Tools
Providing energy security has multiple dimensions and is relevant to both on-going operations and long-term investment plans.
Generation units from the Conventional Generation, District Heating and the Renewables segments are deployed in ensuring energy security. The Distribution segment also plays an important role.
The deployment of generation units in the National Power System depends on energy demand, which fluctuates around the clock and changes seasonally. The Transmission System Operator issues work or stand-by orders to generation units in accordance with the rule that units with the lowest variable cost are deployed first. As demand grows, the operator engages other (increasingly expensive) generation units, which makes the wholesale energy price go up. PGE Group’s portfolio includes competitive generation units based on lignite, which thanks to a cost advantage and access to their own fuel are engaged by the operator also during off-peak hours, which in practice means around the clock, all week, which has an impact on these generation assets’ production volumes and economies of scale. This is why availability of PGE’s generation assets has a direct impact on energy security and competitive energy pricing for the Polish economy.
PGE Group’s generating fleet is distributed throughout the country, which is why we are an important partner for the Transmission System Operator. The operator’s role is to balance the system, i.e. to match demand for electricity with electricity supply. The most important services provided by PGE Group to the Transmission System Operator include:
These revenues constitute stable part of the Group’s revenues, and with the launch of the capacity market, their role will increase even more. Thus, PGE’s exposure to the electricity market will become relatively lower.
The capacity market in Poland will commence operation in 2021. Three capacity auctions took place in November and December 2018 – for the periods starting in 2021, 2022, 2023. The main auction for 2024 took place in December 2019. Moreover, first additional auction took place in 2020 –concerning deliveries for the particular quarters of 2021.
Main auctions for delivery years:
| 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|
| Clearing price (PLN/kW/year) | 240.32 | 198 | 202.99 | 259.87 |
| Volume contracted (MW) | 22,427 | 10,580 | 10,631 | 8,671 |
| Multiyear contracts (MW) | 12,459 | 125 | 853 | 5,669 |
Estimated PGE revenues (indexed*)
*Estimated revenues based on auction clearing price. Capacity obligation price for multiyear agreements will be adjusted annually with the annual average consumer price index (assumed 2.5% a year).
In addition, remuneration for new or modernised units is lowered by the amount of public aid granted to investments. PGE minimalised the risk that capacity market revenues will be curtailed because of public aid
As result of the above auctions, the PGE Group has concluded agreements, securing a revenue of PLN 2.5 billion per annum during the next 5 years. Multiyear auctions concern new units (at Opole, Turów and Dolna Odra power plants) or modernized ones. Low-emission units (like Dolna Odra) benefit from the extension of the contracted capacity supply period by 2 years.
PGE Group is committed to long-term projects. Construction of new generation capacities and their diversification is one of the main assumptions of the Group’s strategy. The profitability of investments in generation assets cannot be based solely on the volume of energy produced, but requires an additional support system. The solution is the capacity market, in which generating units receive remuneration not only for the volume of energy produced, but also for the readiness to deliver it. Obtaining 17-year support for the construction of new gas capacities at Dolna Odra Power Plant will allow for a favorable rate of return on investment, while guaranteeing stable revenues.
Delivering electricity to customers is no less important than producing it. As Distribution System Operator, we are responsible for the reliability of energy supplies in the eastern and central parts of the country. We deliver energy to end customers over high-, medium- and low-voltage grids. Ensuring energy security means, above all, continuously maintaining the distribution network in proper shape, conducting essential modernisations and immediately removing failures caused by forces of nature. We want interruptions in energy supply to be as short and infrequent as possible. The quality of distribution services is measured using generally accepted indicators: SAIFI and SAIFI:
SAIDI – System Average Interruption Duration Index – measures the average system interruption duration in minutes per customer per year.
SAIFI – System Average Interruption Frequency Index – measures the average frequency (number) of interruptions, expressed as the number of customers exposed to the effects of all interruptions in a given year divided by the total number of customers.
The President of the Energy Regulatory Office requires distribution system operators to systematically improve quality indicators, tying this to the level of regulated revenue. The tariff process includes the option to adjust network operators’ remuneration due to objective difficulties caused by weather conditions.
In 2019, we consistently improved our quality indicators. At the same time, we also managed to improve the process of connecting new customers to the network, which on average decreased to less than 200 days.
SAIDI (including low voltage)
SAIFI (including low voltage)
Connection time (days)
