In 2022, the impact of COVID-19 on the Polish power sector was only marginally felt in Q1. In the following quarters, Russia's aggression against Ukraine, the Polish and international response to this aggression and its economic consequences became a key factor shaping the external environment. In particular, the sanctions imposed on Russia had an impact on prices and, in part, on the availability of fossil fuels in Europe: natural gas, coal and oil.

The operation of the power system was also affected by regulatory changes influencing the framework in which PSE operates. The final shape of the EU energy market in the future is also still under discussion. In the medium to long term, technological trends primarily related to the decarbonization of the sector, the development of nuclear power, phase-out of natural gas and coal-exit will play a fundamental role in the evolution of the power system and its environment. The renewable energy, energy storage and electromobility sectors continue to grow strongly. The process of introducing new metering technologies is also underway, providing opportunities for the use of high-frequency data (HFD) and accuracy demand data. Annual sales of electric vehicles (BEVs) in Poland exceeded 10,000 in 2022.

• Technological advancement in the area of data collection and processing will impact the importance of TSOs as HFD (High Frequency Data) owners
  
  

In the modern economy, data acquired with high frequency, showing economic activity, play an increasingly important role. With technological advancement in metering, it is becoming increasingly possible to collect and analyse data from the real economy, including data from energy suppliers. PSE acts as the Energy Market Information Operator and oversees the establishment and development of the Central Energy Market Information System.

• Technological transformations in the area of energy storage and generation change the structure of generation and the nature of the transmission grid and the role of the TSO

Poland is undergoing rapid development of prosumer energy based on photovoltaics, which began to play a noticeable role in the national energy mix in 2020 and whose importance is steadily increasing. Generation companies are gearing up for off-shore wind power projects. The first commercial-scale energy storage facilities, such as the BESS storage facility in Pomerania, are already in operation. As a result of the dissemination of new technologies, it will become necessary to adapt to the new model and spatial allocation of generation of both the distribution networks managed by distribution companies and the transmission grids managed by PSE.

The photovoltaic sector is growing primarily based on small, domestic prosumer systems and small commercial systems. Changes to prosumer billing rules in 2022 have slowed the process slightly, but the group of active prosumers continues to expand. Serving this group of consumers and generators and managing the energy they generate within the existing distribution network and transmission grid infrastructure is an increasingly serious challenge.

A barrier to the development of renewable energy industry is still the problem of energy storage during periods of excessive generation; making it possible to use energy at times when generation from RES sources is not possible, during windless times, at night, etc.). The lack of efficient storage technologies has, until recently, made it impossible to solve this problem. In recent years, the commercial use of energy storage has become increasingly common. Technology development is supported by falling component costs, the growth of commercial energy storage facilities for power systems, and the rapid development of information and metering technologies that enable distributed source management. At the same time, other energy storage technologies, such as power-to-gas and hydrogen electrolysis technologies, are developing around the world. Hydrogen is increasingly being treated as a future energy storage and transfer technology.

• Government policy to build nuclear power in Poland

In 2022, negotiations with potential investors for the construction of a nuclear power plant in Poland were underway and important decisions were made about the direction of the country's nuclear power industry. The first, pre-project agreements with contractors were concluded at the end of the year. The planned handover dates for Poland's first nuclear power units (the first half of the next decade) are also key to the coal-exit process and the challenges posed by aging coal-fired power units, still the core of the NPS.

• The development of the European market and the increase in international trade influence the long-term process of price convergence in Europe

The development of the European market, supported by successive regulations, results in an increase in the scale of cross-border exchange. The development of a common market based on price zones affects the process of development of the national transmission grid and forces its adaptation to the new scale and directions of cross-border flows. In the medium-term perspective, it may also be a source of additional costs for transmission operators, due to the need for more frequent use of remedial actions taken outside the market.

• Discussion on the reform of the power market design

The energy crisis triggered by a decline in the supply of energy resources and a surge in their prices, exacerbated by the Russian-Ukrainian conflict in 2022, has sparked a European discussion on correcting the market design. As a result of ongoing discussions as early as in 2023, the EC has submitted for discussion draft amendments aimed at accelerating the market penetration by RES and at the same time accelerating the phase-out of natural gas as a transition fuel, as well as reducing the sensitivity of energy prices for end users, especially individual consumers, to the volatility of fossil fuel prices. The changes are intended to complement the European Green Deal and the REPowerEU programme.

• European climate policy increasingly driving up the cost of generation from emitting sources

The situation of the national power system, and especially the condition of generators using conventional generation sources, is also – increasingly – affected by EU climate policy and the growing pressure, both regulatory and ETS pricing, on an accelerated coal-exit. The primary tool of this policy is the so-called ETS – emission allowances, the prices of which are determined by the market. ETS price increase has been observed for several years. In 2022, the price of the unit, after temporary fluctuations in the third quarter, remained near record levels of EUR 80–90. It resulted in a significant increase in the price of energy generated in emission sources, multiplying a price increase effect caused by the situation in the energy resources market. Eventually, ETS prices on European markets rose significantly. For some European countries, including Poland in particular, coal-exit will be a major technological challenge due to the high share of coal technologies in domestic generation and the time it takes to introduce new technologies.

• Restoring the balance of energy resources markets

Market prices for coal, oil and natural gas, after spectacular increases in the first half of the year, further accelerated by the outbreak of the Russian-Ukrainian war, stabilised in March and declined in the second half. By the end of the year, prices for all energy resources were at prewar levels, although still higher than multi-year averages. In the first quarter of 2023, we saw further price declines near pre-2021 levels triggered by fears of a global recession and oversupply.

The PSE is working extensively to adapt to the new shape of markets and new technologies in both the short and long term.

Development of market mechanisms

Our company develops market mechanisms on an ongoing basis to adapt them to the changing situation. In 2022, intensive works were underway to prepare a thorough reform of the balancing market, the results of which were submitted for public consultation in 2023. The market reform aims, among other things, to adapt it to the changing generation structure and enable integration with European platforms for balancing energy exchange:

In 2022, PSE also introduced a new model for procuring contingency reduction of power consumption services, allowing demand-side offers to be used in situations of particularly high demand and thus, reducing peak power demand in the NPS.

At the end of 2022, PSE began publishing daily peak hour information on its website, with the highest demand on any given day. The publication aims to activate consumers and encourage them to save energy during these periods, and thus – actively involve them in the process of balancing the power system.

Research works

In order to prepare for long-term changes, PSE participates in analytical and research works conducted both individually and as part of various international groups and consortia.

ENTSO-E Vision: A Power System for a Carbon Neutral Europe

In 2021–2022, our organisation actively participated in the Vision project implemented by ENTSO-E, which resulted in the report ENTSO-E Vision: A Power System for a Carbon Neutral Europe which presents a comprehensive vision of the development of the power system and energy markets in the perspective of a shift away from conventional energy sources towards non-carbon and renewable sources. The report addresses the 2050 outlook and beyond. It covers issues in the areas of:

• management of system operation,
• acquisition of sources of flexibility,
• development of transmission grids,
• energy market,
• providing energy at affordable prices for end users.

Research and development works

In the research and development area, new technical and technological solutions are identified, and methods and tools emerging on the market are tested and verified, including the possibility of applying them to the TSO's business needs.

Adaptation activities to the new shape of markets and new technologies are carried out by the substantive organisational units of the PSE. They aim to ensure the implementation of newly emerging environmental regulations and requirements while ensuring a safe and continuous supply of electricity.

Development of technical solutions for the suspension clamps of phase conductors in existing 220 kV and 400 kV lines in order to increase the suspension height of phase conductors

The subject of the work was the development of new technical solutions for the suspension of phase conductors on the intermediate poles of existing 220 and 400 kV lines, allowing to increase the height of the suspension of phase conductors in relation to the heights resulting from the suspension insulator solutions, such as the ŁPA type, currently used in domestic transmission lines.

The work analysed the insulation clearances and strength of ten types of intermediate poles of different series (2 400 kV poles and 8 220 kV poles) in order to test the feasibility of using the designed two-row tension and suspension insulator of ŁO2P type on them. As a result of the analysis, detailed designs for technical solutions of insulating strings for 220 kV and 400 kV intermediate poles were developed.

The developed solutions will be used in places of existing lines, where there will be a need to increase the height of the cable suspension on the intermediate pole, for example, due to the so-called cable flow. The work ended in June 2022.

Purchase of electricity to cover transmission losses with a cost optimisation component

The goal of the project was todevelop a solution concept based on technical and fundamental analysis and implement an electricity price predictor. As part of the project, research was conducted on the feasibility of using a cost optimisation component based on historical data, current energy prices, and factors directly and indirectly affecting the energy price.

Work has been done, including analysis of predictive models for electricity prices and optimisation of the electricity purchasing process. The optimisation model selects the best buying scenario, i.e. the plan for buying exchange instruments for each day, depending on the results of the forecasting module. The tool employs a number of configuration options, such as the selection of the decomposition period, upper purchase limits on instruments, the possibility of introducing limits on the purchase of individual contracts, the possibility of introducing external regressors into the forecasting models in the form of, among others, CO₂, oil, gas and coal allowance prices.

A prototype of the application is currently undergoing additional testing before a possible deployment. Implementation is being considered for: possible use of forward market energy price projections (this could be used to support the decision to purchase a particular instrument) and to compare the results with the monthly decomposition that is used to plan purchases on the OTF.

Support in the implementation of the preparatory stage of the pilot of digital substation technology at PSE

The task included a review of projects carried out around the world and a multi-option analysis of the project conduct concept to determine the optimal method for carrying out the work. The next step will be to prepare the documentation necessary to launch the next stages of work.

The purpose of the analyses carried out was to assess the maturity of the digital substation construction techniques in use and to verify theoretically whether the solutions are secure and safe in operation and ready for implementation in the National Power System. Consideration is currently being given to the feasibility of implementing the selected digital substation implementation option in terms of the availability of PSE resources and the capabilities of the technology provided by manufacturers. The project ended in December 2022.