Tag:
Capacity market
Capacity at any cost? What has Poland achieved through 10 years of work on the capacity market?
Nearly a decade ago, the first work began on the concept of a capacity market in Poland. For the European Commission, it was a support mechanism for electricity producers. For the transmission system operator, it is a vital part of the energy market, providing tools to maintain required reserves and mitigate the risk of capacity shortages. Today, we can summarise the effects and the scale of the costs of the capacity market’s operation in Poland for the years 2021 to 2046—approximately PLN 200 billion. This means that the discussion on energy security cannot be limited solely to capacity itself. Security should also be understood as the ability to deliver electricity to consumers at all times and the certainty that this energy will be affordable. In view of the announcements regarding the continuation of support through the capacity market, a key question arises: is Poland achieving its goal of capacity adequacy and security of supply effectively, or rather is it entrenching a “capacity at any cost” approach?
66 minutes minutes
Capacity at any cost? What has Poland achieved through 10 years of work on the capacity market?
Nearly a decade ago, the first work began on the concept of a capacity market in Poland. For the European Commission, it was a support mechanism for electricity producers. For the transmission system operator, it is a vital part of the energy market, providing tools to maintain required reserves and mitigate the risk of capacity shortages. Today, we can summarise the effects and the scale of the costs of the capacity market’s operation in Poland for the years 2021 to 2046—approximately PLN 200 billion. This means that the discussion on energy security cannot be limited solely to capacity itself. Security should also be understood as the ability to deliver electricity to consumers at all times and the certainty that this energy will be affordable. In view of the announcements regarding the continuation of support through the capacity market, a key question arises: is Poland achieving its goal of capacity adequacy and security of supply effectively, or rather is it entrenching a “capacity at any cost” approach?
66 minutes minutes
Capacity and Flexibility: What Kind of Capacity Market Does a Modern Power System Need?
In the first six months of this year, Poland wasted the potential to generate nearly 800 GWh of electricity from renewable energy sources—more than in the entire year of 2024. The growing mismatch between energy consumption and the output of wind and solar power plants is driving up the cost of operating the system month by month. Meanwhile, demand for electricity is increasing during the winter when there is less sunlight and some days are windless. At the same time, costly and depreciated coal units are approaching decommissioning. Two key needs emerge: making the system more flexible, and encouraging investments in new capacity that can operate effectively under the new system. These challenges, along with an analysis of the relationship between capacity adequacy and system flexibility, and recommendations for a reformed capacity market, are addressed in the latest report by Forum Energii, developed in cooperation with Magnus Energy, a pan-European energy transition consultancy, titled Capacity and Flexibility: What Kind of Capacity Market Does a Modern Power System Need?
7 minutes minutes
Capacity and Flexibility: What Kind of Capacity Market Does a Modern Power System Need?
In the first six months of this year, Poland wasted the potential to generate nearly 800 GWh of electricity from renewable energy sources—more than in the entire year of 2024. The growing mismatch between energy consumption and the output of wind and solar power plants is driving up the cost of operating the system month by month. Meanwhile, demand for electricity is increasing during the winter when there is less sunlight and some days are windless. At the same time, costly and depreciated coal units are approaching decommissioning. Two key needs emerge: making the system more flexible, and encouraging investments in new capacity that can operate effectively under the new system. These challenges, along with an analysis of the relationship between capacity adequacy and system flexibility, and recommendations for a reformed capacity market, are addressed in the latest report by Forum Energii, developed in cooperation with Magnus Energy, a pan-European energy transition consultancy, titled Capacity and Flexibility: What Kind of Capacity Market Does a Modern Power System Need?
7 minutes minutes
Support mechanism for new capacity after 2030 - for whom and why?
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.
20 minutes minutes
Support mechanism for new capacity after 2030 - for whom and why?
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.
20 minutes minutes
Eighth capacity market auction—high time for the flexibility market
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.
17 minutes minutes
Eighth capacity market auction—high time for the flexibility market
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.
17 minutes minutes
Conclusions from the 7th capacity market auction - cleaner, but adequacy remains a challenge
The results of the seventh auction in the Polish capacity market clearly show the dilemma Poland has faced - existing high-carbon (coal) capacity can no longer be supported with this mechanism, while gas is risky due to the geopolitical situation. Although Polish energy companies have not completely abandoned gas projects, fewer appeared in the auction than previously announced. There is also clearly a greater variety of technologies than before - for the first time, contracts were granted to storage. The market is still expensive - for the second year in a row auctions ended in the first round and at the maximum price.
18 minutes minutes
Conclusions from the 7th capacity market auction - cleaner, but adequacy remains a challenge
The results of the seventh auction in the Polish capacity market clearly show the dilemma Poland has faced - existing high-carbon (coal) capacity can no longer be supported with this mechanism, while gas is risky due to the geopolitical situation. Although Polish energy companies have not completely abandoned gas projects, fewer appeared in the auction than previously announced. There is also clearly a greater variety of technologies than before - for the first time, contracts were granted to storage. The market is still expensive - for the second year in a row auctions ended in the first round and at the maximum price.
18 minutes minutes
The capacity market in Poland―more expensive than ever
Poland has already held six power auctions. Analysis of their results shows that this mechanism in its current form is not an optimum solution for the country. The capacity market has proved more expensive than anticipated, has failed to curb the increase in electricity prices and, in addition, has contributed to the petrification of the outdated and coal-based generation structure. The arduous task of plugging the coal gap has only just begun, which is why decisions on modernisation and on methods for supporting capacity up to 2030 must be taken urgently.
9 minutes minutes
The capacity market in Poland―more expensive than ever
Poland has already held six power auctions. Analysis of their results shows that this mechanism in its current form is not an optimum solution for the country. The capacity market has proved more expensive than anticipated, has failed to curb the increase in electricity prices and, in addition, has contributed to the petrification of the outdated and coal-based generation structure. The arduous task of plugging the coal gap has only just begun, which is why decisions on modernisation and on methods for supporting capacity up to 2030 must be taken urgently.
9 minutes minutes
