Partner meeting REMIX November 8th 2017 RES-E AND CAPACITY MARKET IN POLAND Adrian Mekki, Analyst,
AGENDA Delaying RES-E EU 2030 and Polish RES-E Capacity Market 2
RES-E CHALLENGES THE PROFITS OF COAL AND LIGNITE PRODUCERS An increasing share of RES will reduce the income for coal and lignite 3
AND IT IS ESPECIALLY COAL PLANTS THAT EXPERIENCE REDUCED OPERATING HOURS Power mix in 2020 with 15% wind power Power mix in 2020 with 15% solar power 4
Time on the side of the Polish government? 5
AGENDA RES-E and coal EU 2030 and Polish RES-E Capacity Market 6
Market-based support Reduced ETS surplus Auctions: The higher the power market price, the lower the need for RES-E subsidies EUA price: Reduced surplus increase the EUA price, which in turn increase the power price in Europe The higher the EUA price, the lower the importance of national RES support schemes Stronger tendency towards building RES-E based on resource quality and demand conditions 8
RES-E IS THE CHEAPEST WAY TO REDUCE EMISSION IN ETS but among Eurpean RES-E resources, the Polish are not the cheapest 9
Will the EU demand RES-E in Poland? 10
AGENDA RES-E and coal EU 2030 and Polish RES-E Capacity Market 11
WHY CREATE A POLISH CAPACITY MARKET? Increasing risk of black-out.. 40 GW installed capacity, peak of around 27 GW. But: In the summer a lot of coal and CHP capacity is unavailable due to Lack of cooling water Lack of heat demand Brown-out in the summer of 2015..and insufficient willingness to invest.. New BAT-requirements increases already high re-investment requirements in the polish coal power fleet. Limited willingness to re-invest due to low prices as well as regulatory and market uncertainty. creates the demand for a capacity market Intended to repair what is perceived as a market failure the lack of sufficient investment to assure stability of power deliveries. 12
THE POLISH CAPACITY MARKET IS BEING DISCUSSED December 5th 2016 July 6th 2017 October 27th 2017 First draft of capacity market law Moderate adjustments in the draft law Draft law sent to first reading in Sejm Dutch auctions (Pay-As-Clear) Primary and second market Main/minor auctions MinEner sets demand Costs covers by consumers Cross-border participation unclear First delivery period 2021 November 3rd 2017 EU Poland compromise presented in Energy subcommittee 2016-2017 The European Commission considers the draft law and negotiates with the Polish goverment 13
MAIN REPORTED REVISIONS IN THE EU-POLAND COMPROMISE No auction baskets: Reduces the Government s direct control on who benefits from the capacity market November 3rd 2017 EU Poland compromise presented in Energy subcommittee Longer contracts for low-emission plants: Power plants emitting less than 450 gco2/kwh receive capacity contracts for 2 years longer. Improved conditions for RES-E and storage: The minimum time capacity must be available is reduced from 15 hours to 4 hours. More cross-border participation: Until 2021, the interconnectors will themselves be considered participants. After 2021, foreign power plants will themselves be allowed to participate. ENTSO-E will estimate available capacity. 1 GW indicated NB! Not based on official documents, but on reports from the Polish energy news page Wysokienapecie.pl published Monday 6th of November 2017. 14
THE 550 EPS MIGHT LEAD TO A QUICKER SHIFT FROM COAL TO GAS AND INCREASED PRICES Generation capacity for which a final investment decision has been made after [OP: entry into force] shall only be eligible to participate in a capacity mechanism if its emissions are below 550 gr CO2/kWh. Generation capacity emitting 550 gr CO2/kWh or more shall not be committed in capacity mechanisms 5 years after the entry into force of this Regulation Compass Lexecon study*: The inclusion of 550 EPS in the CM will lead to 3.8 GW CCGT capacity 2020-2030 instead of new coal capacity. From the European Commission s proposal for a regulation on the internal electricity market article 23 paragraph 4. *Source: http://www.pkee.pl/upload/files/a_report_for_the_polish_electricity_association_fti.pdf 15
Consequences for gas and RES-E 16
1000 toe BIOMASS MAKES UP THE LION S SHARE OF POLAND S RENEWABLE RESOURCES 10 000 9 000 8 000 7 000 All other RES 6 000 5 000 4 000 3 000 Solid biofuels 2 000 1 000-1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Solid biofuels (excluding charcoal) Hydro Wind Biogas Municipal waste (renewable) Biogasoline Biodiesels Others * Gross consumption of renewable energy 1990-2015 (Eurostat) 18
1000 toe OF WHICH RESIDENTIAL CONSUMPTION FOR HEATING MAKES UP A CONSIDERABLE SHARE (37%) 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000-1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Power/Heat production Industry Residential Agriculture/Forestry Services 19
Mtoe.. AND IT IS THE HEATING AND COOLING SECTOR THAT DOMINATE TOWARDS 2020* 12 000 10 000 Transport : 19 % 8 000 Electricity: 26 % 6 000 4 000 Heating and Cooling: 55 % 2 000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *NREAP Poland 2010-2020 20