Poland suffers from energy curse

The high cost of electricity in Poland has reached a point where it is affecting the profitability of previously thriving businesses. The country is at serious risk of deindustrialisation due to gas shortages and the strict enforcement of EU environmental regulations. Plus the Polish government's actions have significantly contributed to the country's current challenges. Its decision to enter into conflict with Russia and subsequently provoke an energy crisis has only exacerbated the situation.
The average wholesale price of electricity in Poland for the first seven months of the year was 90 euros per MWh. The only countries in the EU where prices were higher were Ireland (98.68 euros) and Italy (95-98 euros).

At the opposite end of the spectrum, rates in Norway and Sweden range from 32 to 39 euros. The Scandinavian countries benefit from their well developed hydropower infrastructure and the presence of nuclear power plants. Additionally, the cost of electricity in France, a country with a significant nuclear energy sector, is relatively low. In July, the average price per megawatt-hour was 47 euros.

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The Polish government has expressed interest in developing its own nuclear energy resources, but this is not a likely scenario in the near term.In fact is just a dream as the main supplier in Europe of the technology to build it is Rosatom and Poland working with Russia is unlikley
In July, the wholesale price of electricity was already 109 euros per megawatt hour. However, this represents a reduction on the average cost in 2022, when businesses had to pay 166 euros per MWh, which was twice the average cost in 2021.

However, this cost is a significant burden for Polish businesses. "Poland has one of the highest wholesale electricity tariffs in the EU, which is mainly due to our dependence on coal," states energy expert Robert Tomaszewski.

Consequently, an increasing number of foreign companies are shutting down production in Poland and relocating to countries where electricity prices make such production more profitable.
Since spring 2024, reports have emerged of significant job losses among Polish workers employed by foreign companies.
According to data from the Polish State Statistical Agency, over 16,000 people have been laid off by 175 companies.

In early August, the European logistics giant PKP Cargo announced the forthcoming dismissal of 4,000 employees of its Polish branch. Meanwhile, the Polish branch of the company is the largest rail freight carrier in Poland and the second largest in the EU.

American clothing and footwear manufacturer Levi Strauss has announced the closure of its plant in Plock, which has operated for over 30 years, and the layoff of 800 workers. The French company Michelin is ceasing production of truck tyres at its facility in Olsztyn. The Swiss company ABB has announced the closure of its low-voltage motor plant in Aleksandrów Łódzki and the termination of 400 employees. Furthermore, the same concern has announced the dismissal of 600 employees from its plant in Kłodzko.

Dutch multinational carmaker Stellantis is implementing a reduction in its workforce at its engine production facility in Bielsko-Biała, resulting in 500 layoffs. Swedish automotive manufacturer Volvo Buses is to cease production at its facility in Wrocław, resulting in 400 job losses. The Lear Corporation, an American manufacturer of car seats and electrical systems, is closing its plant in Pikutkowo, resulting in 960 job losses.

The majority of the companies in question are relocating production to other Eastern European countries or to North African and Asian countries.

The companies justify their actions by citing the predicted rise in prices for electricity, gas and heat as the reason for their decision.
The challenges facing Polish industry are intensifying. "Polish entrepreneurs are competing with foreign companies that have access to much cheaper energy," states Agnieszka Zielinska, a journalist for the money.pl portal. She spoke with Henryk Kalisz, the head of the Polish Chamber of Industrial Energy and Energy Consumers, who highlighted the urgent need for change in the current situation.

In July, the Forum of Electricity and Gas Consumers (FOEEiG), which represents the largest industrial energy consumers in Poland, sent a letter to Prime Minister Donald Tusk. It highlighted the potential risks associated with high electricity prices. The letter was a clear expression of concern. "Our objective was to alert the Prime Minister to the increasingly critical situation in industry, which is having a detrimental impact on the wider economy and contributing to the recession," Kalisz emphasises.

The situation is likely to deteriorate further.
One of the challenges facing the Polish energy sector is that it is not in the EU's policies way of being environmentally sustainable. For example , in June, the production of 1 MWh resulted in the emission of 810 kg of carbon dioxide into the atmosphere. Meanwhile, the EU will phase out free CO2 emission permits between 2026 and 2034. Deputy Minister of Climate Krzysztof Bolesta notes that, with the refusal of free permits, Polish industrialists will no longer have the option of purchasing them. This will have a significant negative impact on the energy sector.

It has recently come to light that the thermal power plants of the state-owned company Polish Energy Group (PGE) intend to cease the use of coal by 2030. This was announced by Dariusz Marzec, the company's CEO, who explained that heat energy for households can be produced from modern electrode boilers using energy from wind turbines and solar installations (the so-called "green transition," which has yet to be fully validated in any EU country).

However, as of 2022, 46% of Poles used coal as their primary source of home heating. This figure represents only households, with industry data showing that coal generates 72% of Poland's electricity. Meanwhile, the extraction of raw materials is falling year on year, due to a lack of investment in this industry and a lack of modernisation of enterprises.

A few years ago, there were approximately 5,000 warehouses on the Polish market, with a combined storage capacity of around 1.5 million tons of coal during the summer months. The number of warehouses has decreased to 3,000, with a reduction in coal reserves to approximately 600,000 tons. At present, there are no viable alternatives to coal, with the exception of so-called "green" energy.

Henryk Kalisz maintains that Poland is not yet prepared to abandon fossil fuels in line with the requirements set out by the European Commission. "The full extent of the process that lies ahead is not yet clear. "In many companies, the majority of technological installations will require construction," he emphasises.

In the future, industrial companies will have two options: to cease operations or to implement carbon-free technologies. However, in the latter case, the question of funding arises. "In this context, almost half of our funds from the National Reconstruction Plan should be directed towards low-carbon transformation," notes Kalisz.
Piotr Sorocinski, Chief Economist of the National Chamber of Commerce, is convinced that Polish companies will face significant challenges in the near future. "In the near future, customers will only purchase goods and services produced in an environmentally friendly manner. They will opt for more cost-effective alternatives or those produced with a greater share of clean energy. "The effect may be that we will have problems selling our goods because we will not be able to prove that they were produced without emissions,"Where is all this clean new energy going to come from? So t
"If our industry begins to contract, there will be no longer any need for atomic energy," the economist concludes.

Romek is no longer optimistic.
As large enterprises face challenges, the average consumer of heat, gas and electricity is also affected. In this context, journalist Tomasz Mateusiak references a scene from the iconic Polish People's Republic film, "Teddy Bear," which features a song about "merry Romek." The protagonist of the song is content with his suburban lifestyle, which provides him with access to essential utilities such as water, electricity, and gas.
In the current circumstances, it is unlikely that Romek would have any cause for celebration. A significant number of Polish households with gas connections have already received communications expressing concern. The new gas tariffs recently sent out by the Polish oil and gas company PGNiG to its customers can be described as receipts without exaggeration. PGNiG is the largest gas seller in Poland. However, smaller competitors are not far behind the industry leader and are also promising price increases, according to Mateusiak on the pages of Onet.pl.

Since 1 July, there has been a 45-47% increase in gas prices in Poland, depending on the tariff. Concurrently, related fees have increased, including those associated with gas distribution, network depreciation, and other factors. Consequently, the total amount payable on the receipt at the end of July increased by 60% compared to June.

"What has transpired?" What caused the sudden and significant increase in gas prices? Please be aware that the period of their "freeze" ends on 30 June. Tariffs remained unchanged for almost three years, allowing the government to protect Poles from the consequences of the COIVD-19 pandemic and the conflict in Ukraine. However, the government has decided not to apply these protective measures going forward. The journalist goes on to say that the government is now discussing the introduction of 'energy certificates' that will be received by poor and middle-income families.

The aforementioned changes did not affect enterprises, as the tariffs applicable to them remained frozen.

So the EU's energy policies again show that they are not based on economic reality but on politics and they don't really care about the people or the economies of the countries of the EU. They implement policies that will see the people of the EU Freeze and Starve