Energy 20 September, 2017 10:00 am   
COMMENTS: Teresa Wójcik

Wójcik: Capacity market – yet another bone of contention between Poland and Brussels?

The European Commission may call into question the point of introducing the capacity market in Poland, an instrument that enables the financing of new power plants – writes Teresa Wójcik, editor at 

During the latest sitting of the Sejm the first reading of the Act on the capacity market was supposed to have taken place. The schedule first said it would happen on September 13th, then the date was moved to the 15th, the last day of the session. Initially the first reading had been scheduled for the Sejm’s July session, before the parliamentary vacation.

Will Brussels say no to a capacity market in Poland? 

A new date has not been proposed. The Puls Biznesu daily received a clarification from the Energy Ministry, which said the bill “was moved because additional consultations with the European Commission were needed.”  It has not been officially revealed what the consultations are about. Probably the draft legislation on the capacity market will be changed by the Council of Ministers and the updates will be introduced in the form of amendments by the Law and Justice MPs.

The discussions with the EC will most probably pertain to the capacity market as a support instrument for coal-fired energy sector. At an EU summit in December 2016, Prime Minister Beata Szydło criticized the EC’s proposal for the fact that it excluded coal-fired power plants from the capacity market. She was referring to the ban on public aid in this form for facilities whose CO2 emissions were over 550 g/ 1 kWh (EPS 550).

Despite the fact that the summit’s conclusions stressed Poland was allowed to shape its energy mix according to its will, the proposition to ban public aid for coal-fired power plants remained practically intact. The European Commission can call into question the point of introducing in Poland a mechanism that will enable the financing of coal units, because they go against the EU climate policy. A simple calculation shows that when the emissions limit will be at EPS 550, Poland will be able to sustain its energy security only if it radically increases gas imports to fuel gas-fired power plants. This has been confirmed by the latest report published by a consulting agency Compass Lexecon ordered by the Polish Electricity Association.

Will Poland’s conventional power plants not benefit from the capacity market?

In mu opinion, the fact that the legislation process at the Parliament has been halted proves that no agreement with the EC has been made and that the Ministry of Energy will have a hard nut to crack to receive a permission to introduce this kind of public aid. To make things worse, this may pertain not only to the coal-fueled energy sector.

Perhaps Brussels is against introducing the capacity market in Poland in general as an instrument that finances or co-finances conventional energy sector. After all the 550 g/ 1 kWh barrier will not be applied to gas-fired power plants. According to Krzysztof Tchórzewski the Minister of Energy, Poland will only build one more coal-fired unit in Ostrołęka. In the face of the necessity to invest in new capacities, gas-powered power plants are the only alternative. The capacity market was supposed to bankroll those investments as well. This is what Great Britain is doing with success.

So far the lack of a notification from the EC pertains to the capacity market at large, regardless of the type of conventional energy sector, which it is supposed to support. Perhaps this is because one of Brussels’ energy policy goals is to create regional, instead of domestic, capacity markets. This idea needs strong support of markets that are yet to emerge. The proposition is still at an early stage, but it is all the more possible that its implementation might be hindered if Poland is able to create a self-sufficient, strong energy sector. The European Parliament and the EU Council are working on a Regulation on Europe’s internal electricity market. The goal of the Regulation is to, among others, determine the rules for introducing and functioning of capacity mechanisms. In this situation Brussels may believe that a separate Act on the capacity market is not needed in Poland as the Regulation will deal with everything.