A new opening for Polish-German energy relations

For many years Poland and Germany have failed to agree on important energy matters. The change of government in Poland and the Russian aggression in Ukraine provide an opportunity for a new opening for Polish-German energy relations, write Agata Łoskot-Strachota and Georg Zachmann.

Agata Łoskot-Strachota is visiting fellow at Bruegel and senior fellow at the Centre for Eastern Studies (OSW) in Warsaw. Georg Zachmann is a Senior Fellow at Bruegel and at Helmholtz-Zentrum Berlin.

The change of government in Poland provides an opportunity for a new opening for Polish-German energy relations.

Germany’s pre-war prioritisation of its gas relationship with Russia clashed with the strategic interest of its neighbours. This German “Sonderweg” increased the EU dependence on Russian gas. For electricity, Germany’s erratic policy-shifts were not coordinated with Poland. They caused physical and commercial challenges on the Polish electricity system. In return Poland devised regulatory and technical changes that constrained physical and commercial exchanges.

German-Polish energy relations systemically suffer from sometimes perceived and sometimes actual asymmetries. Germany is seen as using its economic and political weight to push through its own strategic interests in the region and in the EU. Corresponding Polish fears of German overreach were highly politicised, and even made it difficult to work together on rather technical issues.

That being said, Germany and Poland have still managed to cooperate on certain strategic energy matters. After the Russian aggression they agreed on sanctioning oil deliveries and enabled two German refineries to import crude oil through the Gdansk port. The two countries were instrumental in enabling the synchronisation of Ukraine’s power system with that of continental Europe.

Together, Poland and Germany will be much better able to manage the loss of Russia as their main supplier of fossil fuels as well as the energy-transition. But big gains from cooperation will first require rebuilding trust.

Minimising the role of Russian fossil fuels

Germany and Poland can use their political and economic weight to minimise the role of Russian oil, gas and coal in the EU. This requires effective implementation of existing EU sanctions on coal and oil imports. One joint project could be to push for a European capacity to monitor legal and illegal forms of sanction evasion.

Even more important are natural gas imports. The EU has not managed to agree sanctions on Russian gas. It has not even succeeded in defining a common policy on Russian gas imports. A concerted effort lead by Warsaw and Berlin to include Russian gas in the EU sanctions could reduce the revenue of the aggressor state and also minimise the EU’s still existing vulnerability. German and Polish political leverage and their ability to support Hungary, Slovakia and Austria, who continue to heavily depend on Russian gas, will be crucial for an agreement. A complete embargo will still be difficult to agree.

A pragmatic approach could be to (1) establish EU control by channelling all gas imports from Russia through a joint purchases mechanism, (2) reduce the vulnerabilities of countries still dependent on Russian gas by unblocking necessary supply corridors and tailored support for gas demand reduction, (3) devising a clear timeline for minimising imports of gas from Russia.

The coordinated use of existing and the development of new gas infrastructure is another area where cooperation would be fruitful. Certain German and Polish infrastructure projects, such as plans for the new LNG terminals at Rügen and Gdansk, are to a certain extent in competition with each other.

But cooperative solutions such as the use by German companies of the Polish gas terminal in Gdansk, for example, seems possible. Gas from Gdansk could in that case be transmitted to Germany via the currently almost empty Yamal pipeline. For cooperation in this area the German government must take a clear stance on the future of the Nord Stream pipelines, including a guarantee that those will not be used to import gas (or hydrogen) from Russia.

Finally, the two countries share a vital interest in collaborating on improving the security of critical infrastructure in the Baltic Sea (gas pipelines, cables, wind farms) and maritime transport security (including tankers and gas tankers). This has been driven centre stage by explosions on the Nord Stream pipelines and damage to the Baltic connector.

Electricity and the energy transition

Electricity will become the main energy vector in Poland and Germany. The cost of securely supplying electricity to Polish and German consumers can be substantially lowered when the systems work together.

This requires a substantial increase in cross-border transmission capacities. But this is not enough to reap all the benefits. Regulators and transmission system and market operators need to work together regionally to ensure that when the wind is blowing in Gdansk Bay, electric vehicles in Berlin are being charged. Moreover, governments and transmission system operators should coordinate their plans for new transmission lines and the de/commissioning of power plants to prevent expensive overbuilding or even more expensive scarcity in the region. To be politically feasible, constructive coordination needs to safeguard national sovereignty over the domestic fuel mix.

The most effective tool for better coordination of the German and Polish electricity grids would be harmonised or even joint investment instruments. This might include joint contracts for difference auctions for renewables or aligned capacity mechanisms. Currently, such national instruments are barely coordinated across borders as countries fear for their energy-sovereignty and are worried to be left paying for power plants in other countries. But bilateral and regional European progress on coordination is conceivable – if it enables gains for all sides.

Germany and Poland share the challenge of quickly phasing out lignite. Tight capacity margins in the region require coordination and joint tools to address the social consequences of the transition in the coal mining regions of both countries might help to overcome political dilemmas.

To improve coordination up-to-date energy data and reliable forecasts and scenarios are crucial. Poland and Germany can work together to establish a European Energy Data Agency, especially as Polish experts have recently advocated the establishment of such a national institution.

Dialogue on difficult topics

There are clearly also topics where the strategic interest of Poland and Germany do not align. Cooperation on less controversial issues will reestablish a constructive dialogue and help to rebuild trust that is needed to address the more contentious issues. Understanding the essence of fundamental differences is crucial for finding compromises.

One such contentious topic is the future of nuclear energy in the EU. Poland and Germany substantially differ in their visions. Yet dialogue on this is crucial, to be able to effectively cooperate. A clear recognition by Germany that it will not deliberately impede the implementation of the Polish nuclear power plants projects would be important for the overall energy relations.

Another potentially difficult, but important topic is the issue of Ukraine’s reconstruction and accession to the EU. In the field of energy and climate – mapping out possible scenarios, how the accession process and EU enlargement itself will affect regional energy markets can be a first step. This would create space for Polish-German-Ukrainian mutually beneficial cooperation.

There is a lot to be gained from good German-Polish relations in the energy and climate area. And the benefits will only increase as Europe increases its energy self-sufficiency. To establish constructive cooperation a new start is needed, and there are ample opportunities to make significant progress quickly.