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Energy 6 September, 2021 1:00 pm   
Editorial staff

Inflation, heat and energy price hikes, Kurtyka’s dismissal – another beautiful day in the neighborhood

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Poland needs time and money to transform its energy and heating sectors. In the meantime an increase in heat and energy prices is certain, because the price of CO2 emission allowances is going up. A scapegoat has already been found. Rumor has it that there is plan to dismiss Michał Kurtyka, the Minister of Climate and Environment – write Wojciech Jakóbik and Jędrzej Stachura from BiznesAlert.pl.

Power and heat prices will go up

European Commission’s latest plans talk about a continued climb in energy prices in the European Union. According to analysts from the Polish Economic Institute (PIE), the poorest families will suffer the most. “The additional fees for emissions in transport will result in an increase in spending on energy by as much as 40 percent and on heating by 50 percent, impacting 20 percent of EU’s poorest households,” PIE warns.

Analyses prepared by the Polish Electricity Association (PKEE) prove that freeing the tariffs and combining that move with the proper social policies (e.g. an energy allowance), may contribute to a more just and stable distribution of the energy costs, so that the people most in need receive real help. In February 2021 the government started working on the idea to support underprivileged consumers and defining energy poverty.

According to PKEE, ending the tariff system should not have a negative impact on the situation of households and does not have to cause a price hike, or increase energy poverty. Substantial competition on the domestic market could save Poles from the coming price increase. Bulgaria, Cyprus, Portugal, Romania, Latvia and Great Britain have abandoned tariffs, and yet no significant rise in prices has been reported in those countries.

In August 2021 the PGE Group supported freeing the energy prices. The company believes that it would not lead to an unnatural increase in electricity prices for households. Such a change would result in prices changing on an ongoing basis instead of once a year. “In July the energy price on the Power Commodity Exchange (TGE) was at PLN 0.38 net per 1 kWh. At the same time the tariffs approved by URE for individual consumers set the maximum price between PLN 0.16 (Tauron Dystrybucja) and PLN 0.23 (Energa Operator) per 1 kWh,” Wirtualna Polska said. This shows the difference is substantial.

The cost of heating in Poland will climb as well. During the Cogeneration Congress in Kazimierz Dolny the members of the heating sector complained about the Fit for 55 package, which will impose on them the duty to reduce CO2 emissions by 55 percent by 2030, whereas the Polish sector is still mostly dependant on coal. Additionally small heating companies that operate on regional markets do not have any investment potential to change the situation. The Social Climate Fund that was established as part of the Fit for 55 is to funnel EUR 72.2 billion, about PLN 320 billion, into the European heating sector. The participants of the conference in Kazimierz have estimated that Poland alone will need PLN 100 billion in this regard. The new tariffs will up the heating prices by several percent due to this policy as well.

Fit for 55 Euro per 1 CO2 ton

The price of CO2 emissions has gone over EUR 55 per ton, which impacts the heating and power prices. We are also dealing with a negative feedback loop caused by the high inflation that has already exceeded 5 percent. Growing utility bills are speeding up the inflation, which is impacting all prices. The hikes in energy and heating prices will only continue as the climate policy will step up as part of the Fit for 55 package. Only a negotiation success would allow Poland to take its time to complete the transition, and to acquire the necessary funds to finance it. According to Radio Zet, the scapegoat that will pay for this situation has been already found – it’s Michał Kurtyka, the Minister of Climate and Environment, who is to be dismissed as part of the coming reshuffling of Mateusz Morawiecki’s government. Kurtyka is to be fired for the unsuccessful – in the opinion of his critics – negotiations over the Fit for 55 package on the EU forum. However, the truth is that the prices had to go up not because of Kurtyka, but because of Poland’s dependence on coal that the country has not been able to shake off in the past decades, despite the clear course of climate policy Warsaw has undersigned.