Poland is at a critical juncture in its energy transition. According to the report «No lo hay y no lo habrá» by Forum Energii, the country will require an additional 100 to 120 GW of power capacity by 2040. While this gap will largely be addressed by renewable sources such as wind and solar, ensuring a balanced and stable system will demand significant investments in flexible technologies, including energy storage and gas generation, which are still underrepresented in the capacity market.

In the ninth capacity auction held in December 2023, the Polish transmission system operator, PSE, secured 8,053 MW, exceeding the initial demand of 5,424 MW thanks to competitive pricing and surplus offers. However, no new large gas units managed to secure contracts, highlighting the difficulties in attracting investments in more expensive but essential technologies. Grzegorz Onichimowski, President of PSE, emphasises: «We need to separate auctions for energy storage and generation sources. Perhaps it’s also worth considering a mechanism specifically for gas power plants, but it’s too early to discuss that now.»

Renewables and Flexible Generation: Vital Allies

The report highlights that while renewable energy sources will dominate the power landscape, the increasing variability in generation presents significant challenges. Flexible technologies, such as gas engines and battery storage systems, will play a crucial role in mitigating these fluctuations and maintaining system balance.

Recent auctions saw battery storage leading the awards, securing 4.4 GW in contracts. This trend reflects a shift towards faster, more dynamic technologies. However, Forum Energii warns that the current market model, which places all technologies in a single category, does not favour investments in more costly options like gas units. This approach could limit the system’s ability to respond effectively to critical conditions, particularly during periods of low renewable generation.

Costs for Consumers and Industry

The current model also has economic implications. While auction prices have decreased, benefiting consumers, investments in key technologies remain sluggish. Industry participants pay an average of PLN 141 per MWh, while a typical Polish household could spend PLN 11.44 per month on capacity-related fees if exemptions were not in place. Without structural changes in the market, consumers could face higher costs in the long term due to risks linked to grid instability.

Reforms Needed for an Efficient Capacity Market

Forum Energii proposes a reform of the capacity market by introducing differentiated auctions:

1. Firm capacity auctions, targeting high-availability technologies like gas plants that can supply energy continuously.
2. Flexible capacity auctions, designed to address short-term fluctuations with rapid-response technologies like storage and gas engines.

Further recommendations include lowering the minimum capacity requirement for providers from 2 MW to 1 MW to increase participation from distributed resources, and incorporating hybrid installations into auctions. These measures aim to ensure more efficient use of technological resources and promote sustainable diversification.

Transition Without Coal: The 2029 Challenge

The planned phase-out of coal by 2029 adds another layer of complexity. By that year, most capacity contracts for coal plants will have expired, leaving a significant void in installed capacity. While the Polish government has proposed supplementary auctions to extend support for coal units, this is a temporary solution that does not address the urgent need for investments in clean and flexible technologies. «The capacity market must evolve to fulfil its purpose of ensuring system stability in the long term,» stresses Forum Energii.

Poland requires a balanced power system that combines the expansion of renewable energy with investments in flexible, low-emission technologies. Without urgent reforms, the country risks increasing grid instability and higher costs for consumers. Grzegorz Onichimowski, President of PSE, concludes: «This market should no longer be treated as a state aid instrument but rather as a way to pay providers for services essential to the energy system and consumers.»