The capacity market is a system of public support to maintain dispatchable capacity in the Polish electricity system. It was introduced in 2018, with the approval of the European Commission, because coal-fired power plants were no longer making money for themselves. It could have initiated the creation of new dispatchable and flexible capacity, but after eight auctions so far, it is mainly old coal units that are benefiting. Now the capacity mechanism needs to be redesigned to give an impetus to new, flexible investments replacing coal. We present our take on how to organise a new capacity market in Poland. 

Polish coal regions are the largest beneficiary of the EU's Just Transition Fund. This is a new instrument of the Cohesion Policy, supporting the achievement of the EU's energy and climate goals between 2021 and 2027. However, the future of the Fund in the next EU budgetary perspective is uncertain. Its continuation should be one of the priorities for the Polish government, and the upcoming Polish presidency is a perfect time to discuss it with the European partners. In the meantime, while there are many ministries in Poland responsible for energy sector, there is virtually no one responsible for a just transition. What is there to lose?

Poland’s energy transition is progressing, and 2023 was a year of real records. Although coal remains the main source of electricity production, its share in the mix fell to an all-time low of 60.5%, down 10 p.p. from a year earlier. Production from RES reached 27% for the first time. At the same time, energy production from natural gas increased, by more than 40%. This is a result of falling fuel prices and the flexibility of gas generation. Wholesale energy prices in Poland compared to other EU countries remain very high, and the economy’s dependence on imported fossil fuels is growing rapidly. In the latest, seventh edition of the “Energy Transition in Poland” report, Forum Energii presents the state of transition play and a broader look at the overall process.

At the end of December, one of the last power market auctions took place. Under this form of state aid, contracts so far concluded have been for nearly PLN 90 billion (nominally), which will be repaid until 2044. Financing for them comes from electricity consumers, in the average household electricity bill, in which the power market fee accounts for about 7%. This mechanism, although costly, allows maintaining capacity in the power system. So far, however, it has mainly generated subsidies for existing and new coal and gas-fired power plants. The eighth auction turned out to be different from the previous ones: it was decentralised, clean, cheaper and battery-based. Instead, there is no new generating capacity.