Energy 29 November, 2017 11:00 am   
Editorial staff

Capacity market underneath the Christmas tree?

Draft law on power market ready to vote at the session of the Sejm on 5 – 7 December. On November 24, the Sejm Energy and Treasury Committee worked on the amendments proposed to the draft law on power market in the second parliamentary debate – writes Teresa Wójcik, editor of

The Commission’s meeting was attended by: 22 members of the Commission and deputy ministers of energy Andrzej Piotrowski and Tadeusz Skobel. Initially, the Commission negatively assessed the motion submitted in the parliamentary debate by the Members of the Nowoczesna party to reject the whole project. With justification that firstly, one needs to have a “long-term energy strategy” and then in the order the legislative tools for implementing this strategy, including the power market law. 13 Members (PiS, Kukiz 15 and WiS) voted against the motion of Nowoczesna party, and 9 in favour (PO, Nowoczesna and PSL). No abstentions.

Important amendments

Subsequently, the Commission examined and opined 16 amendments in the second reading of the plenary debate. 14 amendments were submitted by the ministers of PiS, two amendments concerning Art. 75 and 76 of the draft act were jointly submitted by PiS and Kukiz’15. The purpose is to provide the payer of a capacity charge with the information on the total of the charges due and on the minister’s regulation regarding detailed charging of the power fee.

Two amendments shall introduce regulations to the draft law that were negotiated by the government with the European Commission. Firstly, these are important clarifications of the conditions for admission of foreign energy power for auctions in Poland. Secondly, the possibility of a bonus of up to 2 years’ support of production units with emissions below 450 kg of CO2 per MWh, as emphasized, is a sharper standard than in the Winter Package (550 kg of CO2 per MWh) project. Deputy Minister Piotrowski explained to that this is about the necessity of the requirements for the CHP plants – especially small ones.

Another important amendment is already introducing in 2018 an exchange obligation increased to 30%. The increased share of electricity generated by the participant of this exchange is to be sold on TGE. The exchange obligation is 15%.

The voting results of the amendments were always identical. 13 ministers of PiS, Kukiz15 and the WiS voted in favour of this. 9 ministers (PO, Nowoczesna and PSL) were abstained, no one voted against. The rapporteur of the Energy and Treasury Committee will be Wojciech Zubowski (PiS) at the third reading. The Office of Legislation of the Sejm, in cooperation with the Committee, within the next few days will develop in the legislative and editorial way the content of the amendments adopted at the second reading.

Third reading on 8 December

As learned, third reading and voting will take place at the next 53rd session of the Sejm on 5-8 December, in the first block of voting.

The capacity market is, in principle, a support mechanism for power plants and power companies. Today’s energy prices in the wholesale market are so low that they do not allow to earn to pay off the loan for the construction of a new power plant, practically in any technology. Prices are heading down e.g. RES. In Poland these are wind farms, which eliminate the oldest and the worst coal blocks from the market. As investment in new conventional production units is unprofitable, with the closure of the oldest sources, there is a danger that new ones will not be built in their place.

The capacity market is therefore introducing support in the form of additional remuneration – capacity payments – for generating sources for the contractual time, if needed, e.g. in the event of energy shortage, they will have the relevant power. So they will be able to provide the energy required. The government hopes that energy companies with such an additional source of income will be able to finance the modernization or construction of new units.

Bids for the amount of the expected remuneration for power will be selected at special auctions, which – according to the project – would begin in December 2018. Exceptionally, there will be three auctions – for power in 2021, 2022, 2023. From 2019, there will be one auction for five years ahead.

Auctions will win the cheapest bids with maximum consideration of the EC’s technological neutrality expected. Similarly, the bids of national power plants ought to be considered, but also – at a certain level – of foreign sources, as well as DSR services, i.e., reducing energy consumption and power consumption on demand.

Consumers will feel the capacity charge

Capacity payments will be made by all recipients in the form of the next item on the energy bills. Consumers will feel these payments from 2021. According to the first estimates, the capacity market would cost about 4 billion zlotys a year, but – according to Energy Minister Krzysztof Tchórzewski – the final bill will depend on the results of the auction and the amount of winning bids. According to the ministry, the average household will pay well below PLN 10 per month in exchange for a guarantee of uninterrupted energy supplies.

The draft law does not specify who the money will flow to. It predicts that the bigger the investment, the longer the contract. Maximum support is provided for a period of 15 years. Longer contracts will be awarded to units with low CO2 emissions and providing enough heat for municipal systems.