Meeting the EU’s 2030 climate targets poses a huge challenge for Central European countries, especially for coal-dependent Poland. But it is also helping the country with a population of 40 million to modernize. Thwarted by the highest electricity prices in Europe, and pressured by EU environmental regulations, Poland has committed to phasing coal out of its energy mix by 2049. According to the Polish Energy Policy 2040, besides boosting renewables and involving nuclear power in its power matrix, Poland will increase LNG imports significantly. This move will also allow for the establishment of a North-South Gas Corridor, from Croatia to Poland, which is supposed to weaken Russia’s dominance in the region’s energy market. For the eighth consecutive month, Poland’s wholesale electricity prices have been the highest in Europe according to Ember, an independent climate and energy think tank. Electric power is now at EUR 46/MWh, which is almost 50% higher than the average for the rest of the EU-27 (EUR 31/MWh).
Such extremely high utility prices have a severe impact on the industrial competitiveness of Poland, which has been evident from companies reducing activities or even shutting down in Poland in the past few months. ArcelorMittal, the largest steel producer in Poland announced last October that it would permanently close a blast furnace and steel plant in Krakow due to reduced demand caused by the COVID-19 pandemic, but also because of “high energy costs, rising carbon prices and a lack of emergency trade measures.” By “emergency trade measures” the company may have been referring to state support to preserve the competitiveness of Poland’s manufacturing industry. Meanwhile, taxes on household and non-household electricity are already extremely low in Poland. Polish power production relies heavily on hard coal and lignite: they account for about 70% of the electricity produced in Poland, followed by natural gas and oil, accounting for 10% and just under 3% according to 2020 data. In fact, Poland is the second-largest coal-mining country in Europe, after Germany, and the 9th-largest coal producer in the world. Polish coal mining dates back to the 18th century and is still associated with work ethic and independence from Russian energy imports, especially in rural areas. However, dependency on coal has become as painful as it can be for Russian gas, as natural gas has been cheaper than coal since March 2019. Renewable energy sources have a share of some 17%, including wind, biomass and hydropower.