January 2023

Making Sense of the Energy Crisis

Penteris Senior Partner Andrzej Tokaj took time out to reflect on the so-called energy crisis that began in 2022.

Driving the Crisis

The main driver behind the crisis which seems to be hitting energy-intensive companies the hardest but also greatly impacting other businesses is the rising price of commodities. Logically, this is having a knock-effect on both food and energy prices which, in turn, is ramping up the operating costs of companies.

Of course, those enterprises, companies, and corporations that use the most energy as part of their operations have been affected the greatest. This includes businesses within the paper, fertilizer, and nitrogen compounds industries as well as those companies producing cast iron and iron alloys.

In the past, Poland benefitted from rather low-priced energy supplies and was rather reluctant to take a greater effort or make investment commitments which might lead to the improvement of efficiency in energy production and consumption.

Cutting the Costs

Now, due to the steep prices of energy, many production facilities have been forced to temporarily shut down. This includes Grupa Azoty, Poland’s chemical giant, which had to briefly suspend production in August 2022. However, their production of melamine, a compound used in varnishes, paints, and adhesives within the automotive and textile industries, has yet to resume.

It is not only the large industrial powerhouses that are having to deal with these problems. The energy crisis has also affected sectors that are not normally considered energy-intensive. This includes hotels and restaurants, the entertainment and services sector. They have all been hit by rising energy costs which have only added to the struggles these smaller entities have had to deal with during and after the pandemic.

Protecting the Future

In order to deal with this situation, Poland’s government has pushed through a handful of regulations to support citizens, vulnerable parties, and energy companies through the so-called Energy Shield, which is a system of compensation and supplements which in the final analysis equates to lower energy prices.

This initiative, together with Poland’s push for nuclear energy highlighted by the news that US-based Westinghouse will be supporting Poland’s nuclear programme, and the greater sense of urgency across the European continent for energy security mean that this crisis has set the scene for a more measured and practical approach to energy security in Poland and the EU.