The electricity market in Poland is shaped through the energy act from 1997. Due to the fact that production, sale and distribution of electricity in contrast to transmission doesn’t show the characteristics of a natural monopoly the market underwent an unbundling process, which is in its advanced phase now. The monopoly for transmission services belongs to the PSE S.A. a sole-shareholder company of the State Treasury. The structural importance of the transmission system and the fact that the exact way electricity flows cannot be retraced the form of a government dependent regulated monopoly is optimal.
PSE SA in the “Development Plan 2010 - 2025”, updated in May 2014, introduced the development plans of the national power grid. The plan includes development of cross -border mergers, the modernization of transformers, construction of new network elements and expansion of the existing network.
The producers group consists of all power plants and power-heat plants which are mostly coal and lignite fueled. Then there are the distribution system operators. The strongest companies from this group have been separated from the former national groups due to the unbundling process and are meant to be financially strong entities capable of developing expensive infrastructural projects and establishing an equilibrium on the market in a competitive way. Those legally independent entities Energa – Operator SA, Enea Operator sp. z o.o., PGE Dystrybucja SA and Tauron Dystrybucja SA unite other energy companies and divide the territory of the country into 4 regions. RWE Stoen Operator sp. z o.o. has been privatized before the unbundling measures took place and owns a sub region of the capital city of Warszawa.
Currently, Poland is a net energy exporter. The main export destinations are: Germany, Czech Republic and Slovakia. The export growth is stimulated by the reduction of nuclear power in Germany, and the limiting factor is the need to modernize the existing infrastructure. The main source of electricity import is Sweden and Ukraine.
Conventional power generation
The Polish energy system is based on 19 so called professional power plants and over 50 heat and power stations. Professional power plants generate about 60% of the overall consumed electricity in the country from lignite and coal. Those facilities are located near the fuel mining spots to reduce transportation costs. Heat and power stations are about 30% more efficient than professional power plants due to the cogeneration of electricity and heat and cause 30% less CO2 emission. Those 50 facilities are located around bigger agglomerations. There are also around 160 industrial power and heat stations. Some industry companies build their own power and heat stations to secure huge amounts of energy that their specific production process needs.
The group of electricity traders is fully open. Every company with a concession can become a player in the market.
Also the price shaping is almost freed from the regulatory measures. The only exception to that are the electricity prices for private households, which are still controlled by the regulator because of the threat of an unreasonable price growth in cases where the consumer has still no ability to switch freely between electricity providers.
The only other non-market component that has an influence on the price shaping is the way electricity mix is being created. The electricity mix in Poland follows to some extent the obligatory path for the energy sales structure, which was stated by the EU legislative and implemented by each member country.
Poland is one of the few countries that choose to implement a quota system for renewable energies. As an effect every year a certain amount of the sold electricity has to be generated from renewable energy sources, which means that the amount of energy from those sources has its fixed place in the electricity sales. This path is scheduled till 2030 when the percentage of renewables in the overall sold electricity should be around 20%. Although the development of renewable energy in the common electricity mix is increasing rapidly over recent years, the share of electricity from conventional sources is still dominant.
CCS and ATOM
Every price development scenario in Poland has to make some assumptions concerning the CCS technology and atomic power.
The abbreviation CCS comes from Carbon Capture and Storage, which is a possible solution to dramatically reduce the CO2 emission caused by the energy sector. The reduction is achieved through separating them in special sealed and monitored empty mines.
Atomic power is a very probable step for further modernization of the energy sector. There have already been some plebiscites concerning the future location of the plant. The Polish government plans to increase the share of renewable energy sources (RES) and construction of two nuclear power plants with a total capacity of 6000 MWj by 2050.
The interaction of those factors, the economic growth and most reasonable energy market development scenarios allow to make a forecast of the future electricity prices for industrial consumers although every single forecast of the recent years has turned out to be wrong. The reason for that was that every forecast simulated a further trend development concerning increasing prices and demand. Since 2012 this trend stopped most probably due to weaker demand resulting from will the global finance crisis and today the electricity prices charged to the final consumer are amongst the lower ones in the EU.
Liquid fuel market
The production of liquid fuel in Poland is dominated by two companies PKN ORLEN and LOTOS. Both companies own refineries and have a great influence on the market prices. The liquid fuel market in Poland in 2015 increased by 5% compared to 2014. The main reason for this trend was the increase in the demand for all liquid fuel products, with the exception of heavy fuel oil.
Source: Polish Investment and Trade Agnecy, Poland your business Partner. Invest in Poland, 2016.