Recently there has been a significant debate about the possible implementation of a centralized capacity mechanism in Poland. Despite the fact that capacity adequacy is currently being discussed at the national level as a long-term issue, the lack of sufficient capacity and insufficient demand flexibility has already been observed on a number of occasions. In July 2016, the Polish Ministry of Energy expressed its support for the implementation of a market-wide capacity mechanisms. In view of these recent events, the aim of this paper is to shed some light on the possible implementation of a capacity market in Poland. The paper presents a brief overview of the key problems that the Polish power sector faces and provides a comparative analysis between some of the main elements of the Polish capacity market proposal and the GB capacity market.

With the upcoming implementation of the centralized capacity market in Poland, capacity auctions will be organized where domestic power companies will offer their available capacities. It is assumed that bidding will be auctioned according to the so called descending clock auction system with uniform-price (Pay-as-Clear), which will lead to the market equilibrium price. Some analysts, however, are of the view that it is more appropriate to organize capacity auctions in the Pay-as-Bid formula, as this system should lead to lower prices that those of Pay-as-Clear, hence lower costs of capacity purchase. However, this opinion does not confirm the practice – theoretical considerations do not take into account such important factors as the behavior of market players and the tendency of bidders to accept a higher risk or the lack of access to advanced analyses, and thus better information for all market participants. This paper presents a hypothetical calculation of the prices in the centralized capacity market using Monte Carlo simulations. The results of the study confirm that the price level for the Pay-as-Bid system, due to the asymmetry of information and the level of concentration of the power generation sector in Poland would lead to higher prices than for the Pay-as-Clear system on average by approximately 2.5%. The implementation of the PAB system would, therefore, be less efficient to electricity consumers.

The paper investigates the supply structure of the capacity market in Poland in the coming years. The results of the capacity auctions conducted in 2018 are analyzed for this purpose. Three auctions were held at that time. The products traded in the capacity market are capacity obligations for the following years: 2021, 2022 and 2023. The auctions were organized in accordance with (i) he Act of December 8, 2017 on the Capacity Market and the (ii) Capacity Market Regulations published by the Polish Power Grid. The source of data used in this study is the official information of the President of the Energy Regulatory Office on the final results of the main auctions for 2021–2023 delivery periods. The list of the capacity suppliers who won capacity auctions contains the type of capacity market units, the volume of capacity obligations, the duration of capacity agreements and the business name of the capacity suppliers. The conducted analysis indicates that the auction for 2021 was won mainly by existing units (45.81%) and refurbishing units (33.51%). In subsequent years, the share of existing generating units is significantly higher and amounts to 91.67% for 2022 and 84.54% for 2023. The results of the study carried out in this paper also show that one energy company, being the owner of power generating daughter companies, has a very high share in these capacity auctions. The PGE Capital Group contracted 51.95% for 2021, 69.92% for 2022 and 64.44% for 2023 of the total capacity obligation. The volume amounts to over 70% of their total installed capacity.

The capacity market is a response to potential capacity scarcity in the system. The missing money problem may occur as a result of the dynamic development of renewable energy sources because their capacity factors are significantly lower in comparison to those of conventional generating units. The capacity market is a response to capacity scarcity in dynamic growth in renewable energy sources with lower capacity factors than thermal power plants. It is a support mechanism that provides additional funds in order for generation companies to be ready to produce electricity in system stress events. So far, seven capacity auctions have been held for 2021–2027 delivery periods. Since the vast majority of capacity market units are coal-fired public thermal power plants and combined heat and power plants, the analysis of capacity auction results provides valuable findings on coal consumption in the years to come. With this in mind, the objective of the study is to investigate the potential of coal consumption resulting from the long-term capacity contracts signed thus far. For this purpose, a comprehensive analysis of the capacity auctions’ results is conducted, including the analysis of the duration of the contracts, the structure of ownership, and fuels used in power units. The results show that the figures relating to the consumption of steam coal in units that have won capacity auctions are around 21,306 thousand Mg for 2023 and decreasing to 9,603 thousand Mg for 2035. Although European restrictions were introduced to limit remuneration for high-emission units, the long-term contracts ensure that these will remain in the system and will have an impact on the total consumption of steam coal in the medium- and long-term in the Polish power system.

The condition of the Polish energy sector does not inspire any trust of its customers. Outdated machinery and the lack of investment in new technologies make it necessary to take action to ensure the stability and continuity of electricity supplies to the end-user. In Poland, the industrial power sector is based on the use of coal and despite the Government’s announcements to resign from this raw material, more and more power investments are being made to generate energy from coal (Ostrołęka power plant). The solution which compensates for the current state of the Polish power industry is the development of distributed generation. The article presents a description of dispersed sources, power market, its organization and problems arising from its implementation. Distributed energy sources in the form of micro installations, energy clusters and virtual power plants have been described and characterized as well. It also assesses the impact of power market introduction on the development of distributed energy sources. The impact of the power market on the development of distributed sources is very hard to predict and determine. The functioning and further development of the energy sector, including the capacity market, strongly depends on the laws, regulations, as well as the economic and political situation in Poland and Europe. The social factor will also play an important role as the introduction of the capacity market will burden the financial side of each energy consumer. On the basis of the data presented on particular sources and distributed systems, one can only make predictions related to the possible effects of introducing the capacity market for the development of distributed sources.

Capacity remuneration mechanisms have been imposed globally in order to ensure capacity adequacy and prevent a sharp increase in electricity prices in the long-term. The main causes of their introduction are to provide financial support for companies to generate electricity or reduce consumption in peak demand and ensure sufficient incentives for potential investors. The paper aims to review the capacity remuneration mechanisms introduced in various countries. The following mechanisms are discussed: capacity payment, strategic reserve, reliability options, capacity obligations, and capacity auctions. The paper indicates the main advantages of mechanisms and key challenges related to their introduction and operation as well. The paper contributes to the existing literature by extending and updating the knowledge on the capacity remuneration mechanisms in various energy markets. The results indicate that the most complex schemes are market mechanisms. Regardless of the nature of the traded good (call options, certificates, capacity obligation), the second market structure must be introduced and managed. Consequently, the obligations are imposed on (i) the regulatory body (regulator or transmission system operator), generation companies (or demand-side response), trading companies, and consumers. The other challenge of the implementation of various CRMs is related to the transparent treatment of all technologies. All CRMs should be technologically neutral, but ultimately, some units are more favorable due to their greater impact on the reliability of the power system.