As announced in the previous article, today I would like to focus on the fuels used to heat our homes and apartments. I mean specifically gas and coal heating in Poland. It’s is not difficult to guess with the current situation, the lack of the right number of raw materials is reflected as usual by price hikes which, among other things, rising inflation. But will this state of affairs last forever? What does it look like now and what are the prospects of Poland securing heating sources? Without further ado, let’s get down to details.
- Coal prices are going crazy
- Increased gas prices in 2022
- Forecast of gas price drops – EU storage full?
- PGNiG discovers new gas deposits
- Gas grant / subsidy 2023 – what are the conditions?
- Tauron terminates gas contracts
Coal prices are going crazy
For the last year, coal has increased by up to 400%, from PLN 800-1000 per ton to PLN 3000-4000 if not more. Already in May, the prices of coal jumped to an average of PLN 3,000 per ton. In addition, the availability of heating coal is currently very limited. And the average house needs from 3 to 5 tons of coal for the winter. It should be known that the coal for heating houses, as I have already mentioned about it here (click), is used by about 60% of the population living in Poland. The war in Ukraine and the embargo on Russian raw materials has caused a record increase in coal prices. There are growing concerns that there will be no coal for this winter. This is the opinion of, for example, the chairman of Polska Grupa Górnicza (PGG). And this does not bode well.
The online store for individual customers of Polska Grupa Górnicza (PGG) – the largest Polish coal producer. They offer various types of coal. Prices should be attractive compared to the local free market. Although recently PGG has recorded two increases in coal prices in a fairly short time. Each by approx 20%. It is also worth adding that the price of a coal is one thing. You still have to buy it and pay for its transport. If any of you have tried to buy coal on PGG, you are well aware of how unreliable this system is.
Okay, but why such increases?
Analysts of PKO BP bank believe that prices at points of sale are rising mainly due to expensive imported raw material, transport costs and limited access. But they admit that “it cannot be ruled out that the coal allowances in the amount of 3,000 zł may be an incentive to increase the margin in coal stores”. Yes. Every family who declared using coal as a main heating fuel, was eligible to get a one-time allowance in the form of 3,000 zł. And actually no one checked if this money was used for buying coal as it should be. Once again, the law of supply and demand, used by fraudsters and greedy sellers, teaches us the basics of economics with this harsh example.
Anyway, we have similar situation as it was a few weeks ago with sugar. It was “allegedly” unavailable in stores, and “being held” in warehouses. When I think about situations in which sellers increase the margin on basic necessities by several hundred percent, my blood pressure rises. But oh well… that’s how the market works. It is important that we are conscious consumers. So, what is the situation on the market with gas prices?
Increase in gas prices – heating in Poland
The situation with the availability of gas on the European market is quite complicated. Russia, which is slowly turning off the tap for Europe, originally supplemented as much as 42% of European demand for this raw material. Poland was cut off from Russian gas on March 31, 2022. Just after our first actions against the Russian invasion of Ukraine. The question is then raised. “Are we running out of gas this winter?” Poland and Europe seem to have the proper amount of resources for this year. The annual demand for Polish gas is approximately 20 – 21 billion cubic meters. The main sources of this fuel for Poland at the moment are from the Baltic Pipe, contracts with Slovakia or the Czech Republic and the gas port in Świnoujście, which provides gas transported by sea.
The Minister of Climate and Environment, Anna Moskwa, said that Polish warehouses are about 90% full, and that we keep adding gas into them. In the minister’s opinion, there are no concerns about gas shortages in our homes. Below are the statistics from the beginning of December 2022.
EU gas storage
I couldn’t dig into the actual gas demand vs the actual reserves expressed in cubic meters. I only see the percentage of full tanks. Therefore, I cannot answer if these reserves are really enough to manage through the winter if all other ways would be closed. On the other hand, the fact is that the price of TTF gas on the market is actually falling. We must remember that the price increases for gas are not dictated only by the war in Ukraine. The price has been soaring regularly since the beginning of 2021 and there is no indication that we can count on a return to pre-2021 prices in the near future. But I have already mentioned this in the article to which I provided a link above.
It is also worth mentioning that Poland is building independence in the supply of gas. PGNiG has discovered two new gas deposits, which will bring 20 million m3 gas per year. As it is not difficult to calculate, it is only about 0.1% of what is the annual demand of Poland. However, this is a more long-term plan. In 2021, Poland extracted 5.2 billion m3 of a gas. And this is already about 25% of the total demand. As they say: ” a penny saved is a penny earned “. Therefore, each new extraction point is a step in the right direction for us. This does not change the fact that prices are still high and even if we do not use gas heating ourselves, it still affects our wallets in the form of increased prices in companies. What does the government say for it?
Gas grant 2023 – heating in Poland
On 1 December 2022, the Parliament adopted a “frozen gas price” in 2023 without the income criterion. Gas prices will be frozen to the level of prices from 2022 or close. In addition, the poorest will receive a gas grant. However, the bill in the Parliament does not provide a gas grant for everyone. The condition to be met will be an income threshold. Therefore, the gas supplement will be given to households with the lowest incomes, i.e. with a monthly income per person:
- PLN 2,100 in the case of a single-person household,
- PLN 1,500 in the case of a multi-person household.
Let me remind you that this year, the same thresholds were used to cover this allowance in the amount of PLN 400 to 1150, which should be used to cover higher gas bills. Is that a good thing? Hmm… In my subjective opinion, if this money goes to the right target group that really needs such help, then it seems appropriate to me. However, as usual – I am afraid of the abuse. And thus printing more money which leads to an increase in inflation. In addition, these actions from the government create financial turmoil in the market among current suppliers of gas fuel. And that’s where I wanted to bring your attention as well.
Tauron terminates gas fuel contracts
If you have signed a contract with a gas supplier and your supplier is Tauron, there is a good chance that your gas contract may be terminated as early as this year or at the beginning of 2024. Tauron is one of the largest trading companies with the participation of the State Treasury, supplying customers mainly with electricity. Information that Tauron was resigning from gas supplies appeared on social media on October 17th. Journalist Malgorzata Fraser, who was directly affected by the whole situation, commented bluntly:
“In short, as has been said, the introduction of the government’s inflation shield and the official gas price causes the company to withdraw from the sale of gas fuel. Thus, my contract has been terminated and I have to look for a new operator.”
The company argues that the decision is caused by the unstable situation on the international gas market caused by Russian aggression against Ukraine.
What about this problem?
Tauron declares that their decision will not affect customers. There will be no interruption in the gas supply. If you do not take any action on it, you will automatically be taken care of by the reserve provider or ex officio. In most cases, this is PGNiG. However, lawyers advise, to switch to a normal sales contract and choose a company that suits you the most and which offers the sale of the gas in the most favorable conditions. Rachuneo is one of the most reliable search engines which can help you comparing offers available in your area.
It is worth mentioning that the reserve supplier is obliged to apply prices not higher than the tariff approved by the President of the Energy Regulatory Office, until the end of 2027. The current energy policy pushes most companies involved in the sale of gas throughout Poland, in a similar direction. Therefore, I encourage you to contact your operator and inquire when your contract expires. Mine, although I have not received any official notice, will end up on 1st January 2024.
Summary of heating in Poland
As I have already written, I do not expect visible price reductions in the gas energy market in the near future. To be honest, if you are looking for savings, I recommend focusing on reducing heating fuel consumption and on proper insulation, which can save a lot of heating energy. I wrote about it in an article, which I will once again share here (click). However, probably the best alternative in terms of quality, price and eco-awareness to our environment are heat pumps powered by electricity. The installation of such a pump is much more expensive than the installation of a gas heating furnace. On the other hand, the combination of a heat pump with a photovoltaic installation, which is an even greater expense, generates heating and electricity from the sun. I will look closer at this solution in the next article.
Would you like to read more publications about “Home” on my blog? Click here. You may also get to main “Table of content“, which is available here. Do you want to stay in touch and get updates about new posts? Subscribe now and follow EinP in social media!
Special thanks to Eamon Gosney, who has helped with proofreading of this article.