Coal is not making Poland any safer. New ranking reveals the problem
The Jagiellonian Institute has created an Energy Security Index, which includes the countries of the European Union and the OECD, China and Ukraine. Russia was not taken into consideration, as it provides data of questionable quality.
The index examines the demand for energy carriers during peacetime and the participation of domestic sources in meeting it (structural pillar), as well as the potential of a given state to react to crises, like the one initiated in 2021 (resilience pillar). It also researches the vulnerability of citizens of a given country to changes in energy carriers prices (consumer pillar) by measuring how much of the household budget they devour.
„Individual pillars in the case of Poland reached a score below 50, which means a relatively low level of energy security compared to the leaders of the ranking and Western European countries such as France, Great Britain or Germany,” the authors of the report from the Jagiellonian Institute wrote.
Hard coal accounts for 40 percent of energy consumption in Poland. This makes Poland vulnerable to global and local crises, according to the authors of the Energy Security Index.
The ranking and other data collected by the Jagiellonian Institute are available at research.jagiellonski.pl
Wojciech Jakóbik
Russians are fear-mongering about LNG supplies bypassing Europe, while Poles may have the cheapest gas on the continent
Gas in Europe is as cheap as it was at the beginning of the energy crisis. China can suck LNG out of Europe, which Gazprom would be happy about, provided Beijing doesn’t have problems itself. The price in the US has fallen so much that Poles may have the cheapest LNG contract with the US on the continent.
The fall in gas prices in Europe makes the more expensive Asian market more attractive, but the redirection of LNG supplies to the East is not certain, because it depends on demand in China, which is not growing due to the energy crisis.
Russia’s Kommersant daily describes how the fall in gas prices in Europe increases the attractiveness of the market in Asia. Prices on the TTF Stock Exchange fell to about 25 euros per megawatt hour. This is a level not seen since September 2021, when the energy crisis began. Kommersant converts this value into thermal units, or USD 7.7 per mBTU, which is 17 percent cheaper than the price of the Asian Japan Korea Marker index (JKM).
Spot supplies of liquefied natural gas are usually diverted from Europe to Asia when the price difference in favor of the latter region exceeds USD 2 per mBTU, because then it covers higher transportation costs. „The escape of spot LNG may limit Gazprom’s losses,” writes Kommersant, without referring to specific figures, unpleasant for this company from Russia.
Gazprom lost half of its net profit in 2022, which fell from 2,093 trillion rubles in 2021 to 1,226 trillion rubles in 2022. Gazprom sent 185.1 bcm of natural gas to Europe in 2021. A year later, it was only 100.9 billion cubic meters.. Reuters estimates suggest that exports outside the former Soviet Union, not including China, could fall to 50-65 billion cubic meters.
However, Kommersant itself admits that the escape of gas from Europe to Asia is not certain as demand for gas in both regions is sluggish as they were hit by record energy crisis prices. It describes the lack of growth in LNG trading on the spot market in Asia. Meanwhile, the decline in the price of this fuel in the US increases the profitability of exports. The price of USD 2.5 per mBTU at Henry Hub allows most traders to buy gas at a price of USD 3.5-4 per mBTU and send it out into the world.
Interestingly, the 25-year PGNiG-Cheniere contract from 2018, valid from 2019, for the volume of 1.45 million tons of LNG (1.95 billion cubic meters after regasification) is annually indexed to the Henry Hub, which means that its price may be one of the cheapest on the continent.
Reuters / Kommersant / Wojciech Jakóbik
PKEE: energy transformation is the only recipe for lower energy prices in Poland
According to the Polish Electricity Association (PKEE), the transformation of the Polish energy sector is the only way to permanently stabilize energy prices in Poland. The experts point out that it is necessary to consistently build capacity in renewable sources and in nuclear energy.
„Over the past year, the cost of energy production and its prices on the futures market have increased by several hundred percent. The provisions of the government’s solidarity shield protected final recipients from significant increases. The shield froze net energy prices for households and introduced a maximum price limit for small and medium-sized businesses and vulnerable consumers,” the Association explains.
PKEE notes that the difference between the cost of generating energy and its sale is covered by the energy companies themselves. According to PGE estimates, for this one company alone this year it will be an expenditure of about PLN 10 billion. These funds will go to the Price Difference Payment Fund. It is worth noting that even without these additional burdens, PGE Group is the largest taxpayer among the companies listed on the WSE – last year the company added to the budget PLN 26.5 billion.
The Association’s press release includes statements by Wojciech Dąbrowski, president of PGE, professor Wojciech Suwała from the Department of Sustainable Energy Development, Faculty of Energy and Fuels at the Kraków University of Technology, and Włodzimierz Cupryszak, expert on sustainable energy regulations in the Polish Electricity Association.
„PGE will contribute PLN 10 billion this year. so that Poles and Polish companies have access to energy at an acceptable price. However, we are aware that this is an ad hoc action. In the long term, it is necessary to move away from fossil fuels and consistently switch to zero – and low-carbon sources that are not susceptible to fluctuations in raw material prices and emission costs. However, the energy transition is an expensive process – in total, we will spend PLN 75 billion for this purpose by 2030. This is a necessary expenditure to permanently stop the price increase,” said Wojciech Dąbrowski, president of PGE Polska Grupa Energetyczna and chairman of the Governing Board of the Polish Electricity Association.
EY analysts in the report „Polish Energy Transition Path,” prepared for PKEE, estimated the total costs of this process at PLN 600 billion. „Energy companies, which primarily bear the cost of the investments, are able to cover only a fraction of this amount,” the report claims.
„Depending on the criteria adopted, the costs of the energy transition can be estimated differently. However, each time we are talking about billions of zlotys only in the next few years. These are unprecedented amounts – but far less than the potential costs that would be incurred in slowing or halting the energy transition. Energy companies strive to keep energy prices low, but at the same time they do not withhold very expensive investments related to the energy transition, and this is the only way to protect citizens from future energy price increases. It is sometimes forgotten that energy prices affect not only household budgets, but most of all companies, including industry. Maintaining low and stable energy prices is to ensure the competitiveness of the economy,” said Professor Wojciech Suwała from the Department of Sustainable Energy Development at the Faculty of Energy and Fuels at the Kraków University of Technology.
PKEE notes that one of the key factors affecting the cost of energy generation is the price of EU ETS carbon allowances. These have increased fivefold in three years and now represent a key cost for energy produced from fossil fuels.
„According to the assumptions, funds from the EU ETS go to national budgets for the energy transition. The problem is that the demand in Poland, despite the decrease in emissions, is greater than the pool allocated to our country. In fact, Polish polluters and, consequently, energy consumers indirectly finance the energy transition in other countries. It is the Polish energy companies that are most burdened by the costs of shielding programs that maintain prices for customers at an acceptable level, the costs of investment in the energy transition and the costs of the EU ETS. Each time, these amounts are calculated in billions of zlotys,” calculates Włodzimierz Cupryszak, an expert on regulations in the Polish Electricity Association.
According to PKEE, the process of moving away from fossil fuels is all the more challenging because it must be implemented in parallel with increasing generation capacity in the National Electricity System. According to the assumptions of the update to the Energy Policy of Poland by 2040, electricity production should increase by more than 36 percent, and installed capacity should more than double – to approx. 130 GW to meet the growing demand for power.
Jędrzej Stachura