The costs of operating the capacity market in Poland, in total for the years 2021-2046, will amount to approximately PLN 200 billion at current prices – estimated Forum Energii in its latest report. The forum calls for an open discussion about the future of the capacity market in Poland, which, according to FE experts, should include, among others: more flexible and adapted to the increasing RES capacity. They also call for a reform of the capacity fee.
“The costs of contracting the capacity market are very significant (…) and it is not only about the total amount, but also about what we get in return and how it is reflected in the accounts of recipients, especially the energy-intensive industry,” said Joanna Pandera, president of Forum Energii, on the occasion of the presentation of the report.
In the opinion of FE experts, the current discussion on the capacity market lacks reflection on costs and the purpose this mechanism is intended to serve.
“As part of the capacity market, some money flowed to the coal sector, but gas investments actually began to be made and we want to emphasize that this is probably a good thing, but it is very important to minimize costs and for the units that are already being built to be very flexible and adapted to the operation of variable sources that will grow,” Pandera noted.
She added that analyzes indicate that the situation in our region is deteriorating due to the great pressure of shutting down coal-fired power plants, which need to be replaced. However, in her opinion, the system in Poland is slowly balancing and if the contracted units arrive on time, the demand for coal in 2030 will be radically lower than planned. In this context, she drew attention to the “huge” costs of maintaining the contract with miners until 2049.
The forum appeals to an open discussion on the future of the capacity market in Poland and greater transparency of its functioning, especially since the capacity mechanism is an important price component for electricity.
“PSE is talking to the EC and claims that it is close to agreeing on the final shape (…), but it would be good if there was some discussion after these 10 years, such as a white paper published by the Ministry of Energy, PSE about how this capacity market worked and what it should look like in the future,” Pandera emphasized.
In the report, FE experts emphasized that the capacity market is an important tool for the transmission system operator to ensure power adequacy, but after almost a decade of its operation, it is still unclear what its long-term strategy is.
“Although this mechanism is declaratively intended to support the transformation, in practice it has largely perpetuated the status quo of the Polish power industry, maintaining the operation of old and inflexible conventional units. At the same time, it also favors the construction of new gas capacities, while energy storage facilities are of limited importance. The structure of the capacity market requires order and a clear definition of the goal in order to ensure safe operation of the National Power System in the conditions of a zero-emission mix over the next decade,” it was noted.
It was also noticed that the mechanism generates high costs.
“The capacity market supplemented the falling revenues of conventional generating units and gave an impulse to build new capacities. However, this is a very expensive solution and a long-term commitment. We estimate that in the years 2021–2046 this mechanism will consume a total of approximately PLN 200 billion (at current prices) and will constitute a significant item in the accounts of all recipients. The system operator and the Ministry of Energy announce the maintenance of the capacity market, so it can be assumed that the costs will increase in the following years,” it was noted.
It was indicated that the costs of operating the capacity market are transferred to consumers in the form of the so-called capacity fee, which is a component of the energy bill.
“In 2026, the capacity fee for an average household will increase from PLN 11.4 to PLN 17.2 per month, which will constitute 8.1% of the household's electricity bill,” it was indicated.
In the case of industry, depending on, among others, depending on the consumption profile and hours of consumption, this share is from 2.5 percent. (mainly heavy industry) to 14.7 percent their bill.
In 2028, a household with an annual consumption of 2,000 kWh will pay approximately PLN 15 per month as part of the capacity fee, according to FE estimates.
Forum experts believe that the capacity fee requires reform because its structure is incompatible with the needs of flexibility, and the method of charging the fee still rewards consumers with constant daily electricity consumption. They emphasized that promoting a flat consumption profile is contrary to the need to make demand more flexible and shift energy consumption to the hours of the highest renewable energy generation (often at the peak of the day).
“We are calling for the abolition of the capacity fee during periods of energy oversupply (…), because industry and heating provide an additional resource of flexibility. By imposing a capacity fee on them during these hours (of oversupply – PAP), we additionally charge them for something that they could benefit the system with and reduce these costs for everyone – not only the cost of the fee, but also the cost of energy,” said Jędrzej Wójcik, co-author of the report.
“The second thing is that it is necessary to change the structure of the capacity fee, change peak hours depending on the season and time of day. Currently it is 7 a.m.-10 p.m. (…) now in 2025, we see that the peak is somewhere else: first in the morning and then in the evening,” he added.
In the opinion of Forum Energii, the capacity market in its current shape does not sufficiently support flexibility.
“The shape of the capacity market auction has so far promoted existing coal-fired units and large gas-steam units (mainly CCGT), which respond to a limited extent to the variable supply of electricity. Relatively few simple-cycle gas units (OCGT) or gas engines appeared. However, the strategy towards energy storage was variable. While they are very necessary – they are not generation units. They perform another function in the system, which was not present in the current model of the capacity market. noticed,” the report stated.
Finally, experts pointed out in the report the risk of oversizing power.
“The system operator prefers access to controllable domestic conventional units. They are needed in the energy system, but there are also other forms of ensuring appropriate power levels. The operator's approach, based on conservative assumptions (which was also questioned by ACER[1]) and priority for controllable power, leads to overdimensioning of the system and generating excess costs, instead of seeking optimization, e.g. through better use of cross-border connections, renewable energy sources or other sectors, such as industry and heating,” it was emphasized.
Forum Energii also believes that the capacity market is not transparent, although it is an element of public support, and the method of publishing auction results makes it impossible to identify the beneficiaries of the contracts. (PAP Business)
jz/ gor/
