Energy Infrastructure / Innovations SECURITY 9 October, 2023 7:35 am   
COMMENTS: Andrzej Bondyra

Bondyra: Poland was prepared for the energy crisis

The Polish government – in order to stop the increase in energy prices for consumers – used a similar catalog of protective measures as other European countries. However, we showed one of the highest efficiency – the increase in energy prices was relatively small with relatively low expenditure – writes Andrzej Bondyra, VP at the Energy Market Agency.

Opole Power Plant. Picture by PGE
Opole Power Plant. Picture by PGE

At the height of the energy crisis, between September 2021 and January 2023, European countries spent a total of EUR 758 billion to support consumers. For this purpose EUR 646 billion has been allocated by the countries of the European Union, of which Germany alone spent as much as EUR 265 billion. Most states used similar support mechanisms as Poland including fiscal solutions, regulating retail electricity prices, supporting vulnerable and business customers, introducing a tax on extraordinary profits.

However, the efficiency of these mechanisms varied  across different countries. Germany has allocated 7.5% of its GDP to this purpose, but the price of energy for households has increased by 40% anyway. France, in turn, provided support at approx. 3.8-4 percent of the GDP, and the price wen up by 20 percent, and the UK – with a cover expenditure of almost 4 percent of GDP has seen energy prices rise by as much as 90 percent.

Against this background, Poland has shown one of the highest cost-effectiveness. From September 2021 to January 2023, EUR 12.4 billion was spent on protective measures in our country, which is  2% of the Polish GDP. Despite this, energy prices for households increased by only 12.9 percent during this period, which is much less than in most European countries.

As a result, energy prices in Poland – those for final customers, not on the wholesale market – remain relatively low despite the ongoing crisis. This applies both to prices for small and medium-sized companies and other entities covered by the solidarity shield, including vulnerable institutions, and for households energy prices have consistently managed to stay below the European average.

This was possible thanks to the shield, which included lowering the VAT, excise duty cuts in 2022 and a freeze on household prices and the introduction of maximum prices for SMEs in 2023. The cost of these solutions was relatively low considering the European scale, and was borne by the state budget and energy companies.

On the other hand, it should be pointed out that the energy crisis caused by Russia’s blackmail affected Poland to a lesser extent than countries that had previously depended on the supply of Russian raw materials, especially gas. Before the crisis, we had managed to diversify the sources of gas supplies (since 2015, an LNG port has been operating in Świnoujście, and before last winter the Baltic Pipe was launched), and the Polish electricity industry based, for the most part, its generation on coal from Polish mines. This did not save us from the rise in commodity prices – we are still feeling its effects. However, this growth did not affect the Polish energy sector as it happened in the case of, for example, Germany, Italy or the United Kingdom.

While the sources of the energy crisis should be sought not only in the hostilities in Ukraine, but also in Russia’s aggressive raw material policy, it can be said that Poland’s energy sector was prepared for this crisis to some extent. If it were not for the diversification of gas supply sources and domestic coal mining, the consequences of the crisis for the Polish economy and citizens could have been much more severe.