, and operate hydrogen installations. The projected dynamic growth of hydrogen mobility should take place in parallel with educating personnel skilled for maintaining such vehicles and refuelling stations. The Strategy also emphasised that the hydrogen economy growth creates a possibility for employees from coal-based sectors to effectively change their qualifications. To this end, it will be necessary to commence educational activities, which will make it possible to increase social awareness of the fact that structural changes of the labour market do not entail only the liquidation of positions but also the creation of new jobs. Therefore, the Strategy anticipates that the Government should undertake actions and be involved in social campaigns sharing knowledge on the current hydrogen use and the security rules that should accompany such hydrogen use.

Energy and industry

As specified in the Strategy, the application of hydrogen technologies in the energy sector needs to be commenced in the context of an increasing share of non-controlled electric energy from RES in the Polish energy mix. Under the draft Energy Policy of Poland until 2040, the share of RES in the net electric energy production will reach at least 32 per cent in 2030. A significant portion of generation capacity from renewable energy installed in Poland is based on sources whose operation profile depends on weather conditions (wind, sun, partially water) and which operate for an insignificant number of hours a year.

The actions planned in the Strategy for the forthcoming five years, which are meant to support the performance of that objective, include the need to support the stable operation of distribution grids, including commissioning class 1 MW P2G installations based on Polish technologies, determining the legal framework for hydrogen technology operation, support for research and development in relation to the creation of co- and poly-generation systems for the construction of demonstration installations. Studies also are envisaged in relation to the development of the hydrogen storage methods, including the possibilities of making use of large-scale salt caverns. Subsequently, the plans to be implemented by 2030 envisage the commissioning of medium-sized co- and poly-generation installations with hydrogen being the main fuel, commencing the use of hydrogen as energy storage capacity, and the installation of fuel cell systems. 

The year 2030 is also a year for which the use of hydrogen as energy capacity storage is scheduled to commence with a view to supporting the operation of the RES-based energy grid. By 2030, favourable conditions should be created for establishing installations throughout the country that use fuel cells for blocks of flats, small housing estates and public buildings, which installations may also serve as a source of emergency energy supplies.

The Strategy proposed supporting actions aimed at obtaining and using low-carbon hydrogen for industrial production processes. Using low-carbon hydrogen will make it possible to significantly reduce the greenhouse gas emission within that branch of the economy in which achieving the climate neutrality is the most difficult.

The Strategy assumes that heavy industry could observe the highest increase in the consumption of low-carbon hydrogen. According to the forecasts, electrolysis using RES, with natural gas prices as high as in Europe, will achieve a cost parity for certain products and processes after 2030.

Therefore, actions designed in the Strategy to achieve this objective include: providing support until 2025 in respect of initiatives related to obtaining and using low-carbon hydrogen in petrochemical production processes, implementing a coal contract of differences as an instrument supporting climate transformation in industry, the development of technologies consisting in the production of steel in the process of its original melting process, financial and organisational support for feasibility studies of industrial hydrogen valleys as part of creating circular industrial processes. 

In turn, it is envisaged that by 2030 at least five hydrogen valleys with a significant element of hydrogen transmission infrastructure in the form of pipelines will have been constructed.

Transportation

Hydrogen for transport is a cornerstone of Poland’s hydrogen economy. There is wide ranging interest within the Polish industry around the development of hydrogen transportation infrastructure, such as refuelling stations for hydrogen fuelled vehicles. One example is PKN ORLEN’s focus on developing hydrogen generation and distribution installations of hydrogen fuel for this purpose. Furthermore, state funding is available to encourage individuals to purchase hydrogen fuelled vehicles. The Strategy of Sustainable Development of Transport for 2030 predicts that low emission transport, including technologies such as hydrogen, will be key in addressing the negative impact on the environment.

A number of local companies have begun developing hydrogen refuelling stations. These include the state-owned energy companies PKN ORLEN, PGNiG and LOTOS, who are planning to develop a network of hydrogen vehicle refuelling stations by 2021. PKN ORLEN’s first refuelling station for hydrogen-fuelled vehicles shall be open in 2021.

PKN ORLEN is also planning to develop a hydrogen hub, with hydrogen generation installations located in Włocławek, in 2021, and in Płock at a future date. PKN ORLEN has signed a Letter of Intent (“LOI”) with Pojazdy Szynowe PESA Bydgoszcz S.A. – the largest manufacturer of railway vehicles in Poland – for the construction of a hydrogen fuelled train. Furthermore, PKP Cargo S.A. – the largest rail freight operator in Poland and the second in the EU – has also signed a LOI with JSW concerning joint initiatives for the commercial use of the hydrogen as a fuel.

In relation to buses, Solaris Bus & Coach S.A. – one of the leading European bus manufacturers – is currently producing a fleet of hydrogen fuelled buses.

Therefore, the Strategy envisages that the potential of hydrogen includes replacing conventional fuels, specifically in municipal/public transport, road, railroad or sea/maritime transport, and subsequently also in aviation (also unmanned aircraft aviation).

To totally decarbonise that branch, it will be necessary to implement fuel cell electric vehicles (“FCEVs”). FCEVs will be of special importance in the scope of public transport, as well as heavy goods and long-distance road transportation.
The Strategy assumes increasing use of hydrogen as an alternative fuel in transportation, precisely thanks to the significant advantages of FCEVs, including the fact that they can cover long distances without the need to refuel (more than 500 kilometres). In line with the Strategy’s assumptions, FCEVs will play a special role in the process of decarbonising public transportation in the future, as well as heavy goods and long-distance road transportation, where there is a limited possibility of using electric vehicles.

Therefore, in the perspective of the next five years, the Strategy assumes the creation of conditions in which 500 hydrogen-driven buses manufactured in Poland will be admitted to operation, as well as 32 hydrogen refuelling stations and hydrogen cleaning installations will be constructed. The plans also include the construction of the first hydrogen-driven passenger trains/freight locomotives which will replace their combustion equivalents at railway lines which cannot be easily electrified. The projections also include the examination of the possibility and profitability of the application of hydrogen in transporting synthetic gas produced through hydrogen methanation and launching pilot programmes related to using hydrogen in heavy goods road, railroad, sea and inland/river transport.

In a 10-year perspective, the Strategy assumes that the number of hydrogen-driven buses in operation will increase to 2000, and that the refuelling infrastructure and hydrogen cleaning installations will be further developed. The forecasts state that diesel trains will be replaced with hydrogen trains and that the use of hydrogen in heavy goods transport, railroad, sea, and inland/river transport will grow. Within the same perspective, work is envisaged to produce synthetic fuels in the reaction of hydrogen with CO, CO2, N2. It is also planned to further increase the use of hydrogen in heavy goods road, railroad, sea, and inland/river transport.

Energy system management and hydrogen transmission

According to the Strategy, it will be necessary to create, by 2030, conditions for commissioning installations for producing hydrogen from low- or zero-carbon emission sources, as the majority of hydrogen in Poland is currently produced from fossil fuels. The above choice is not meant to discriminate the existing production methods but is aimed at encouraging Polish industry towards a low-carbon economy transformation.

To this end in line with the Strategy – within the next five years, activities will be undertaken with a view to commissioning the installation for hydrogen production from low-carbon sources, amongst others by electrolysis, from biomethane, waste gas, natural gas with CCS/CCU, by pyrolysis, and other alternative technologies of hydrogen production, as well as commissioning synthetic gas production in the process of hydrogen methanation.
By 2030, it is projected that the capacity installed in RES will be used for the production of hydrogen and synthetic fuels by electrolysis. The installed capacity of electrolysers will then reach 2 GW, which will enable the generation of approximately 6,415 GWh, i.e. 193,643 tonnes of hydrogen annually, which represents approximately 20 per cent of the existing total hydrogen production in Poland.

The plan to be realised by 2030 also encompasses securing conditions for constructing installations in Poland for hydrogen production at nuclear power plants.

The Strategy emphasises that in order for the economy based on hydrogen to develop, it is necessary to efficiently supply it from the production place to its end recipient and its secure storage. Therefore, a gradual development of the hydrogen transmission and distribution grid is proposed. The existing solutions relating to hydrogen transportation provide for pipelines, road and railroad transportation, and it is expected in the future that network will be expanded to include oceanic transportation.

It has not yet been confirmed, under Polish conditions, whether electric energy transmission proves to be more efficient so that hydrogen is produced from it near the demand centres, or whether transmission of hydrogen generated at RES installations or of synthetic natural gas (“SNG”) produced from it by the existing gas grid is regarded as more efficient. The possibility of transmitting hydrogen by dedicated pipelines also needs to be considered. In the perspective of the first five years, it is also necessary to examine the existing gas infrastructure in relation to possible hydrogen feeding and transmitting mixes of hydrogen and gas.

Therefore, in the perspective outlined up to the year 2025, it is assumed that actions will be taken based on the analyses carried out, through:

  • The development of the hydrogen transmission and distribution grids, whether by transmitting electric energy, transmitting hydrogen/SNG by the existing gas grid or by transmitting hydrogen by dedicated pipelines;
  • the preparation of a feasibility study in respect of the north-south pipeline and the establishment of the so-called “Hydrogen Highway”,
  • and examining the existing gas infrastructure from the perspective of the possible hydrogen feeding and transmitting mixes of hydrogen and gas.

The plan of actions to be completed by 2030 stipulates adjusting selected sections of gas grid for transmission and distribution of gas doped hydrogen, constructing dedicated pipelines for hydrogen transmission and distribution or expanding the electric energy grid to transmit electric energy and feeding SNG produced in P2G systems into gas grids.

3. Challenges Facing Hydrogen Projects in Poland

Legal framework

Regulatory shortcomings – for example, in the transport and generation sectors – are a barrier to hydrogen development in Poland. There are still no specific provisions concerning technical conditions or localisation outside industrial areas. Therefore the Strategy assumes the implementation of comprehensive legal regulations related to hydrogen, the development of hydrogen technology and financing of projects based on that technology (more details provided in section 4 of the Guide).

Financial support and incentives

Currently, the National Fund for Environmental Protection and Water Management supports matters connected with the generation and use of alternative fuels in general, which would include hydrogen. Nevertheless, a designated hydrogen support scheme is still needed.

There remains a need for more engagement of public and private funds in the development of the hydrogen sector generally, not just with regards to transportation. To date, companies developing hydrogen projects have utilised their own funds or have benefitted from EU financial support.

Research and education

The National Centre for Research and Development supports the research and development into hydrogen storage projects.  The National Fund for Environmental Protection and Water Management also provides financial support for research and education in respect of alternative fuels. However, awareness of hydrogen and an understanding of its applications amongst the general public is low.

The Hydrogen Development Technology Programme is a government level policy designed to consider new areas for use of hydrogen in energy, transportation, and the natural gas network.

GAZ-SYSTEM S.A. (“Gaz-System”) – the Polish Gas Transmission System Operator and a member of Hydrogen Europe since 2019 is conducting a programme, “HYready”, which is aimed at analysing the possibility of the injection of hydrogen into the network. The company is seeking to transport hydrogen, together with natural gas or via a dedicated network, and is also considering hydrogen injection into underground storage.

PGNiG is conducting a project “ELIZA”, which is aimed at providing technology for generation of hydrogen from renewable energy sources.

4. Regulation of Hydrogen

Currently, there is no dedicated hydrogen law in Poland. Existing provisions of the Polish legal framework primarily captures hydrogen in transportation, although this area is also not well covered.  According to the assumptions underlying the Strategy, the draft comprehensive legal regulation concerning that subject is to be published at the end of 2021 and during 2022.

The Strategy provides for the drawing up of comprehensive legal regulations enabling the creation of a competitive and efficiently operating hydrogen market in Poland, removing current barriers to the development of that market. 

The most important activities in that field include the creation of a legal framework for hydrogen being used as an alternative fuel in transportation, the creation of the legal grounds for the hydrogen market operation and, in the longer term, the development of the hydrogen legislative package, i.e. provisions detailing the market operation, implementing EU law in that respect, and implementing incentives to low-carbon hydrogen production.

According to the timetable adopted in the Strategy: in Q3-4 2021 the planned actions include the creation of a legal framework for hydrogen being used as an alternative fuel in transportation, and it is planned to elaborate the grounds for the hydrogen market operation and, at the turn of 2021/2022, the development of the hydrogen legislative package is scheduled. The work related to preparing legislative changes, as envisaged in the Strategy, is already delayed.

At present, the adoption of a comprehensive regulation by implementing a separate comprehensive “Hydrogen Law” has been seriously considered.

As at the date of this study, no draft acts which could regulate the above areas have been drawn up.

Policy and government programmes

As previously mentioned, there are a number of government initiatives, such as the National Centre for Research and Development, the National Fund for Environmental Protection and Water Management, as well as the Hydrogen Technology Development Programme that has formulated the National Energy and Climate Plan 2021–2030.

Primary legislation

Hydrogen legislation in Poland is fragmented. There is no dedicated act for hydrogen in the Polish legal framework. Thus, the stakeholders are forced to follow general rules arising from the Polish system of energy law, which are currently not always suitable for the development of the hydrogen technology. 

However, to the extent that it is technically possible to transport hydrogen via the gas network, hydrogen could be treated as a gaseous fuel under the definition provided by the Energy Law Act. Thus, general provisions for gaseous fuels are applicable in this respect. Nevertheless, there are currently no direct provisions concerning hydrogen’s injection into a gas system or a storage system.

In June 2021, the Ministry of the Climate has proposed an amendment to the Act on the Fuel Quality Monitoring and Scrutinising System. The draft legislation classifies hydrogen within the definition of fuels under this Act and outlined its use for transportation. Furthermore, the Act deals with the quality of such hydrogen. Under this Act, the minister responsible for energy matters was authorised to issue the regulation, which provides in detail the quality conditions for hydrogen and for collecting samples of it for control purposes. The Act was passed by the Polish Parliament and signed by the President of Poland on 27 August 2021.

Generation

A licence for the generation of gaseous fuels is not required by the Energy Law Act. It is worth mentioning that there is a general requirement to obtain a licence in order to generate electricity from hydrogen.

Connection and distribution

Pursuant to the Energy Law Act, there is a requirement to arrange a connection agreement to the gas network and the Distribution System Operator (“DSO”) is responsible for providing conditions concerning connection to the grid. Activity of DSOs is also regulated, in particular a relevant licence is required alongside a number of other regulatory requirements.

Transportation

The Act on Electromobility and Alternative Fuels deals with the use of hydrogen and liquid biofuels in transportation. It sets out rules for the development and operation of infrastructure and relevant disclosure requirements concerning alternative fuels and applies in particular to hydrogen. This act also provides a framework for refuelling stations for hydrogen-fuelled zero-emission buses.

Financing

The Act on Protecting the Environment sets out the operating principles, which provides financial support for hydrogen transportation projects, amongst other alternative fuel projects. The financial support is provided by National Fund for Environmental Protection and Water Management in the form of a grant from the Fund, once the criteria indicated in the programme have been met by the entity.

As regards supporting the financing of new hydrogen investment projects, the Government plans to allocate its own budget funds to carry out such projects, as well as to mobilise investors to fully use the resources made available with the EU programmes. 

The Strategy points out that, at present, the following programmes and funds are available in Poland in relation to supporting the development of hydrogen projects: IPCEI (Important Projects of Common European Interest) EU programme, the Infrastructure and Environment Operational Programme, or programmes established within the Polish Development Fund: PFR Green Hub, which is to support the financing of venture capital projects. 

The National Fund for Environmental Protection and Water Management established two programmes “Nowa Energia” (New Energy) and “Zielony Transport Publiczny” (Green Public Transport), also covering hydrogen investments planned in the future. Since 2021 the Hydrogen Technology Support Programme (Program Wsparcia Technologii Wodorowych) has been in place within the National Centre for Research and Development (Narodowe Centrum Badań i Rozwoju). 

To secure financing of the development of the said objectives, the Strategy envisages that the Government will establish a multi-year programme supporting the development of hydrogen technology under Article 136 of the Act on Public Finance dated 27 August 2009, with a value at the level of PLN 100 million annually in the years 2022-2026.

As stated in the Strategy, by 2025, the achievement of the objectives related to the implementation of hydrogen technology in the energy sector and transportation, along with securing the planned production (50 MW of electrolysers), will require an investment of approximately PLN 2 billion. However, the above estimate does not take into account the costs of electric energy necessary to produce hydrogen, the costs of maintaining hydrogen-driven buses (fuel, maintenance services) or the development of transmission and distribution.

Permitting process

The Building Law and the Act on Spatial Planning and Land Development are fundamental in determining where and how hydrogen installations can be constructed. They are also crucial in the permitting process of planned projects as they determine aspects connected with occupancy and security, since hydrogen is considered as a flammable and explosive gas.

Regulation of hazardous activities

The main acts regulating this area are:

  1. the Act on Protecting the Environment (together with its secondary legislation) is key in Poland as it concerns environmental protections, particularly for the scope of the integrated permit, which is a required and crucial permit for hydrogen generation installations. This Act is also important as it regulates other permits, such as emission permits;
  2. the Act on Providing Information on the Environment and its Protection, Public Participation in Environmental Protection, and on Environmental Impact Assessments concerns the carrying out of environmental impact assessments and includes an obligation to conduct such assessments with respect to planned hydrogen generation projects. For this reason, it is vital for the development phase of hydrogen projects. Moreover, this Act is a guarantee of the participation in the proceedings concerning the issuance of the integrated permit for hydrogen generation installation. Installations that generate gases, such as hydrogen, are treated as potentially materially polluting installations under the regulation published by the Minister of the Environment;
  3. the Act on Preventing Environmental Damage and the Remediation of Environmental Damage deals with liability and subsequent remediation for damage caused by, inter alia, installations for which an integrated permit is required. According to the Regulation of the Council of Minister the installations required for hydrogen storage would qualify as such installations under this Act on projects that may significantly affect the environment.

Transport, import and export of hydrogen

Since there are no dedicated regulatory solutions for hydrogen under the existing legal framework in Poland, the provisions applicable for gaseous fuels should be taken into account in this respect. There is a general obligation to obtain a licence for the business activity of the distribution of gaseous fuels, however, the distribution of gaseous fuels in the network with a capacity below one MJ/s is not subject to the licensing requirement. Specific rules related to transport of dangerous goods apply to road and railway transportation. The Regulation of the Ministry of Health on the method of marking places, pipelines, containers, and tanks for storing or containing hazardous substances or hazardous mixtures would also apply to the transportation and storage of hydrogen.

5. Regulatory Bodies

Since there are no hydrogen-specific provisions, the general provisions concerning the investment process and exploitation of industrial installations and devices apply to hydrogen.

The most important regulatory bodies are:

  • the President of the Energy Regulatory Authority which governs the licensing of gaseous fuel storage and its distribution, and tariffs related to the gaseous fuel market; and
  • local authorities that govern spatial planning and the building process, which are vital areas for the installation of electricity generators and refuelling stations, among other things.

6. Regulatory outlook and market prospects

The potential of hydrogen to enhance the economy is recognised in Poland. There is a huge interest in this technology; Polish authorities are convinced that Poland could be one of the leading countries in this area and could be a transit country for the mixture of natural gas and hydrogen in the future. This enthusiasm is reflected in various strategic documents for the sector where hydrogen is considered, especially in the Strategy, which main assumptions were described in this study. The use of hydrogen in transportation as a fuel and as a technology for energy storage are currently the main areas of growth in Poland. 

Hydrogen technology is still at the early stages of development in Poland. There remains a lot of scope for M&A activity and investment opportunities that are also open for private investors and funds. To date, however, no significant activity of this type has taken place and companies involved in this market are predominantly state-owned. Nevertheless, the private sector is becoming increasingly involved in this area. One example is a recent acquisition of an electrolyser by Zespół Elektrowni Pątnów-Adamów-Konin S.A. – a private owned complex of four thermal power plants - for the purpose of generating hydrogen from renewable sources. Furthermore, in June 2020, Polenergia S.A. – the largest Polish private energy group – signed an LOI with Siemens Energy sp. z o.o. and Siemens Gas and Power GmbH & Co. KG concerning the introduction of solutions which shall make it possible to produce and use hydrogen in the Polish market.

Since a number of commercial banks are starting to opt out of financing carbon intensive, fossil fuel energy projects, their attention is likely to turn to providing debt financing to stakeholders investing in new, low carbon technologies, such as hydrogen projects. This will be important given that the infrastructure needed for the development of low carbon hydrogen projects is likely to involve significant capital expenditure (e.g. new pipelines, electrolysers etc.). 

Low carbon hydrogen production is currently expensive compared to the production of hydrogen from coal or methane gas, having not yet benefitted from the price reductions seen across certain, more mature low carbon technologies. Developers, therefore, will often need financial assistance beyond their own equity investment to support hydrogen projects. However, smaller developers are not always able to satisfy the conditions attached to bank financing. State support may, therefore, have a crucial role in funding hydrogen projects at least initially and particularly for smaller developers. 

While there is some government support in research and development (discussed in more detail above), more government engagement is required in order to develop this technology, especially in more capital-intensive areas, such as infrastructure.

This is because a significant part of the Polish gas infrastructure is old, and consequently not suitable for the purpose of transporting hydrogen. Despite the fact that Poland is one of the most active issuers of these bonds, there are still no plans concerning this method of financing for hydrogen technology. 

It is worth noting that, in Poland, all kinds of hydrogen are at present produced mainly for its producers’ own needs, which, however, does not result from the lack of possibilities of producing larger amounts of hydrogen. The producers jointly indicate that production can be increased as the production capacities of the hydrogen installations are not 100 per cent utilised. However, the current lack of a developed hydrogen trade market means that most producers simply do not find it profitable to produce hydrogen in amounts larger than their own needs related to the core business of these business entities.

7. Upcoming Developments

On 7 July 2020, an LOI was signed by the Ministry of the Climate and 17 other entities, concerning the establishment of cooperation for the purpose of building a hydrogen economy and conclusion of a hydrogen sector deal. Signatories include leading Polish companies, energy and transportation organisations, such as: Grupa Azoty S.A., Grupa Lotos S.A., Instytut Ekologii Terenów Uprzemysłowionych, Instytut Energetyki, Instytut Nafty i Gazu – Państwowy Instytut Badawczy, Jastrzębska Spółka Węglowa S.A., Operator Gazociągów Przesyłowych Gaz-System S.A., PKP Energetyka S.A., Politechnika Rzeszowska, Polski Koncern Naftowy ORLEN S.A., Polskie Górnictwo Naftowe i Gazownictwo S.A., Polskie Stowarzyszenie Paliw Alternatywnych, Tauron Polska Energia S.A., Toyota Motor Poland Company Limited sp. z o.o., TÜV SÜD Polska Sp. z o.o., Wałbrzyskie Zakłady Koksownicze “Victoria” S.A., Stowarzyszenie Polski Wodór, and Poczta Polska S.A. The signatories of this LOI declared to cooperate in the research and development of hydrogen. The purpose of the agreement will be to prepare a roadmap aimed at developing the hydrogen economy. The roadmap will be related to the development of strong national and local competence in the field of production of key components in the hydrogen technology value chain, hydrogen mobility and hydrogen in the sectors of the economy in which climate neutrality is not easily achievable. 

Furthermore, there are also plans to use the Baltic Pipe Project (a gas pipeline that is under construction connecting the Norwegian, Danish and Polish markets) in order to transport hydrogen and other gases. 

An Inter-Departmental Team for Hydrogen Economy has recently been established by the Polish government.
With the first zero-emission buses already in the testing phase, local governments are placing orders for the buses and they are expected to start driving on Polish roads soon. 

Currently Polskie Górnictwo Naftowe i Gazownictwo S.A. (“PGNiG”) - the leader in the Polish natural gas market - plans to introduce hydrogen as a blend into the gas network for commercial sale to customers, particularly in the heat sector but also, in the future, alongside other associated services. Moreover, the company is planning to develop hydrogen energy storage.

The company is also seeking to develop Power 2-Gas technology, however, PGNiG needs the introduction of regulatory solutions which would allow it to operate this kind of project. Currently, the company is at a stage of conducting research on the proportion of hydrogen that may be blended in the existing gas network. PGNiG’s testing gas network is scheduled to start operation in 2022. 

Grupa LOTOS S.A. (“LOTOS”) – a member of Hydrogen Europe and a leading oil company in Poland, which, together with Grupa Azoty, is responsible for half of hydrogen production in Poland – is developing a hydrogen purification project. The ‘Pure H2’ project is aimed at developing a hydrogen cleaning and distribution installation which would produce low greenhouse gas emissions. In addition, LOTOS’ ‘Project Hestor’ is developing onshore hydrogen storage for use in industrial processes. LOTOS has also established an electrolysis research and development project in conjunction with Polskie Sieci Elektroenergetyczne S.A. (“PSE”), the Polish Energy Transmission System Operator, to produce green hydrogen for use in its refining processes. Whereas Gaz-System – considers the future use of hydrogen via its injection into the gas network and its storage.

There are also plans for changes in relation to decarbonisation. One example is the activity of Tauron Polska Energia S.A. (“Tauron”), which supplies electricity to over 5.6 million customers per year and is the largest distributor of electricity in Poland. Tauron set up a pilot project in the Łaziska hard coal-fired power plant concerning production of green hydrogen from renewable energy. 

One of the areas of development of Jastrzębska Spółka Węglowa S.A. (“JSW”) - the largest producer of high-quality coking coal in Poland and the largest commercial group of coking plants in the EU – has been the separation and purification of hydrogen from coal gas using pressure swing adsorption (“PSA”) technology.

The activities of Polish companies described above are fully consistent with the objectives set out in the Strategy, concerning the implementation of hydrogen technologies in energy, industry and transportation sectors of the Polish economy.

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Piotr Ciolkowski
Partner
Warsaw
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Michał Andruszkiewicz
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Poznan