Preview
The crisis is forcing a shift of the transition paradigm. For the past 20 years, decarbonisation has been a key factor shaping the transformation of the European and global energy order. Moving away from fossil fuels has become a trend that went global after the 2015 Paris climate agreement. The Russian invasion of Ukraine shattered this order and highlighted how much European countries had based their development on Russian resources. This will be the topic of discussion during the Risks and Trends conference panel entitled "How to change climate and energy policy in the face of war". The war has caused a rise in the price of fuels and forced Europe to focus on ensuring energy security. The consequence of this change will be an indefinite halt to the liberalisation processes of the energy markets and a significant appreciation of state interventionism, whose main objective will be to stabilise energy price increases, and protect vulnerable consumers and jobs.
Europe is betting on interventionism. The rise in demand for energy carriers in winter will increase tolerance of increasingly radical state measures. A succession of European governments is already taking extraordinary steps. The UK has frozen energy prices for households, France wants to buy out EDF, the largest nuclear power producer facing a wave of reactor malfunctions, and Germany is preparing to take over Uniper, the country's most important gas supplier. Berlin has also prepared a EUR 200 billion package to freeze gas and electricity prices. The idea has already caused a lot of controversy in other EU countries. This is because its size could favour German business, and this would lead to a distortion of competition and the possible disintegration of the European energy market.
The dismantling of the energy market will continue. In the case of Poland, the energy crisis may strengthen the position of state capital in strategic sectors of the economy, especially in the energy sector. State-owned companies already control 88 per cent of the gas sales market and 77 per cent of electricity generation. The dismantling of the free energy market may be initiated by the abolition of the exchange obligation with the Polish Power Exchange. The obligation forced generators - mainly state-owned power plants - to sell the energy they produce through the exchange. Without it, electricity trading will be more likely to take place within state-owned groups, which will reduce market transparency and push private operators out of the market. The price of energy will be easier to control, and may consequently fall, but at the same time, it will cease to be a reliable indicator for the economy.
The energy sector may face a decline in decarbonisation. In the absence of sufficient gas supplies, domestic coal-fired power plants will have to operate much longer to avoid the risk of a blackout. Old coal-fired units (the average age of Polish power plants is 47 years) will have to be overhauled to extend their operating life. As a result, the state-owned companies - PGE, Tauron, and Enea - may not be able to complete their plans to transfer coal assets to a new entity, the National Energy Security Agency (NABE), by the end of 2022. Meanwhile, getting rid of the coal burden was supposed to accelerate investment in renewables.
There is a growing risk of defragmentation of the EU energy market. Overly radical action on the part of governments, without proper EU-wide coordination, could fragment the EU energy market. The temptation to micro-manage energy could also lead to an explosion of public debt, which has already increased during the pandemic. On the other hand, high electricity and gas prices force reduced consumption and energy efficiency measures. The state's expansion in the sector, in turn, can facilitate and accelerate projects that would be impossible under normal market and regulatory conditions. The loosening of EU state aid rules may, for instance, encourage states to expand capital-intensive energy infrastructure - transmission networks or new nuclear power plants.
the Panelists
The panel "How to change climate and energy policy in the face of war" will feature Georg Zachmann, senior fellow at Brussels-based think tank Bruegel, Jadwiga Emilewicz, PiS MP and former MinDev, Zuzanna Rudzińska-Bluszcz, President of ClientEarth Prawnicy dla Ziemi, and Marina Dubakina, CEO and CSO at IKEA Retail in Poland.