Competitive environment

After the acquisition of EDF Polska assets, PGE Group strengthened its position in the generation segment and is the undisputed leader, with a 43% market share. The Group produces more electricity than all of the competitors on the consolidated market combined, whilst having the largest achievable capacities, both conventional and renewable. Aside from integrated energy groups, significant producers on the market include Zespół Elektrowni Pątnów Adamów Konin S.A. („ZE PAK”), PKN Orlen S.A. („Orlen”) and PGNiG TERMIKA S.A. („PGNiG”). Although ZE PAK’s production is based on industrial plants, Orlen’s and PGNiG’s production is based on CHPs, the output of which depends on demand for district heating. ZE PAK’s market share declined due to the shut-down of the Adamów plant from 2018, while Orlen’s share significantly grew with the launch of gas-and-steam units in Włocławek and Płock.

Nearly half of the electricity produced in the country is hard coal-based – and this is a key fuel for PGE Group’s competitors. More than 25% of the electricity produced in Poland is lignite-based. Aside from PGE Group, ZE PAK also bases its electricity production on lignite. The use of other fuels is of relatively low significance from the viewpoint of the national power system, although it should be noted that an increase in gas-based production is related to Orlen’s new assets.

Energy production from renewable sources is much more dispersed than the conventional generation market. Energy from biomass is produced at both dedicated installations and in a co-firing process with other energy sources across the country. In previous years wind power sector was the most dynamically developing sector, with PGE Group’s leading role. Having delivered new wind project Klaster  in 2020, PGE Group became an entity with the largest installed wind capacity – 647 MW (through PGE EO S.A.). PGE Group has approximately 10% share of total wind capacity in Poland, which reached close to 6.0 GW in 2019. Competition among the existing wind assets covers competition on the electricity market (given that as of January 1, 2018 the obligation to purchase electricity from renewable energy sources of 500 kW or more was cancelled) and competition related to participation in green certificates scheme. They are subject of free market trade, however, due to significant oversupply this are administrative decisions with regard to the level of obligation to redeem that essentially influence the prices. The competition  within new support scheme for RES takes place in auctions via lower offered  amount of support.

Net generation

Installed capacity

Source: own work based on information published by the companies and Agencja Rynku Energii S.A. (”ARE”).

The heat production market in Poland is highly dispersed, with the four leading producers accounting for less than 40% of production countrywide, and thanks to the acquisition of EDF’s cogeneration assets, PGE Group became the undisputed leader of this market, too with a share reaching above 30% in 2018. This market is of a local nature and bears the traits of a natural monopoly, with heating prices being set in an administrative procedure – tariffs approved by the President of the Energy Regulatory Office. The dominant producers focus their production activities in different urban areas therefore sector competition is limited. With this transaction, PGE gained access to district heating markets in the Wrocław agglomeration, Tri-City area, Kraków, Toruń and Zielona Góra. Besides PGE Group, the key producers of heat are PGNiG (focused on production mainly in the Warsaw agglomeration) and Veolia Group (Poznań agglomeration, Łódź).

In the distribution area, the country is divided into regions, with five large distribution system operators (the “DSO”) on the market, who are required to carve out distribution activities from their other business. Aside from the above-mentioned energy groups, another significant entity is innogy Stoen Operator sp. z o.o. (formerly RWE Stoen Operator sp. z o.o.), an RWE Group company responsible for electricity distribution in Warsaw, as well as PKP Energetyka S.A. managing the railway electric network throughout the country. A historical division of the distribution areas has substantial impact on the operating conditions of the business, and this specific situation is reflected in the distribution tariffs approved by the URE president. PGE Group operates in an area that is less urbanised and industrialised, meaning that it has 5.5 million clients throughout an area of 122 ths km². For comparison, TAURON has a similar number of clients in an area nearly twice smaller and distributes a larger amount of energy.

Volume of electricity distribution

Source: own work based on information published by the companies and ERO.

In the retail segment, which covers sales to end customers – individual, small and medium enterprises as well as large industrial customers – most of the sales are conducted by the four largest energy groups and innogy Polska S.A. (formerly RWE Polska S.A.). PGE Group and TAURON remain the leaders, having approximately 31% of the market. Both PGE and TAURON sell electricity to over five million clients. Despite a growing number of competitors in the segment, including companies for which electricity is not a core product, companies from outside the four largest Polish groups continue to control little market share. The leaders control close to 90% of the market, while other significant player is innogy, based on sales connected with serving as distributor for the Warsaw area, as well as PKP Energetyka.

Sales to final off-takers

Source: own work based on information published by the companies and ERO.