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PGE calls for the recognition of gas as an environmentally sustainable source

22.02.2021

Due to the considerations of the power and district heating system in Poland, we need investments in gas installations in order to achieve climate neutrality, while treating gas as a transitional technology - said Paweł Strączyński, Vice-President for Finance of PGE Polska Grupa Energetyczna, during the event "EU TAXONOMY: finding the right balance for a successful Transition" held by the Brussels-based Energy Post. The event took place on 22 February 2021. Nancy Saich from the European Investment Bank, a member of the Platform on Sustainable Finance, Dr Mirosław Groszek, former member of the European Commission's High-LevelExpert Group on Sustainable Finance, Ian Simm, CEO and founder of Impact Asset Management and Czech MEP Ondřej Knotek from the Renew Group also took part in the discussion on sustainable financing of energy investment projects.

President Paweł Strączyński emphasised that in October 2020, the PGE Group presented its strategy outlining the Group's transition plan to achieve climate neutrality by 2050. The Group plans to build 2.5 GW of offshore wind farms, 3 GW of solar power plants and at least 1 GW more capacity in onshore wind farms by 2030. The PGE Group is confident that these investments will comply with the European taxonomy for sustainable financing.

The generation mix of the PGE Group will be supplemented with flexible gas sources and combined heat and power plants for which a process of transition from coal fuel to gas has been planned. PGE will use gas as a transition technology on the path to climate neutrality. The gas turbines that the Group will use will be able to burn CO2-free gases such as green hydrogen in the future. To complete its plans, the PGE Group will need financial support. Public funds, stretched due to the COVID-19 pandemic, will not be sufficient to this end. Therefore, it will be necessary to turn to instruments linked to the sustainable financing agenda.

Natural gas is associated with high uncertainty related to the European taxonomy, especially when it comes to identifying technologies that can be considered environmentally sustainable and those that cannot - emphasised Paweł Strączyński. This applies in particular to natural gas – in this case, the European Commission will indicate whether it is a sustainable technology in a delegated act to be published in April 2021. The European taxonomy requires a flexible approach, which would allow replacing coal with gas, especially in major district heating systems - pointed out Paweł Strączyński.

Gas, as a transitional technology, should be considered as environmentally sustainable or at least as not causing significant harm. President Strączyński stated that a good example of a balanced approach for an effective transition are the technical guidelines for the Recovery and Resilience Facility published by the European Commission on 12 February 2021. According to the guidelines, investments in generation sources based on natural gas and gas cogeneration will be able to receive support from the Facility in Member States facing significant challenges in moving away from coal, provided that these sources have life-cycle emissions from facility below 250 g CO2/kWh or are adapted to the use of renewable or decarbonised gases.

We need a similar approach in the long-awaited final version of the delegated act to the European taxonomy, which takes into account the different starting points between Member States and reflects the transition needs also of the Central and Eastern European region - summarised Paweł Strączyński.

The opinion of PGE's Vice-President Paweł Strączyński was shared by the Czech MEP Ondřej Knotek from the Renew Group, who stated that the taxonomy must be free of ideology and, as pointed out by PGE, gas investment projects, in particular gas cogeneration and district heating, need support instruments on the path to transition.

The need to take into consideration different starting points of the Member States in sustainable financing and the European taxonomy was also pointed out by Dr. Mirosław Groszek. In turn, Ian Simm emphasised that the cost of capital for investments that are not considered sustainable will be higher relative to investments that are considered as such. Nancy Saich pointed out that the European taxonomy will have an impact not only on private financing but also public policies, e.g. by taking account of the taxonomy in the case of public aid policies, and that gas will remain important for the district heating market, with cogeneration playing a key role in new gas investment projects.