Poland’s energy price protection measures among most effective in Europe, report finds

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European countries have collectively allocated 758 billion euros to protect energy consumers from the sudden increase in energy prices, spurred in part by Russia’s assault on Ukraine. However, the effectiveness of these unprecedented expenditures has varied – in some countries, despite billions allocated for this purpose, energy prices still rose by several tens of percent. In Poland, expenditures on protective mechanisms reached 12.4 billion euros and brought tangible benefits, as the increase in energy prices was one of the lowest in Europe – argue experts from ARE (Association for Renewable Energy). Currently, they are still significantly below the EU average.

“In response to the energy crisis, Poland has implemented a full range of protective measures, putting itself in the European mainstream. We have used most of the resources recommended by the European Union, apart from the most drastic ones, such as intervention in wholesale market prices or direct support for state-owned enterprises,” says Maciej Maciejowski from the Polish Electric Energy Committee. “Both in absolute numbers and in relation to GDP, we have spent a small amount of money, maintaining energy prices at one of the lowest levels in Europe.”

A new report “Energy War 2021-2023. Summary of Protective Measures Protecting Energy Consumers in Poland and Europe”, prepared by ARE at the request of the Polish Committee for Electric Energy, shows that from September 2021 to January 2023, European countries allocated a total of 758 billion euros to protect energy consumers from the effects of the energy crisis. 27 out of 29 studied countries applied VAT or energy tax reductions and money transfers for vulnerable consumers. Most also decided to regulate retail electricity prices, mainly lowering costs for households, as well as supporting business consumers and introducing a tax on extraordinary profits for energy companies. Only a few countries decided to regulate wholesale energy prices and support state-owned enterprises.

“There are at least three causes that triggered the energy crisis in the European Union: Western Europe’s dependency on Russian energy resources, Russia’s aggression against Ukraine, and consequently the suspension of raw materials supplies to the EU, which resulted in a huge price increase, especially in natural gas. This in turn led to a steep increase in electricity prices,” says Andrzej Bondyra, Vice President of the Energy Market Agency.

Poland allocated the equivalent of 12.4 billion euros for protective measures. Expenditures on the protection of individual consumers amounted to about 2% of GDP and were significantly lower than in other European countries, such as Germany (7.5% of GDP), France (3.8-4% of GDP), or the United Kingdom (4% of GDP). Despite relatively lower expenditures, the rise in electricity prices in the Polish market was halted more effectively than in other European countries.

“We achieved a very high efficiency of these costs, for example compared to neighboring Germany, which spent a lot of money on stabilizing its market, not achieving the same effect,” says Maciej Maciejowski.

Highlights of the ARE report reveal that during the same period, France recorded a nearly 20% increase in electricity prices for households, Germany experienced a 40% surge, and the UK saw a whopping 90% increase.
“In Poland, we recorded an increase of 12.9%, which was definitely one of the lowest rates in the entire European Union,” says Andrzej Bondyra.
In the second half of 2022, Polish households paid an average of 0.1092 euros net for one kilowatt-hour, while the average for the entire European Union was almost three times higher at 0.2716 euros. Prices were lower than in Poland only in some Balkan countries – Serbia, Albania, Bosnia and Herzegovina, and Hungary. The most – over 40 euro cents for 1 kWh – was paid by households in the Czech Republic and Greece.

Also, prices for small and medium enterprises (with consumption of 2-20 GWh per year) were among the lowest in Europe during this time. In Poland, they paid on average 0.1084 euros net for 1 kWh. Only Iceland, Montenegro, and Bosnia and Herzegovina had lower prices. In contrast, companies in Italy, Bulgaria, and Greece had to pay over 30 euro cents for 1 kWh.

“Currently, electricity prices in Poland remain one of the lowest in Europe,” says the Vice President of the Energy Market Agency. “The price of energy for households is almost twice as low as the average in the European Union. Small and medium-sized companies also pay a price substantially lower than the EU average.”

As estimated by ARE analysts, at the end of June, the average gross price (including VAT) for end consumers in Poland was equivalent to 0.16 euros per 1 kWh. However, these calculations assumed exceeding the limit for households provided in the Solidarity Shield, which entitles to preferential settlements. Those households that stay within the limits, pay 0.11 euros gross for 1 kWh for the whole of 2023.

“Thanks to the Solidarity Shield, we currently have frozen prices at around 40% of energy production costs, and households in Poland only pay part of these costs,” says Maciej Maciejowski.

Over the past three months, the government has decided to extend the range of support provided in the Solidarity Shield. After the amendment in August, households currently have a higher energy consumption limit at a preferential price by 1000 kWh, and they additionally gained the possibility to receive a one-off discount of PLN 125. On the other hand, small and medium-sized enterprises, vulnerable consumers, and local governments have been paying a new, lower price for electricity since October 1st.

“These all tools mean that the vast majority of households in Poland simply use cheaper electricity,” says the expert from the Polish Electric Energy Committee. “Small and medium-sized enterprises as well as sensitive entities – such as hospitals, social assistance homes and local governments – also benefit from the Solidarity Shield, thanks to which they can effectively carry out their tasks.”

The currently functioning solutions reducing energy prices for households, small and medium-sized entrepreneurs, sensitive recipients, public institutions, and local governments are valid until the end of the year. Detailed solutions for 2024 should be known in the fourth quarter.