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Europe faces key challenges in the energy and geopolitics sectors. The European Union is introducing further sanctions against Russia, Poland is accelerating work on its first nuclear power plant, and Germany is considering returning to nuclear power after the elections. The European Commission is developing a strategy to support industry and lower energy prices, while the synchronization of the Baltic countries’ networks with continental Europe is affecting local markets.
How do these changes shape the future of the region? Let's look at the most important current events changing the face of the European electricity and natural gas market.
- 16th package of EU sanctions against Russia. EU foreign ministers unanimously supported another package of sanctions in Brussels on Monday, February 24. It will cover more sectors of the Russian economy, as well as more ships of the so-called shadow fleet, which transports oil from Russia bypassing price limits.
- Polish nuclear power plant. On Thursday, February 20, the Sejm passed an act on the recapitalization of the Polish Nuclear Power Plants (PEJ) company from the budget by up to PLN 60.2 billion, which is to be a contribution to the construction of the first nuclear power plant. The condition for the recapitalization is the consent of the European Commission to state aid. In December 2024, the Polish government submitted to the EC an application for approval of state aid for the power plant in the form of a contract for difference (CfD). A bilateral contract for difference works in such a way that if the price at which the investor sells energy is lower than the strike price, the government pays the difference. Otherwise, the investor returns the surplus to the government. The document published by the Commission shows that in the basic scenario, Poland assumes a strike price of PLN 470-550/MWh.
- Energy in Germany after the elections. The new chancellor from the winning party, who will probably be Friedrich Merz, will face an attempt to partially return to nuclear energy, which was phased out in previous years. During the campaign, the Christian Democrats (CDU/CSU) announced the possibility of halting the dismantling of the last nuclear power plants, and Merz himself has criticized Angela Merkel's decision on this issue several times.
- European Commission to the rescue of industry. The Clean Industrial Deal (CID) is a new strategy of the European Commission, which is to enable the EU to effectively compete with the US and China. The main assumptions of the proposal presented on Wednesday, February 26 are lower energy prices in the EU and financial support for European industry and renewable energy sources. In connection with this, the EC has developed the Affordable Energy Plan, which aims to reduce electricity bills for households and businesses. Most of the assumptions of the Plan are to enter into force as early as 2025.
- The impact of synchronization with CESA on energy prices. At the beginning of February, the Baltic countries (Lithuania, Latvia and Estonia) successfully synchronized their networks with the Continental Europe Synchronous Area (CESA). However, this process contributed to the increase in energy prices in these countries, which was caused not only by the synchronization itself, but also by the simultaneous implementation of the balancing market reform. These changes, modeled on the Polish GVA introduced last summer, initially caused an increase in costs – among others due to the lack of full knowledge of the generators about the functioning of the system in the new conditions, which was also visible on the Polish market.
Detailed information about the energy and gas market is presented in the monthly Enfree Market Report.
