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– The cost of the capacity charge will be less than PLN 2 per month for the largest group of households. For non-household end users, the capacity charge will depend on the electricity consumption at certain hours of the day – Teresa Wójcik, editor of BiznesAlert.pl, counts.
The Power Market Act has been adopted. It was voted yesterday by the Sejm and the document was immediately forwarded to the Senate. But the law will return to the Sejm, because also yesterday the Senate Committee on National Economy and Innovation adopted three amendments, which, as we have learned, will be examined at the 61st session of the Senate currently taking place. And according to our knowledge, they will get the majority of senatorial votes. So the Act with amendments will come back to the Sejm.
Of the three amendments, one is of more specific nature. The next two probably result from the suggestion of Brussels and should probably be combined with talks held in the European Commission by the Minister of Energy Krzysztof Tchórzewski. One applies to art. 9 of the Act (which defines the procedure for submitting an application for a certificate allowing to participate in the next main auction or in the secondary market) – the point is to ensure that the results of the initial auction are not published earlier than the results of the main auction. It is supposed to prevent discrimination of foreign powers against domestic ones. And also ensure the full transparency of the auction.
The second amendment is to introduce the distinction of price-makers and price-takers in the auction.
Costs? Unnecessary panic
From 2021, consumers will pay a capacity charge in electricity bills, in billing on the side of transmission and distribution costs. The amount of this charge will eventually be determined in practice, but the general rules allow to assess that – contrary to arguments of the opponents of the power market during the third reading in the Sejm – one should not panic. MP Wojciech Zubowski, rapporteur on the work of the Committee (PiS), emphasized yesterday in the Sejm that the cost of the capacity charge will be less than PLN 2 per month for the largest group of households. According to more precise calculations, this group includes about 3 million households. The second, smaller group of more than 1 million more wealthy households, will be charged a capacity charge of less than PLN 7 per month. Which is less than PLN 100 per year. The amount of charges for both groups will depend on the volume of electricity consumed. For non-household end users, the capacity charge will depend on the electricity consumption at certain hours of the day. This means that the capacity charge rate for these customers will be higher for energy consumption at peak demand.
For enterprises, the amount of the capacity charge was initially set at PLN 40-50 on average per MWh of electricity. So a medium-sized enterprise that consumes 50 GWh of electricity per year will incur an additional cost of several million zlotys. It should be assessed that the medium and small enterprises would be most burdened. However, this is definitely less than the losses caused, for example, by interruptions in production due to limitations or lack of energy supply. Not to mention blackout.
According to analysts, the capacity market is a much more effective solution than a cold reserve or strategic reserve. Maintaining the strategic reserve would cost end users in total in the years 2021-2040 by about PLN 35 billion more than the power market. The strategic reserve is also not an appropriate structural tool for Poland due to the short-term nature of this solution. The problem of security of energy supplies has a long-term character in Poland.
It will be worth it
According to preliminary calculations, the power market will reduce the costs of Polish consumers by approx. PLN 30 billion or PLN 1 billion a year. Although a new cost component is being created (the said capacity charge), it is compensated to the end user with a surplus by reducing the cost of undelivered energy and reducing wholesale energy prices. The analysis shows that electricity prices on the wholesale market at the introduction of the capacity market will be, by 2040, on average more than PLN 20/MWh lower than without the power market. This will be the result of lower fluctuation in energy prices and the associated lower capital costs for new investments, especially for peak sources.
The capacity market is an effective support mechanism for power plants and energy companies. Today’s energy prices on the wholesale market are so low that they do not allow to earn a loan for the construction of a new power plant, practically in any technology. The prices are pushing down, among others the RES. Yesterday in the Sejm, deputy energy minister Grzegorz Tobiszowski warned that without the power market law ‘in two years there would be no electricity in the sockets’. It should be objectively acknowledged that the adoption of a mechanism that is the power market is the only way out for the Polish economy and energy security of the country.
The new law is supposed to guarantee the availability of suitable power resources in sources that produce electricity. Also in renewable energy sources, which results from the act, and what is usually not remembered. The power market introduces support for energy producers in the form of additional remuneration for the fact that for a time specified in the contract, especially in the event of energy shortage, with the appropriate power it will be able to provide the necessary energy. However, in the opinion of experts from the Warsaw University of Technology, the failure to implement this law is a loss for the economy of at least PLN 10 billion per annum.
Making it before the winter package
Minister of Energy Krzysztof Tchórzewski argued on Wednesday in the European Parliament in Brussels that what distinguishes the Polish law on the power market from similar projects in other countries is the fact that it is based on the auction system, and therefore it is more transparent. Tchórzewski and deputy ministers of energy in working mode met in Brussels with EU competition commissioner Margrethe Vestager, with whom they discussed the ongoing work on the power market and the restructuring of the Polish hard coal mining sector. Certain additional solutions will be introduced into the power market regulations. However, Tchórzewski negatively assessed the European Commission’s proposal that the power markets should be limited by the emission.
Work on the winter package is a strategic challenge for Poland. It is obvious that the rush of work on the power market is deeply justified – in order to fulfill the assumed goal, the act must come into force before the winter package becomes effective as a regulation of the European Union.
Tchórzewski met with the EU Commissioner for Energy and Climate Change Miguel Arias Canete in Brussels yesterday regarding the prospects for further negotiations of the winter package. The talks focused on the fundamental challenges for the Polish and EU energy sector – Minister Krzysztof Tchórzewski informed.
Tchórzewski pointed to innovative solutions proposed by Poland in the field of renewable energy. ‘It is said that we are defenders of coal energy. It is not like that – we also want to develop opportunities in the field of renewable energy. The capacity market toward RES should also serve this purpose – the minister said.
