OPINIONS

Date: 4 May 2022

Energy policy in Poland and Czechia undergoing stress test: Opportunities for cooperation and joint initiatives

Poland and Czechia are in many ways structurally very similar due to the parallel economic and political developments in these two countries since the late 1940s. In terms of energy policy, both have traditionally relied heavily on domestic coal as a key primary resource for electricity generation and industry.

Notwithstanding the substantial economic transformation that witnessed a transition away from heavy industry toward manufacturing and services that has been underway since the early 1990s, coal still represents the most important energy source, accounting for 40 % of primary energy consumption in Poland and 30 % in Czechia. This fuel’s share is well above the EU average for the share, which is 11.5% according to Eurostat data.

On the one hand, reliance on coal makes both economies less dependent on imported oil and natural gas, as the consumption of these fuels in Poland and Czechia is below the EU average. Coal thus contributes to energy security in both countries, making them less vulnerable to external shocks. On the other hand, the Polish and Czech coal industries are hampering efforts at achieving the common European goal of becoming climate neutral by 2050. Reducing dependence on coal will require a massive transformation of the energy system, including building electricity generation capacities that rely on renewables and other low-carbon solutions, modernizing the electricity grid, developing energy storage facilities, and introducing large-scale retrofitting programmes for both households and businesses.

For both countries, the need to transform their energy sector represents an enormous challenge. Now, after Russia’s unleashing of aggression against Ukraine, both countries, as well as other Central and Eastern European countries, are faced with additional pressure on our energy policy with new risks to the security of energy supplies. Russia has already stopped delivering natural gas to Poland and Bulgaria.

On the other hand, the EU is working on speeding up the process of reducing its dependence on Russian fossil fuels to stop European cash from bankrolling Russia’s aggression against Ukraine. The REPowerEU package is expected in mid-May and should contribute to reducing overall EU´s dependence on Russian gas by two-thirds until the end of this year by combining several solutions, including diversifying supplies, switching to alternative technologies, and promoting energy savings.

In this context, energy cooperation between Poland and Czechia is becoming more than desirable. In fact, it comes as a surprise that the two neighboring countries have not developed stronger energy ties over the past twenty years. There are not many remarkable energy projects between Poland and Czechia, with some honorable exceptions. One would certainly be the acquisition of the Czech company Unipetrol by the Polish group Orlen. Another is the Stork I gas pipeline, which has been in operation since 2011, but with its capacity of some 0.5 billion cubic meters it does not represent a significant interconnection. Now, with both pressure to decarbonize and new energy security risks caused by the Russian war against Ukraine, is the right time for Poland and Czechia to strengthen cooperation in the field of energy.

Unsurprisingly, a debate has started about cooperation on diversifying natural gas supplies to Central Europe. In this area, Poland has advanced much faster than Czechia, as it has developed LNG options and will soon be finishing the Baltic pipeline to deliver Norwegian gas to Poland. Prague and Warsaw can consider joint investments in further developing LNG regasification capacities and consequent North-South interconnections. The Stork II project could be revived and be recategorized as an EU Project of Common Interest.

Nonetheless, cooperation could go far beyond natural gas diversification. Nuclear energy, for example, plays a vastly different role in the two countries’ energy mixes. It represents 20 % of Czech primary consumption. In contrast, Poland lacks any nuclear power facilities but has ambitions to develop its own nuclear energy sector more or less from scratch. Indeed, there are certainly synergies to be found as the experiences of the Czech authorities and private sector can give impetus for new areas of cooperation, such as on the Dukovany II project, which is in the pipeline on the Czech side.

Finally, we should not write off cooperation in new dynamically developing segments, whose neglect could be detrimental to both Poland and Czechia. There is huge potential for cooperation on energy efficiency and savings, especially in innovations. Also, in areas such as hydrogen, we should consider the potential for building vibrant new segments of our economies; here, German and French companies already have a head start. Smart grids and connected ICT solutions comprise another promising sector. There are many opportunities and much-untapped potential.

The project is financed in cooperation with the Ministry of Foreign Affairs of the Republic of Poland under the title “Polish-Czech Forum”.

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