Capacity market & energy storage – new developments on the Polish energy market
The beginning of the new year brought many developments within the Polish energy market. On January 18, 2018 the capacity market law entered into force in Poland. The capacity market is based on the premise that energy producers guarantee readiness to deliver certain volumes of power to the system within the delivery period and to also deliver this during emergency periods. The capacity market is expected to significantly change the functioning of the energy market in Poland and promote more flexibility in energy production.
The capacity market also gives momentum to the development of energy storage capacities across Poland, both for individual and self-standing storage capacities as well as storage capacities combined with energy production. The capacity market also provides the possibility of financing storage capacity investments out of the revenue generated from the provision of capacity services. This means that energy storage services could play an active role in the capacity market as the threshold for providing stable energy capacity has been set to a relatively low level of 4 hours, which is the minimum level of financial feasibility of energy storage technologies. In particular the capacity market will be accessible to the available energy storage technologies such as lithium-ion batteries or pumped storage power plant. The Ministry of Energy assumes that the competitiveness of capacity market will be achieved among others though auctioning of Demand Side Response (DSR), which is a mechanism limiting demand for energy, as well as giving access to the market to renewable sources of energy (RES). A feasible solution could rely on RES such e.g. windfarm and energy storage solution, which combined together could ensure sufficient availability of capacity services on the operators demand. The capacity market is still in the development stage. On January 19, 2018 the Polskie Sieci Elektroenergetyczne (PSE) opened the forum to public consultations of the capacity market regulation, which further develops rules for participants in this market.
Hand in hand with this, in January 2018, the Ministry of Energy reaffirmed its ambition to build a nuclear power plant in Poland. The capacity of the planned nuclear power plant is likely to be between 1000-3000 MW, with costs of the project estimated at EUR 5-15 billion depending on the ultimate capacity. The government has already indicated two potential locations, and indicated that the key aspect of the project, which is finance is to be decided in the very near future.
Author: Jacek Kozikowski, PhD, LL.M. Associate in Energy, Natural Resources & Chemicals at Kochański & Partners