One of the company’s primary responsibilities as a transmission system operator is to ensure the operational security of the power system. This objective is supported by the implementation of a capacity mechanism, i.e. a capacity market, which should guarantee generation adequacy in the medium and long term. The capacity market should also provide available capacity for further development of renewable energy sources without adversely affecting the security of electricity supply to end users.

The capacity market is an important part of the power sector transformation. Its operation can generate investment incentives to support the construction of new generating units, the replacement of decommissioned units and modernisation of existing units. It should also allow the implementation of an effective and competitive mechanism to coordinate the construction and decommissioning of generating units and the development of demand side response services, while ensuring that the costs to end users are minimised.

The capacity market has been operating in Poland since 18 January 2018, the day the Act of 8 December 2017 on the capacity market entered into force. The first year of the performance of the capacity obligation provision by the capacity market units was 2021.

Since the beginning of 2023, a number of processes have been performed to enable the conclusion of new capacity agreements and the performance of those concluded to date.

In 2023, the implementation of capacity market processes began with general certification, conducted from between 2 January and 10 March. Participation in general certification is obligatory for all existing physical generating units with a gross maximum capacity of not less than 2 MW, and the fulfilment of this obligation is monitored by the President of the ERO. The participation of planned physical generating units, demand side response physical units and planned demand side response units  was not obligatory, but it was prerequisite for subsequent participation in an auction. A unit that successfully completed the general certification process was entered into the register.

In the general certification process, applicants submitted 1,735 applications for entry into the register in 2023. 1,679 units were successfully verified and entered into the register, including 1,360 physical generating units and 319 demand side response units. Tab. 2 shows a summary of the 2023 general certification.

The charts below provide information on the number of physical generating units entered into the register in the course of the 2023 general certification, by primary energy source used.

Within 14 days of the end of the general certification, PSE submitted to the minister in charge of energy and the President of the ERO a detailed report summarising the general certification. In addition, within 28 days of the completion of the general certification, PSE prepared a proposal for the parameters of the main auction for the delivery year 2028 and the parameters of the additional auctions for individual quarters of the delivery year 2025, and submitted it to the President of the ERO and the minister in charge of energy.

The final values of the parameters were published in the Regulation of the Minister of Energy of 4 August 2023 on the parameters of the main auction for the delivery year 2028 and the parameters of additional auctions for the delivery year 2025.

Certification for additional auctions for individual quarters of the delivery year 2024 that began on 22 November 2022 was completed on 17 February 2023. In the course of the certification for additional auctions for individual quarters of the delivery year 2024, capacity providers submitted 128 certification applications, of which 58 were for existing generation capacity market units, 69 unproven demand side response capacity market unit, and 1 proven demand side response capacity market unit. As a result of the certification, PSE issued certificates allowing capacity market units to participate in capacity auctions or the secondary market. Tab. 2 provides detailed information on the number of certificates issued.

Immediately after the publication of preliminary results of additional auctions for individual quarters of the delivery year 2024, PSE launched the option to report in the register secondary trading transactions concerning the delivery year 2024. Each secondary trading transaction must be reported to PSE for verification of compliance with the requirements of Article 48(2) of the Act. The minimum volume of the transferred capacity obligation covered by a single transaction is 0.001 MW, whereas its minimum duration is one hour between 7:00 and 22:00 on working days. A transaction conducted in secondary trading must be reported no later than 24 hours before the start of the period to which it relates.

Simultaneously with the certification processes, the PSE continued the process of replacing planned demand side response units. This process is conducted in cooperation with the DSOs and is aimed at obtaining information on physical demand side response units replacing the planned demand side response physical units and entering these units into the register. Capacity providers may submit replacement requests no later than 3 months prior to the start of the delivery period for which the capacity agreement was concluded, or 3 months prior to the start of the last quarter of the delivery year specified in the certificate – this applies to units not covered by the capacity agreement. Ultimately, 26 planned demand side response units were replaced in 2023.

After the process of replacing planned demand side response units was completed, PSE proceeded with demand side response testing for unproven demand side response capacity market units. For unproven demand side response capacity market units that do not receive the confirmation of the demand side response performance test before the beginning of the delivery period specified in the capacity agreement, the capacity agreement is terminated. Demand side response tests are conducted at the request of the capacity provider submitted through the register. Capacity delivered of at least 80% of the product of the net maximum capacity and the de-rating factor (corrective availability factor) is considered a positive test result. In 2023, 52 units received a positive result and changed their status to a proven demand side response unit.

On 24 August 2023, PSE conducted three pre-auctions via the Capacity Market Participant Portal for the main auction for the delivery year 2028 and pre-auctions for additional auctions for individual quarters of the delivery year 2025. Foreign physical units located in countries whose power system is directly connected to the NPS may participate in a pre-auction. The Act allows units located in three areas to participate: in the synchronous profile zone (transmission systems of the Federal Republic of Germany, the Czech Republic and the Slovak Republic), in the Republic of Lithuania and in the Kingdom of Sweden. Pre-auctions are conducted for each zone separately, and the maximum volume of power obligations for a given zone is determined by a regulation of the minister in charge of energy issued pursuant to Article 34 of the Act. In a pre-auction, bids are accepted starting with those with the lowest price until the maximum volume for a given zone is reached. The bids selected in the pre-auction are then replaced with capacity market units in the main certification.

The pre-auctions held in 2023 concerned the admission of foreign physical units located in the territory of the Republic of Lithuania, the Kingdom of Sweden and the synchronous profile to the main auction for the delivery year 2028. Pre-auctions for the main auction for the delivery year 2028 ended with the full acceptance of 67 bids and partial acceptance of 1 bid. The total capacity under the bids accepted in the above-mentioned auctions is 1,590 MW.

The pre-auctions for additional auctions for the individual quarters of the delivery year 2025 ended with the full acceptance of one bid for Q1 of the delivery year 2025 and full acceptance of one bid for Q2 of the 2025 delivery year. Both accepted bids come from the synchronous profile zone. No bids were submitted for the zones covering Lithuania and Sweden. The total capacity under the bids accepted in the above-mentioned auctions is 5 MW for Q1 and 5 MW for Q2 of the delivery year 2025.

Another capacity market process was certification for the main auction for the delivery year 2028. Participation in the main certification is not mandatory but is necessary to create capacity market units and allow them to participate in the auction or in the secondary market for a given delivery period. As a result of successful verification of the applications, PSE issued certificates authorising the capacity market units to participate in the main auction and the secondary market. As part of the certification for the main auction for the delivery year 2028, capacity suppliers submitted 428 certification applications, 329 of which were for generating capacity market units, including 68 foreign generating capacity market units), and 99 were for demand side response capacity market units. Following the certification, PSE submitted a detailed report to the minister in charge of energy and the President of the ERO summarising the main certification.

As a result of the verification of the applications, PSE issued 359 certificates allowing the capacity market units to participate in the capacity auction or the secondary market. Tab. 4 provides detailed information on the number of certificates issued.

In 2023, the main auction for the delivery year 2028 was also conducted. It was the eighth main auction in the Polish capacity market. It resulted in a total of 159 capacity agreements, including 40 for more than one year. As with the main auction for the delivery year 2027, only capacity market units meeting the 550 g/kWh carbon emission limit were also admitted to the main auction for the delivery year 2028. Tab. 5 shows a summary of the main auction conducted.

The rules for conducting main auctions are identical as those used in additional auctions. However, unlike additional auctions, in the main auctions, power market units may – depending on the type of capacity market unit and the duration of the capacity obligation the unit offers – enter into multi-year capacity agreements. Existing generating capacity market units may offer capacity obligations for only one delivery period., Modernised generating Capacity Market units and demand side response capacity market units that will declare to make an investment and meet the unit capital expenditure levels specified in the regulation may offer the obligation for no more than 5 delivery periods. New generating capacity market units declaring unit capital expenditure levels under the regulation may offer the capacity obligation for not more than 15 delivery periods. In addition, the term of the capacity agreement may be extended by an additional 2 years for low-emission generating capacity market units (“green bonus”).

In compliance with the time limit of 3 working days after the end of the capacity auction, as provided for in the Act, PSE entered into the register and published preliminary results of the auctions. Subsequently, a detailed report summarising the auction process was submitted to the minister in charge of energy and the President of the ERO. The final results of the main auction were published by the President of the ERO in the Public Information Bulletin on 5 December 2024. As a result of the capacity agreements concluded, capacity obligations for the years 2028-2044 were contracted.

In 2023, the process of submitting and verifying declarations on the date of commencement of commercial production and declarations on meeting the emission limit was conducted for the second time. Capacity providers submitted declarations for 2022. All capacity providers with capacity market units which included physical generation units certified for the delivery year 2022, were required to submit declarations on the date of commencement of commercial production. The obligation to submit declarations on meeting the emission limit applied to all capacity market units certified for the delivery year 2022, which included generating units that began commercial production after 4 July 2019. The declaration on the date of commencement of commercial production was submitted for 248 capacity market units, and the declarations on meeting the emission limit was submitted for 61 capacity market units. Capacity providers who submitted declarations on the commencement of commercial production after 4 July 2019 and on failing to meet the capacity market unit’s emission limit were required to return the remuneration under the capacity agreement received for performing the capacity obligation that arose after 31 December 2019, and to return the bonus paid in 2022. As a result of verification of the declarations, PSE found that 11 capacity market units, which included generating units that began commercial production after 4 July 2019, did not meet the emission limit. For 10 of these units, the capacity providers were required to return the bonus paid, and for 1 unit, the capacity provider was obliged to return part of the remuneration.

In 2023, work was continued as part of the process of monitoring the performance of capacity agreements. Pursuant to the Act, the capacity provider who has entered into a capacity agreement relating to a new or modernised generating capacity market unit is required to demonstrate, no later than 24 months after the publication of the final results of the main auction, that the capacity market unit in its disposal has reached the Financial Commitment Milestone (FCM). The FCC is achieved by demonstrating that capital expenditure of at least 10 percent of the required capital expenditure has been incurred and investment contracts with a total value of at least 20 percent of the required capital expenditure have been concluded. In 2023, PSE positively verified FKM declarations for 14 capacity market units for which capacity agreements were concluded during the main auction for the delivery year 2026. For 1 capacity market unit for which a capacity agreement was concluded in the course of the main auction for the delivery year 2026, the FCM was not achieved on time. This resulted in the termination of the capacity agreement.

According to the Act, a capacity provider that has entered into a capacity agreement for more than 1 delivery year as a result of the main auction is required to demonstrate – no later than before the beginning of the first delivery period, and in the case of a new generation capacity market unit no later than the end of the third delivery year, or before the end of the term of the capacity agreement if it has been entered into for less than 3 delivery years – that the capacity market unit it has at its disposal has reached the Substantial Commitment Milestone (SCM). The SCM is achieved by presenting documents confirming the completion of the substantive scope of the project and the required capital expenditure, and the ability of the unit to provide capacity in an amount not less than 95 percent of the capacity obligation under the capacity agreement concluded for this capacity market unit in the course of the main auction, with continuous operation of the unit, for a period of at least one hour. In addition, an independent expert opinion containing information in accordance with Article 52(2)(3) of the Act must be presented, accompanied by information on the amount of state aid provided, and for new capacity market units also a list of metering points.

In 2023, PSE positively verified SCM declarations for 26 capacity market units for which capacity agreements were concluded during the main auction for the delivery year 2024. In addition, as part of the process of monitoring the implementation of capacity agreements, investment reports submitted within 10 working days after the end of 6 full months starting from the third calendar year after the main auction was completed, to check whether the achievement of the SCM on time is not at risk. In the first half of 2023, 30 investment reports were positively verified, and in July 2023 – 25 reports.

2023 was the third delivery year for capacity contracted as a result of the capacity auction. PSE continued to handle successive capacity market processes, i.e. demonstrating the ability to perform the capacity obligation, test periods of demand in the capacity market, and payments for the performance of capacity obligations.

In 2023, no periods of demand in the capacity market were announced.

According to Article 67 of the Act, upon the end of each quarter of a given delivery year, the capacity provider that was a party to the capacity agreement, demonstrate to the operator its ability to perform the capacity obligation, with regard to each of the capacity market units to which the capacity agreement relates. The demonstration of the ability to perform the capacity obligation consists in indicating to the operator date and time when the capacity market unit was providing capacity to the system in the required volume (demonstration). Tab. 7. shows the number of capacity market units (CMUs) subject to the demonstration obligation in 2023 and their performance on a quarterly basis.

Due to the negative results of the demonstration, capacity providers returned remuneration totalling PLN 9,954,917.14.

In addition to the demonstration, the second process related to the performance of the power obligation is, according to Article 67(5) of the Act, the test period of demand in the capacity market. PSE may declare a test period of demand in the capacity market for one capacity market unit subject to a capacity obligation no more often than once per quarter (except for units that have received a negative result from the test period of demand). The chart below shows the number of test period of demand in the power market by quarter in 2023.

Of a total of 244 test periods of demand in the capacity market, 219 cases resulted in a positive outcome and 25 in a negative outcome. Pursuant to Article 68(8) of the Act, PSE fined capacity providers for non-performance of the capacity obligation in a total net amount of PLN 1,590,971.07. In the event of a positive outcome of the test period of demand in the capacity market, PSE reimburses any reasonable expenses associated with its performance at the request of the capacity supplier. Tab. 9. presents the amounts reimbursed by PSE to capacity providers following the approval of requests for reimbursement of reasonable expenses in each quarter of 2023.

2023 was the third year of settlements in the capacity market, including in particular the payment of remuneration for the performance of the capacity obligation and the calculation of fines for non-performance of the capacity obligation and to meet the SCM. Tab. 9. shows the remuneration earned by capacity suppliers in 2023 on a monthly basis.

In 2023, PSE did not impose any fines for delays in meeting the SCM.

In early 2024, between 4 January and 11 March, PSE carried out another general certification. It was the first certification in which the participation of generating units with a gross maximum capacity of not less than 2 MW was not mandatory. In the course of the certification, the applicants submitted 2,984 applications for entry into the register. A total of 2,695 units were successfully verified and registered, including 1,977 physical generation units and 718 demand side response units. A summary of the number and net maximum capacities of the units entered into the register is provided in Tab. 10.

Within 14 days of completion of the general certification, PSE submitted a detailed report summarising the general certification in 2024 to the minister in charge of energy and the President of the ERO. In addition, within 28 days of the completion of the general certification, PSE prepared proposed parameters for the main auction for the delivery year 2029 and the parameters for additional auctions for each quarter of the delivery year 2026. The proposal of parameters was submitted to the President of the ERO and the minister in charge of energy.

At the same time, between 23 November 2023 and 16 February 2024, PSE carried out the certification for additional auctions for individual quarters of the delivery year 2025. As in certification for the main auction, participation was not mandatory, but it was necessary in order to establish capacity market units and to enable them to participate in additional auctions for individual quarters of the delivery year 2025 or in the secondary market for that delivery year. As a result of positive verification of applications, PSE issued certificates authorising capacity market units to participate in the above-mentioned processes. Following the certification, PSE submitted a detailed report summarising the certification for additional auctions to the minister in charge of energy and the President of the ERO.

Additional auctions were conducted for the fourth time by PSE on 14 March 2024. Four additional auctions for each quarter of the delivery year 2024 were held simultaneously. The process resulted in the conclusion of a total of 221 capacity agreements. Tab. 12. provides a summary of additional auctions conducted.

Within the time limit of 3 working days after the end of the capacity auction, as provided for in the Act, PSE entered into the register and published preliminary results of the auction. A detailed report summarising the auction process was submitted to the minister in charge of energy and the President of the ERO. The final results of the additional auctions for the delivery quarters of 2025 were published by the President of the ERO in the Public Information Bulletin on 5 April 2024.

After the publication of preliminary results of additional auctions for individual quarters of the delivery year 2025, implementing the provisions of Article 48(1)(1) of the Act, PSE launched the option to report in the register secondary market transactions concerning the delivery year 2025.

As required under the Act,  PSE conducted the general certification, the additional auction, the pre-auction, the replacement of planned demand side response units, the certification for the main auction, the main auction for the delivery period 2028, and the certification for the additional auctions for each quarter of the delivery year 2025. Certifications and auctions are held annually on dates designated by the Act.

The next general certification and additional auctions for individual quarters of the delivery year 2025 were conducted in 2024. The verification of the performance of capacity obligations is also carried out and settlements of capacity agreements are conducted.