Investing in the Recovery and Transition of Europe’s Coal Regions White Paper July 6, 2020 With the support of Investing in the Recovery and Transition of Europe’s Coal Regions Foreword In Europe, the transition to clean energy is accelerating. As the economics of coal come under pressure, it is clear that current market dynamics and political forces are putting cleaner, more economical energy sources at the center of Europe's power system. In the past three years, 15 European countries have committed to phasing out coal from their energy mix and over 130 existing coal-fired plants have closed or announced their retirement. Europe has shown strong climate leadership, committing to climate neutrality by 2050 and stepping up its efforts to transition away from coal. And especially in light of the Covid-19 crisis – a respiratory disease that is exacerbated by the very pollutants that coal creates -- we have both an opportunity and an urgent need to rebuild a sustainable, healthier, and more resilient global economy. To achieve this, national governments, regional authorities, mayors and communities alike will play an important role in delivering a just transition, leaving no citizen behind. At Bloomberg Philanthropies, we believe in a carbon-free future, one that will avoid the dangerous impacts of climate change, bring cleaner air, and protect public health. In an effort to speed Europe’s transition to clean energy, and as part of our partnership with the European Commission Coal Regions in Transition Platform, we have released together with BNEF an in-depth analysis on Bulgaria, Czechia, Poland and Romania, showing how current market conditions and existing policies can accelerate the transition away from coal to cleaner, more affordable sources of energy. The BNEF paper maps least-cost transition pathways revealing the untapped economic gain that will result from a speedy transition towards cleaner energy. For these critical countries, the report outlines how the transition to renewables can unlock 45 billion euro in investments and create 45,000 jobs -- just the kind of stimulus the economy needs to recover from Covid-19. Looking ahead and beyond current levels of ambition, the European Green Deal and the enhanced recovery package can advance climate action in these countries and other European coal regions by supporting the deployment of cheaper and cleaner energy sources. If we’re going to create a sustainable global economy that can withstand the challenges we still face, recovery efforts must go hand-in-hand with climate ambition and bold action. Now is our chance to achieve an even faster transition away from coal and towards a 100% clean energy economy. Antha N. Williams Global Head of Environmental Programs Bloomberg Philanthropies No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact [email protected]. Copyright and © Bloomberg Finance L.P.2020 Disclaimer notice on page 53 applies throughout. Investing in the Recovery and Transition of Europe’s Coal Regions Contents Section 1. Executive summary 1 Section 2. Introduction 3 2.1. Approach 4 2.2. Scope 5 Section 3. Drivers 8 3.1. Policy 8 3.2. Economics 12 3.3. Outlook 20 Section 4. Results 24 4.1. Poland 24 4.2. Czechia 28 4.3. Romania 32 4.4. Bulgaria 36 Section 5. Conclusion 40 Appendix A. Modelling inputs 46 About us 48 Table of figures Figure 1: Gross domestic product at market prices .......................................... 6 Figure 2: Annual EU emissions, current and proposed target reductions from 1990 baseline .................................................................................................... 8 Figure 3: Change in total electricity demand in Northern European archetype based on stylized sector coupling pathway ........................................................ 9 Figure 4: Net electricity imports ...................................................................... 12 Figure 5: Air pollution attributable death rate, per 100,000 population, EU27 . 12 Figure 6: Change in electricity demand expectations in Covid-19 Scenario 2 . 13 Figure 7: Coal productions vs imports, Czechia ............................................. 15 Figure 8: Coal production, Poland, Romania, Bulgaria ................................... 15 Figure 9: Fuel switching potential, Poland ...................................................... 15 Figure 10: Fuel switching potential, Czechia................................................... 15 Figure 11: Medium- and long-term EUA price projections, annual averages ... 16 Figure 12: Monthly average wholesale power prices in Poland and EUA prices .............................................................................................................. 17 Figure 13: Global benchmark LCOEs for PV and wind .................................... 18 Figure 14: Share price of Poland’s top four utilities, compared with market peers ............................................................................................................... 19 Figure 15: Cost of new onshore wind and utility-scale PV vs new coal and gas, Poland ............................................................................................................. 21 No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact [email protected]. Copyright and © Bloomberg Finance L.P.2020 Disclaimer notice on page 53 applies throughout. Investing in the Recovery and Transition of Europe’s Coal Regions Figure 16: Cost of new onshore wind and utility-scale PV vs new coal and gas, Czechia ........................................................................................................... 21 Figure 17: Cost of new onshore wind and utility-scale PV vs new coal and gas, Romania.......................................................................................................... 21 Figure 18: Cost of new onshore wind and utility-scale PV vs new coal and gas, Bulgaria ........................................................................................................... 21 Figure 19: Cost of new onshore wind and utility-scale PV vs operational cost of coal and gas, Poland ....................................................................................... 22 Figure 20: Cost of new onshore wind and utility-scale PV vs operational cost of coal and gas, Czechia ..................................................................................... 22 Figure 21: Cost of new onshore wind and utility-scale PV vs operational cost of coal and gas, Romania .................................................................................... 22 Figure 22: Cost of new onshore wind and utility-scale PV vs operational cost of coal and gas, Bulgaria ..................................................................................... 22 Figure 23: Evolution of installed capacity from 2018 to 2030 ........................... 24 Figure 24: New investment in capacity ............................................................ 25 Figure 25: Generation mix and renewables share ........................................... 25 Figure 26: Power sector emissions and zero-carbon generation share ........... 26 Figure 27: Capacity in 2030 by technology, NECP vs least-cost ..................... 26 Figure 28: New investment in capacity ............................................................ 27 Figure 29: Power sector emissions and zero-carbon generation share ........... 27 Figure 30: Evolution of installed capacity from 2018 to 2030 .......................... 28 Figure 31: New investment in capacity ............................................................ 29 Figure 32: Generation mix and renewables share ........................................... 29 Figure 33: Power sector emissions and zero-carbon generation share ........... 30 Figure 34: Capacity in 2030 by technology, NECP vs least-cost ..................... 30 Figure 35: New investment in capacity ............................................................ 31 Figure 36: Power sector emissions and zero-carbon generation share ........... 31 Figure 37: Evolution of installed capacity from 2018 to 2030 ........................... 32 Figure 38: New investment in capacity ............................................................ 33 Figure 39: Generation mix and renewables share ........................................... 33 Figure 40: Power sector emissions and zero-carbon generation share ........... 34 Figure 41: Capacity in 2030 by technology, NECP vs least-cost ..................... 34 Figure 42: New investment in capacity ............................................................ 35 Figure 43: Power sector emissions and zero-carbon generation share ........... 35 Figure 44: Evolution of installed capacity from 2018 to 2030 ........................... 36 Figure 45: New investment in capacity ............................................................ 37 Figure 46: Generation mix and renewables share ........................................... 37 Figure 47: Power sector emissions and zero-carbon generation share ........... 37 Figure 48: Capacity in 2030 by technology, NECP