We have not had such electricity prices on the Polish stock exchange yet. During the year, they increased by 90 percent, and from the low at the beginning of the pandemic – more than tripled. This heralds one thing: we will face higher bills for households, but also a further increase in prices in stores. Especially that gas is also a record price on the wholesale market.
The weighted average price of the energy supply contract on the Polish Power Exchange stood at PLN 465.70 / MWh in September against PLN 383.42 / MWh in August, TGE announced on Tuesday in a press release. According to the industry portal Wysokienapiecie.pl, “electricity is almost twice as expensive (approx. PLN 244 / MWh) a year earlier and three times more expensive than in spring 2020 (approx. PLN 150 / MWh)”.
– These price increases are due to several factors – explains Bartłomiej Derski, a journalist at Wysokienapiecie.pl.
He explains that the rapid recovery of the global economy is of key importance. – In Poland or China, industrial production is already at the highest level than before the pandemic, which means a huge demand for raw materials, fuels and energy. At the same time, the production of gas and coal during the pandemic decreased. Some of the mines were closed, and some of the producers went bankrupt. Those who remained on the market today are not able to meet the orders of customers – he explains.
Moreover, he adds, the long winter has additionally “drained” the natural gas storage facilities in Europe, and to this day it has not been possible to complete them to such an extent as to ensure gas security in Europe. – This makes both coal and gas prices record high today, and their prices translate into the costs of electricity production. In the last two years, the prices of CO2 emission allowances have also increased significantly, which has also increased the costs of electricity production – he explains.
What do the increases in the wholesale market mean for companies, local governments and ordinary Kowalski? Excessive growth of bills for retail customers is limited by the policy of the Energy Regulatory Office, which approves tariffs for approx. 60 percent. from 15.5 million households. It is known, however, that requests for increases from companies can be expected, and increase in tariffs next year – as admitted by the head of the Energy Regulatory Office, Rafał Gawin – it will be two- rather than single-digit. At the same time, we do not hear about the regulations concerning compensation for the lowest earners, announced many times by the government.
Customers with rates set on the open market may be in a worse position. Communes, cities and companies may also have problems. – Local governments may expect an increase in electricity prices by more than 60 percent – said Arkadiusz Chęciński, President of Sosnowiec on Tuesday. At the briefing, he referred to the prices proposed by suppliers in the ongoing tender of the Górnośląsko-Zagłębie Metropolis purchasing group. As he said, the results “are shocking.” In 2020-21, Sosnowiec spent about PLN 26 million on electricity, while after the tender for 2022-23, this amount will increase to the range of PLN 40-50 million, most likely within PLN 44 million.
In turn, the industry – according to Bartłomiej Derski – must take into account an increase in next year’s energy purchase costs by as much as 30-50 percent. – The situation of Polish factories is improved by the fact that factories all over the world will pay much more for energy, so their competitive position will not be threatened. What’s more, currently electricity prices in Poland are even lower than in the West, which we have not dealt with for years. However, the higher costs will have to be passed on to the customers, so ultimately Kowalski will pay a lot more for the finished products, he explains.
Wholesale electricity prices in other European countries are growing faster than in Poland due to record gas prices on the futures markets. Some countries like Spain, have already enacted emergency measures to cut citizens’ bills. This is to happen at the expense of some of the profits of energy companies and due to tax cuts.
Robert Tomaszewski from Polityka Insight drew attention to the current wholesale prices in European countries.
In Poland, the vast majority of energy comes from coal, but high gas prices will also affect Polish customers. – Another hike is inevitable – Paweł Majewski, the head of state-controlled PGNiG, has just announced. It happened just after the new, higher tariff approved by the Energy Regulatory Office entered into force. Another aspect was pointed out by Jakub Olipra, economist from Credit Agricole.
“Fertilizer prices are going crazy in recent days. Why? Mostly because we have record gas prices,” he wrote on Twitter. “As a consequence, the currently observed increase in fertilizer prices will increase the prices of all basic food products: bread, meat, dairy products, oil and fats and eggs. Thus, food prices will become even more expensive next year than this year” – he added.
Is there a cure for rising electricity and gas prices?
The topic of rising gas and electricity prices is now being faced by the European Union. – In the short term, we will talk at the European Council, not only tonight (Tuesday), but in two weeks at the formal European Council (October 21-22), how to deal with storage, the strategic reserve and we will look at the overall price structure in the electricity market – the head of the European Commission Ursula von der Leyen announced on Tuesday.
According to Bartłomiej Derski, the launch of new gas pipelines – Nord Stream 2 and Baltic Pipe – may help somewhat in the short term. – The weather could also be an ally. Greater wind conditions in Europe in winter and the absence of frost could significantly reduce the demand for fuels and lower their prices, he adds.
– In the long run, investments in new generation capacities are extremely important, not only wind and solar farms, and energy storage – he emphasizes.
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