Poland has the cheapest energy in Europe - there are two main reasons

The price of a megawatt hour for the next day, i.e. on Thursday, on the Polish power exchange (TGE), was 145.81 EUR on Wednesday, the Nord Pool service reported. The previous day it had been set at 166.79 EUR, the lowest price in Europe.

Only Finland with 181.82 EUR and Estonia with 206.58 EUR were similar to ours. In the most expensive Switzerland, you had to pay 386 euros, and the day before as much as 540 euros.

On Wednesday, we slipped one place in Europe behind Finland, where the price suddenly dropped to 51.01 EUR per MWh. Price drops are also visible in other countries of the continent, and this is the result of the decline in gas prices, which on Wednesday fell by as much as 25 percent.

in Dutch April contracts on the ICE exchange. Stock exchanges reacted to US plans to increase shale gas production. You have to pay 161 euros for a megawatt hour of gas on Wednesday. Let me just remind you that the price hit EUR 295 on Monday .

Fall in prices of CO2 rights

But why such low energy prices in Poland compared to the rest of Europe, which is more advanced when it comes to the development of renewable or nuclear energy?

The first explanation is a drastic fall in the prices of CO2 emission allowances. It is currently the main component of the electricity production price in Poland.

The price dropped from over 98 EUR on February 8 to 62 EUR at the Wednesday auction on the eex exchange , which immediately lowered the price of Polish electricity.

Polish power exchange (TGE) calculations at a price of 53 EUR last year. indicated that CO2 allowances are 60 percent. of the cost of generating energy, Pekao analysts pointed out that with 85 EUR at the beginning of January it would be 72 percent.

Based on the proportions, it can be estimated that currently at 62 EUR per ton of CO2 it could be slightly over 65%. the cost of energy production.

But this is not the only factor influencing the relatively low electricity prices in Poland. The latter are the prices at which power plants buy coal from mines.

Not only has gas prices gone mad lately, but so have coal prices. While Russia has recently delivered 27 percent to Europe. imported crude oil, 41 percent. imported gas is coal – as much as 47 percent.

Cheap Polish coal

And steam coal does not get cheaper than gas. In the April contracts on the ICE exchange, you had to pay as much as 455 USD on Wednesday. per ton. Polish power plants certainly pay much less.

The latest available data on how much power plants paid for coal is from January. Back then, they gave an average of PLN 290.64 for one ton of steam coal – reports the Katowice branch of the Industrial Development Agency in the PSCMI index. It was 15 percent. more than in December, i.e. PLN 37 more per ton. Year on year, the price changed by only 13.5 percent.

At the same time, i.e. at the end of January, the Rotterdam contracts for coal on the ICE exchange paid almost 153 USD. per ton, i.e. 623 PLN. If Polish power plants did not buy coal under long-term contracts in Polish mines, they would have to pay twice as much .

Practice from previous years shows that the price from January is maintained for the next few months, so it can be suspected that Polish power plants are still paying over 290 PLN.

Meanwhile, the current market price of coal on ICE is PLN 2,200 in April deliveries and slightly over 2100 PLN in March deliveries. This would mean that Polish power plants can now pay cheaper by up to 87 percent. from the market price.

Of course, the stick has two ends, and what the mines are losing out on now may be profitable in the future. Long-term contracts with falling coal prices can be their salvation and keep mines afloat in harder times.

One way or another, we now owe relatively low electricity prices to the way in which prices for coal from Polish mining plants are set.

Source: BusinessInsider


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