European Commission approves the Polish electricity capacity market


The European Commission approved the Polish electricity capacity market on 7 February 2018. The Act on capacity market, which was adopted in early December 2017, introduces a market-wide capacity mechanism. Generation and demand-response capacity providers will be able to receive remuneration for their availability to generate electricity or to reduce their electricity consumption, respectively. The capacity market is intended to ensure the security of the electricity supply, as well as to provide incentives for investments in new capacities.

Generally, all types of capacity providers (including foreign providers from electricity systems with a direct network connection to the Polish electricity system) will be able to participate in the capacity mechanism. However, certain generating capacities, e.g. capacities that already provide the transmission system operator with services of a similar nature to the capacity obligation, or most installations that receive aid from renewable energy support schemes, are prohibited from participating in the capacity market.

The amount of remuneration to be paid to capacity providers will be determined through competitive auctions based on the “pay as clear” formula. Capacity contracts may be concluded for a maximum period of: (i) 15 years for new capacities, which meet a specific capital expenditure threshold, (ii) 5 years for new and modernised capacities, which meet another capital expenditure threshold and demand-response capacities, or (iii) 1 year for existing capacities, foreign capacities, as well as new and modernised capacities that do not meet the capital expenditure thresholds. The 5- and 15-year periods may be extended for a further 2 years for cogeneration capacities that deliver half the heat they generate to heating systems, or for low-emission capacities.

The capital expenditure thresholds, as well as other key parameters of the main auction, will be determined in a regulation from the Minister of Energy. The key auction parameters will also include: maximum price and demand for capacity. The first auctions (for the 2021-2023 delivery period) will be conducted in the 4th quarter of 2018.