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14 September 2020
In recent weeks, information has been published concerning the draft amendment to the Act of 8 December 2017 on the Capacity Market (Journal of Laws 2020, Item 247, as amended). The amendment aims to adapt Polish regulations to reflect the new electricity market structure agreed at the EU level as part of the Clean Energy for all Europeans package. The Ministry of Climate is responsible for the draft law, the adoption of which is planned for the third quarter of 2020.
The draft amendment's main purpose is to ensure that the Act on the Capacity Market complies with the EU Regulation of 5 June 2019 on the internal market for electricity (2019/943) (OJ EU L of 2019, 158, p54), particularly with regard to new requirements for generation capacity mechanisms, including carbon dioxide emission limits.
As of 4 July 2019, EU Regulation 2019/943 excludes new generation units (which were not carrying out commercial production before that date) which emit more than 550g CO2/kWh from participating in the capacity market. Further, as of 1 July 2025, existing units (which were carrying out commercial production before 4 July 2019) which emit more than 550g CO2/kWh and more than 350kg CO2/kW per year will also be excluded. These emission limits do not apply to capacity agreements concluded before 31 December 2019 (see Articles 22(4) and (5) of the regulation).
Further, according to the regulation, the regulatory authorities will determine and make public the value of undelivered energy; the estimated values of undelivered energy will be updated at least every five years. EU Regulation 2019/943 also requires the President of the Energy Regulatory Office to present the capacity to be purchased at auction.
According to the information presented in the Inventory of Government Legislative and Programming Works, the Act on the Capacity Market proposes changes in the following areas, among others:
The Act on the Capacity Market regulates the organisation of the capacity market and sets out the rules for supplying electricity to the power system during periods of emergency (Article 1(1) of the act).
Under Article 1(2) of the act, this regulatory solution is intended to ensure the medium and long-term security of electricity supply to final customers in a cost-effective, non-discriminatory and sustainable manner.
On 1 January 2020 EU Regulation 2019/943 – one of the key elements of the new electricity market structure agreed in the Clean Energy for all Europeans package – entered into force (with exceptions). The regulation establishes the basic principles of an efficient electricity market and affects:
Pursuant to Article 20(3) et seq of the regulation, as Poland applies a capacity adequacy mechanism in the form of a capacity market, it had to prepare an electricity market reform implementation plan and submit it to the European Commission for its opinion. The European Commission published a draft of the Polish implementation plan and launched public consultations, after which it issued an opinion setting out its recommendations. The agreed implementation plan, which takes the European Commission's recommendations into account, was adopted on 14 May 2020. The supplemented document contains a plan for electricity market reforms with respect to:
The document also considers the impact of the COVID-19 pandemic and its negative consequences for the timely implementation of both current investments and the reforms that have been launched.
As regards the capacity market, the current legislative works primarily aim to take into account the limits introduced by EU Regulation 2019/943. It is indicated that because generation units which emit more than 500g CO2/kWh account for the majority of all generation units in Poland, the draft amendment to the Act on the Capacity Market includes only the amendments necessary to implement EU Regulation 2019/943. As a result, the admission to the capacity market of units which emit more than 500g CO2/kWh and an average of less than 350kg CO2/kW on an annual basis has been waived. Provisions are planned which will prevent the participation of units which do not meet the 550g CO2/kWH limit in the certification for auctioning with a view of participating in capacity auctions. Nevertheless, units which do not meet the indicated limit and were established before 4 July 2019 will be admitted for certification and participation in the secondary market only. In implementing the regulation, the draft amendment:
For further information on this topic please contact Magdalena Krawczyk, Ewa Przyśliwska-Urbanek or Kamil Zawicki at Kubas Kos Gałkowski by telephone (+48 22 206 83 00) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Kubas Kos Gałkowski website can be accessed at www.kkg.pl.
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