Energy 8 February, 2018 10:30 am   
Editorial staff

PKEE: Capacity market will reduce the risk of blackout

The Polish Electricity Association welcomes today’s decision of the Commission, in which the EC has confirmed that the assumptions of the Polish Capacity Market Act (adopted by the Polish Parliament on 8 December 2017) are in line with the State aid rules (SA.46100).

Introduction of the capacity mechanism in Poland is the most cost-effective way of ensuring security of supply and – at the same time – reducing the electricity cost to consumers. The Energy Only Market (one product, i.e. commodity-based market model) does not provide a reasonable assurance – due to limited financial resources – of refurbishment of existing power plants, such as efficiency improvements or adjustment to the latest EU environmental standards. Moreover, an increasing share of renewable energy sources in the energy mix results in fluctuations in power generation. Therefore, the electricity generators should be paid for their readiness to provide energy into the grid in order to ensure uninterrupted supply of electricity, and equally the demand side response operators should also be paid for being available to reduce their electricity consumption.

Implementation of the capacity market is a significant step towards minimisation of risk of blackouts. The adequacy concerns in Poland should be addressed immediately, as proved by power shortages, which have occurred in the Polish power system in 2015. As the PKEE’s report shows, rejection of the capacity market in Poland could result in power shortages, which would lead to annual losses amounting to ca. EUR 2.5 billion.
We should also consider that the capacity market is necessary to implement structural electricity market reforms in Poland, including reserves’ reforms and administrative pricing mechanism.

It should be underlined that the approved scheme is technology-neutral, which in practical terms means that the competitive capacity tenders will be open to all types of generation technologies, including RES, as well as energy storage and DSR.

Furthermore, the capacity mechanism will provide additional environmental benefits. Generating units emitting less than 450 gr CO2/kWh will be granted with the environmental benefit resulting in a two-year extension of their first contracts.

Last but not least, the Polish capacity mechanism will facilitate electricity imports, by providing the set of rules for the cross-border participation.

The Polish capacity market corresponds to other capacity mechanisms, which were introduced by e.g. United Kingdom, Italy, France and Germany. Thus, today’s decision ensures compliance with the strict EU environmental State aid rules as well as guarantees a level playing field for electricity generators from other EU Member States.

Introduction of the capacity mechanism in Poland means that from 2020 onwards, consumers will be paying approximately EUR 2.5 per month (according to the calculations carried out by the Ministry of Energy). This charge will be based on their annual energy consumption.

Implementation of the capacity mechanism in Poland is the most cost-effective way to ensure stability of the power system and energy security for both the industry and the households.

Polish Electricity Association (PKEE)