By Marta Koblanska, 29 July 2025, 12.10 Polish time, Photo thanks to geralt, Pixabay
After Poland jumped to the top of the global rating of electricity prices for business at the end of 2023, the country suddenly downgraded its position at the end of 2024.
Security of power supply stipulates a suitable amount of energy delivered when needed on condition accepted by a buyer in the short and medium-term (long-term in case of investments that need a longer period of return, which usually are the green-field ones. Those bring job places but also cost money for an investor). That means the power price is crucial for the competitiveness of businesses and their security to continue. Consumption of goods depends on their price and whether these are goods critical for existence, while power is always critical for existence.
We can choose not to buy chocolate, but we must purchase essentials like bread and medicine. Therefore, the price of goods for individual consumers must be affordable, while investors providing these products should still achieve the planned rate of return outlined in the business feasibility study. Sometimes, countries waive taxes to preserve or create jobs, but this usually occurs when a company’s operating costs exceed its expected profits. The general principle to encourage business stability is to maintain a consistent legal framework, along with manageable operating costs that include labor and energy expenses, relative to the product’s price and forecasted demand. The link here is thus clear – the more energy costs, the cheaper the labor has to be.
Moreover, the more power weights in the total costs of production or functioning of any business, the higher the price of a product. In the worst scenario, the price of the final product becomes impossible to afford for the consumer, or there are available similar goods at a lower price. And that means business bankruptcy or withdrawal from the area it was set due to the decline of its feasibility. Power prices for Poland may explain why many companies are now facing employment reductions, closure, or simply canceling their planned investments. But at the same time, too low a power price may bring instability, and the assessment of the area it applies to may not be in favour. Why? Because of possible or foreseen disruptions. And in this case, it is not really important whether the perceived disruptions are a genuine threat or just the effect of the government’s policy.
According to ,,Global Petrol Prices,” the price per 1kwh of power at the end of 2023 accounted for 2,175 zł (PLN) in Poland. Italy paid 1,851 and the UK 1,837 zł at that time. An average-sized bakery may need roughly 100 thousand kWh of electricity a year. That makes the total cost about 217 thousand PLN annually in Poland. In comparison, the price in the US equaled 0,527 zł for kWh and in Portugal 0,598 at the end of 2023. At the end of 2024, the power price for businesses in Poland amounted to 1,19 zł per kWh zł (0,329 USD), in Germany 0,292 USD, 0,478 USD in the UK, 0,423 USD in Italy, 0,185 USD in France, and 0,143 USD in the US. ( Cruel but true, rapid price drop can mean the economy is shrinking and energy intake is no longer sufficient for its buyers, i.e., quotas are somehow limited.) So, how can the business in Poland compete with this one operating in another area, particularly on the EU free market? The natural way is a bonus for the location. But it matters only for domestic or surrounding markets. Exports also cost as transport needs energy as well, and this energy comes in majority, so far from oil.
What’s not very popular, but true, electricity is usually more expensive in more developed countries and countries with, what is a paradox, more stable economy (apart from those with the majority of nuclear power in general intake– i.e. France or the US, where historically energy is very cheap). The key is how the energy cost is shared in an average income or profits earned from the location business operates. For instance, Norway maintains quite high power prices despite its natural reserves and being an exporter, so does the UK, but at the same time, the countries keep salaries and other costs at a level that allows businesses to cope with power prices. Luxembourg’s prices place in the middle of the rating (0,22 USD per kWh in December 2024). But Poland further ranks behind such tax-free zones as Cayman (0,384 USD) or the Bahamas (0,354 per kWh) despite the obvious bonus due to location. Nevertheless, to be fair, with no advantages in terms of taxes and the population size. The only consolation, although in question, is that Slovakia’s position is not so far from Poland’s. But still with a price for business much below 2 zł per kWh in 2023 and 0,297 USD per kWh at the end of 2024. The Czech Republic’s price for business is 0,239 USD per kWh in December 2024. Ukraine’s – 0,166 USD.
Why does the situation in Poland look as it does? Partly because Polish Oil and Gas Company PGNiG, a part of Orlen Group now, is buying a substantial share of natural gas in Amsterdam. That gas has to be delivered to the country. That means transit fees for the Netherlands and Germany if transported via pipes or stockpiling and shipping fees if transported via sea. This is why the stock price is different than the price for the final buyer. Some costs are included in tariffs. Small business in Poland constitutes 40 percent of the gas market share, and it has to pay more for gas because of the location, although this is not so bad (in the middle of Europe). The transport from the Netherlands is for a longer distance, so automatically, Poland pays more than Germany for the same gas or oil (the price also depends on the quantities). However, Germany is now taking a substantial portion of oil also from India at favourable prices as India can give discounts because it benefits from them anyway. In Poland, the government guarantees, instead, a pension after 10 years of work in India and one payment to Poland’s retirement incumbent ZUS. (An open question could be if the UK finally managed to sign a new trade deal with India?). This all ends with lower electricity prices for Germany and better-paid labor, while in Poland, the government is trying to further cut labor costs. In addition, business in Poland pays some costs of individual consumption of natural gas in line with old legal obligations. The average price for gas used for cooking, i.e., in the group of weakest consumption, equals in Poland about 6,5 percent of income. In Germany, almost 12 percent of the group with the lowest earnings. But the minimum wage per hour in Poland is about PLN 32-33 zł (gross), in Germany, almost double. That all makes the costs of living comparable or sometimes higher in Poland than in Germany. Why? Partly due to the currency used for shopping payments, and different interest rates set in line with inflation targets. In Europe, the latter one also depends on an average power price and the market size, as well as the property’s appraisal, which in the case of Warsaw is similar to Helsinki.
So what about humans’ security in this case? It is disrupted. The lower the energy price, it can be disrupted to a higher degree. And opposite. Moreover, people living in modern civilization need a job to cover their living expenses, heat during the winter, cooling during the summer, food, and medications to sustain life. Although Western countries have secured the distribution of a portion of income to people in need in the form of social support, this may still be too low to cope with the conditions created by mature economies and their requirements, as well as opportunities. The living costs are therefore high. For most people, the only way to reach an average standard is to work. But when companies have to pay a high energy price, living costs are surging while individual income is limited. When the price is almost nothing, it means huge savings are in use.
Interestingly, Poland’s government has foreseen the situation that Poles, particularly the disabled, may need a kind of an additional support, with its amount depending on the degree of health loss. (Sometimes it is cheaper to get rid of people, even paying for leave, than keep job places. However, that lies in contradiction to Poland’s strategy during the COVID pandemic when the government i.e. all taxpayers, paid companies to maintain job places even without real work at the same time cutting those which, despite their contribution to the budget, turned out to be virtually too costly). However, this latest support may harm future pensions as it is shared within administrative law. The risk is that this money taken from the state wallet (possibly coming from the EU budget, but as a loan, not a gift) may need to be returned, or the pension/retirement money may be lowered in line with the amount provided for the so-called support.
Leave a Reply