Poland to extend energy price freeze next year following Trump’s election victory

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Poland will extend its freeze on electricity prices through 2025 to protect consumers amid economic pressures. Prime Minister Donald Tusk has cited the need to stay competitive, as US President-elect Donald Trump’s pro-fossil fuel stance could lower American energy costs.

A draft law, published on the government’s website, outlines amendments to existing legislation that aimed to support energy consumers during 2023 and 2024.

They include an extension of the price cap into 2025, effectively freezing the cost of electricity at the current rate of 500 zloty (€114.92) per megawatt-hour (MWh), below the market tariff of 623 zlotys, reports Business Insider Polska.

The cabinet’s economic committee has endorsed the measure, which will cost an estimated 6 billion zloty (€1.38 billion) in additional compensation required for energy providers to offset price caps, on top of 2 billion zloty already earmarked for consumer protection.

Explaining the move at a press conference, Tusk said that “the change [of president] in the United States may also mean, at least initially, that the competitiveness of the US economy will still increase, mainly due to energy prices”.

“To maintain stable, competitive energy prices, we need a sustainable system that allows Poland to compete globally, particularly with the United States,” he added.

The election of Trump is anticipated to lead to increased fossil fuel production in the US, which could lower American energy prices and further challenge European economies that are transitioning to greener energy sources.

Tusk noted that Europe already has, on average, 2.5 times more expensive energy than the US. He added that Poland’s competitiveness in particular will be threatened unless action is taken.

Poland has among the highest electricity prices in the EU thanks in large part to its reliance on coal and the resultant high costs under the EU’s Emissions Trading System (ETS). In the second quarter of this year, higher electricity prices were recorded only in Italy and Ireland.

Tusk said that at last week’s summit of European leaders in Budapest, “everybody without exception said, how can we even talk about the competitiveness of the European, including Polish, economy if we are going to have the most expensive energy in the world?”

“We will not allow Poland to suffer economically due to high energy prices,” Tusk said. He added that he had instructed finance minister Andrzej Domański to present a comprehensive proposal for maintaining the freeze on electricity prices for consumers and exploring the possibility of freezing prices for industrial producers as well.

Tusk also criticised the EU’s carbon reduction strategy as too strict, thereby undermining competitiveness. He said that Europe is currently looking for an answer to the question of what to do about the “exaggerated environmental criteria in the European Union”.

“I thought for a long time whether to say it outright, but I will say it outright. Some of the assumptions about CO2 emissions are disarming the European economy, even on such obvious issues as hydrogen energy,” he added.

“We are constrained to consider only green hydrogen, i.e. completely zero-emission hydrogen, and do not consider…hydrogen that is less perfectly clean, but still cleaner than other energy sources,” the prime minister said.

Tusk’s remarks come as Poland explores avenues to mitigate the impact of energy costs while positioning itself within the EU’s energy transition framework.

Poland has in recent years accelerated the expansion of its renewable energy capacity, which accounted for 26% of the energy mix last year. However, two thirds of power was still generated from coal.

In July, the Tusk government, which replaced PiS in office at the end of 2023, partially unfroze energy prices by increasing the price cap and removing it entirely for distribution charges. That helped stoke an acceleration in inflation, which by August reached the third highest level in the EU.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: Janusz Madejski/Flickr (under CC BY-NC-ND 2.0)