Tuesday, 27 January 2015
Polish Capacity Market
Poland, following example of other states, took measures enabling further evaluation of implementation of the capacity market into Polish power market.
What is capacity market?
Capacity market, which is already present in few countries such as the UK, Spain or the USA, has a role of securing future market supply – how come ?
In the well-functioning, price-driven electricity market, “electricity is like any other commodity, is bought wholesale and resold to consumers at retail prices” (The Energy Collective). Keeping in mind the structure of many electricity markets, in which renewable energy sources contribute massively to the energy mix, future stability of the electricity supply can be at risk, as RES have disadvantage of not being programmable. Furthermore, with subsidizing and favorable investment conditions, construction of new traditional power plants does not seem to be a clever choice.
Some countries decided to introduce the system called “capacity market” that shall encourage more investments in programmable power plants. Interested investor (or already existing power plant that need to undertake modernization in order to fulfill technical requirements) receives compensation for capacity offered in the future. For example, in Italian draft of capacity market regulation, auction for the capacity would take place for 3-years period with additional balancing auctions each year.
Proposal of Capacity Market in Poland
First steps towards capacity market development have been taken on the conference organized by the Ministry of Economy on October 29,2014 gathering representatives of regulatory authorities as well as the industry.
One of the most important phases of the planning of capacity market is detailed and strategic evaluation of the Polish electricity market and its possible ways of evaluation. President of the Energy Regulatory Office, Maciej Bando, has collected information about the investment plans of electricity producers in the long future, translating into time slot 2014-2028. The evaluation is prepared on the basis of estimates of energy companies regarding the production of electricity, plans for modernization and expansion of power. The plans relate to the producers with capacity over 50 MW of non-renewable energy sources based.
The report, stating higher probability of centralised market design, suggests that production units, as it takes places in the UK, will apply for compensation via auctions. Auctions are to be held for four years before the year of delivery, meaning that if the plant would like to operate within the power market in 2020 (and be compensated for that year), the auction must take place as early as 2016. At the auction, production unit can win an annual contract, but there would be an opportunity to extend the contract for subsequent years under the same conditions. The contract extension could be the equal to the maximum of: new units - 10 years, modernized - 6 years, other existing - 3 years.
Why is capacity market important?
Capacity market is very important, as it is a system that provides security of electricity supply. Even extensive investment in the maintenance of security of supply is much cheaper than eventual costs of lack of supply or its interruption. Furthermore, such system gives signal for the investors of feasible signals for further investments in the programmable, stable energy sources such as gas, CCGT or oil power plants.
Based on:http://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/5888,Rynek-Mocy-Rozwiazanie-dla-Polski-konferencja-w-Ministerstwie-Gospodarki-z-udzia.htmlhttp://theenergycollective.com/adamjames/237496/energy-nerd-lunch-break-how-capacity-market-works-and-why-it-mattershttp://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Fstanislawporeba_6.pdfhttp://wysokienapiecie.pl/atom/527-znamy-szczegoly-pomyslu-na-rynek-mocyPicture:
What is capacity market?
Capacity market, which is already present in few countries such as the UK, Spain or the USA, has a role of securing future market supply – how come ?
In the well-functioning, price-driven electricity market, “electricity is like any other commodity, is bought wholesale and resold to consumers at retail prices” (The Energy Collective). Keeping in mind the structure of many electricity markets, in which renewable energy sources contribute massively to the energy mix, future stability of the electricity supply can be at risk, as RES have disadvantage of not being programmable. Furthermore, with subsidizing and favorable investment conditions, construction of new traditional power plants does not seem to be a clever choice.
Some countries decided to introduce the system called “capacity market” that shall encourage more investments in programmable power plants. Interested investor (or already existing power plant that need to undertake modernization in order to fulfill technical requirements) receives compensation for capacity offered in the future. For example, in Italian draft of capacity market regulation, auction for the capacity would take place for 3-years period with additional balancing auctions each year.
Proposal of Capacity Market in Poland
First steps towards capacity market development have been taken on the conference organized by the Ministry of Economy on October 29,2014 gathering representatives of regulatory authorities as well as the industry.
One of the most important phases of the planning of capacity market is detailed and strategic evaluation of the Polish electricity market and its possible ways of evaluation. President of the Energy Regulatory Office, Maciej Bando, has collected information about the investment plans of electricity producers in the long future, translating into time slot 2014-2028. The evaluation is prepared on the basis of estimates of energy companies regarding the production of electricity, plans for modernization and expansion of power. The plans relate to the producers with capacity over 50 MW of non-renewable energy sources based.
- centralized market with balancing contracts or
- decentralized market with balancing contracts.
The report, stating higher probability of centralised market design, suggests that production units, as it takes places in the UK, will apply for compensation via auctions. Auctions are to be held for four years before the year of delivery, meaning that if the plant would like to operate within the power market in 2020 (and be compensated for that year), the auction must take place as early as 2016. At the auction, production unit can win an annual contract, but there would be an opportunity to extend the contract for subsequent years under the same conditions. The contract extension could be the equal to the maximum of: new units - 10 years, modernized - 6 years, other existing - 3 years.
- demonstrable power capacity during specified periods and command transmission system operator,
- installed adequate communication systems to control power generating unit or a reduction in power consumption,
- installed system of measuring and billing to facilitate the settlement of energy and power in real time.
Why is capacity market important?
Capacity market is very important, as it is a system that provides security of electricity supply. Even extensive investment in the maintenance of security of supply is much cheaper than eventual costs of lack of supply or its interruption. Furthermore, such system gives signal for the investors of feasible signals for further investments in the programmable, stable energy sources such as gas, CCGT or oil power plants.
Based on:http://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/5888,Rynek-Mocy-Rozwiazanie-dla-Polski-konferencja-w-Ministerstwie-Gospodarki-z-udzia.htmlhttp://theenergycollective.com/adamjames/237496/energy-nerd-lunch-break-how-capacity-market-works-and-why-it-mattershttp://www.cire.pl/pokaz-pdf-%252Fpliki%252F2%252Fstanislawporeba_6.pdfhttp://wysokienapiecie.pl/atom/527-znamy-szczegoly-pomyslu-na-rynek-mocyPicture:
http://www.emcpl.in/images/Thermal%20Power%20Plant.jpg
Monday, 19 January 2015
Price of electricity in 2013 and 2014: analysis
Urzad Regulacji Energetyki ( in short: URE; English:
Energy Regulatory Office) published official statement on the prices of
electricity (wholesale) in the last quarter of 2014. Thanks to this data, it is
possible to compare the prices over the course of two years.
In the above calculation of prices that URE does, the
price includes data on the implementation of contracts for the sale of
electricity to trading companies entered into by the energy companies involved
in electricity generation. Price does not include taxes (VAT, excise duties),
charges related to the amount of electricity sold and the liabilities
associated with certificates of origin. The price was calculated on the basis
of data provided by the manufacturers and for the sale of electricity.
The graph below (graph 1) presents the evolution of
price over the course of 2013 and 2014. It is important to notice that the
vertical axis starts from 150 zloty/MWh, in order to better illustrate price
volatility. Additionally to the graph,
where prices are given in zloty, there is a table with rough estimation of the
same price in euro ( with an assumption that 1 euro = 4.20 zloty ).
--> Click on the graph in order to see it in full size.
 |
| graph 1: price of electricity in 2013 and 2014 * I q 2013: first quarter of 2013 |
It is very difficult to draw conclusion upon the drop
of the price of electricity over the course of two years, mainly due to the
lack of publically available information. According to the report published by
RWE, in 2013 the total installed capacity of wind power increased by 893 MW (
to 3,3903 MW) what definitely had an influence on the price. Furthermore, at
the end of 2013 URE reported that the long term contracts ( contracts for
electricity delivery for 1 year ) have not been executed as much as in previous
years, therefore most of the trading will take place on the power exchange –
the drop of prices was expected.
Another factor that most likely influenced the drop
of price in 2014 was termination of yellow and red certificates mechanism.
Certificates supported the development of cogeneration or combined cycle - more
efficient way of generating electricity and heat in a single process. At the
beginning of 2014 it has been estimated that the parliament will vote for the
renewal of this mechanism, therefore introducing certificates in the second
half of the year, what could cause increase of a price. The first “renewed”
certificates were sold on the power exchange at the end of July and the price of
electricity in fact reflected additional costs that electricity generators had to
bear but the price was still lower than in 2013.
2014 has been revolutionary, as for the first time in
years price of electricity, heat and gas had dropped. Before, it had been “a
rule” that the prices of those services are increasing on the yearly basis.
Based on
information from:
http://www.rwe.pl/web/cms/pl/2398858/start/dla-mediow/aktualnosci/rynek-energii-w-2013-r-podsumowanie-i-perspektywy/
http://gramwzielone.pl/bioenergia/12084/ure-wydal-pierwsze-zolte-i-czerwone-certyfikaty
Picture:
Graph and currency table – developed on available
information
Featured picture: http://thumbs.dreamstime.com/z/electricity-bill-1565154.jpg
Friday, 16 January 2015
Kompania Weglowa to go under restructuring plan
Beginning of 2015 was not very good for the coal mining industry. After difficult discussions between representatives of the mining industry and the government at the end of 2014, it seemed that the situation is under control. Amendments to the coal trading regulation were supposed to be a sufficient measure to create more market opportunities for coal resellers and boost coal mining. Unfortunately, one of the biggest coal mining companies is facing serious financial problems, which, if not solved, will lead to company’s bankruptcy as a result of which the work will be lost by nearly 50 thousand people.
Wednesday, 7 January 2015
Summary of Polish Energy Sector in 2014: legal changes
Year 2014 brought many changes to Polish energy sector. One of the biggest surprises was the fall of fossil fuel prices (reflecting tendency on the international markets) that reached the lowest levels over the years. Polish energy sector also faced many changes from the legal perspective, that have been described by the Energy Regulatory Office and available further in this article.
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