Polish energy suppliers will have to cut electricity prices for households by 12% retrospectively from January 2023, the government reported yesterday. A series of handouts have been announced this year ahead of elections planned in October, including raising its flagship child subsidy program from 500 zloty to 800 zloty in 2024. Rhetoric is on fire.
On the other hand, Poland’s biggest opposition grouping (PO) plans to kick-start the country’s transition from coal if it wins. The heavy carbon footprint could in the longer run hamper its potential to attract greenfield projects or to export power-guzzling products such as steel.
The opposition plan includes unbundling of the state-controlled power utilities to ease access to the grid for renewable capacity. Rules to build new onshore wind farms would be liberalized to boost capacity and spur the replacement of old turbines on existing farms with bigger, more efficient ones. PO would not proceed with the current government’s plan to spin off state-owned utilities’ coal-fired power plants and bundle them into a new state-owned company.
Instead, coal plants with the shortest lifespan and lowest profitability should become a reserve pool for the power grid. However, to enact its energy policy PO would have to overcome opposition from powerful trade unions and possible presidential vetoes from Andrzej Duda.
Polish coal mines employ nearly 76,000 people and, just this week, top state-controlled utility PGE shelved a plan for a quicker coal exit that had angered unions. PiS has introduced subsidies for household consumers installing heat pumps and solar panels, but has blocked the development of onshore wind for most of its eight years in power and promised unions to keep mining coal until 2049.
Some investors, including Mercedes, keep choosing Poland and manage to secure carbon-free electricity via long-term power purchase agreements with producers. With ESG (environmental, social, and corporate governance) requirements in focus, the competition for foreign industrial investments is not just about the electricity price but increasingly centers around the availability of renewable power used in production facilities.
In this scenario, Polish utility PGE reported at the beginning of the month that it was reversing a decision to bring forward its carbon-neutrality target to 2040 from 2050, changing course less than a week after the announcement of a strategy that caused political fallout.
Additionally, Warsaw plans to spin off state-owned utilities’ coal-fired power plants into a new state-owned company, NABE, making it easier to focus on green energy as many banks steer clear of financing coal-dependent companies. In August, the utility signed a term sheet with the Polish treasury on a coal asset spin-off, after the government offered 849 million zlotys for PGE’s mining and generation unit.
More clarity will follow after October’s elections.