On Tuesday, (14.04.2015), the Highest Audit Chamber (Najwyższa Izba Kontroli - NIK) in Poland published a report on the security of power supply. The audit took place between May and October 2014 and was carried out with the assistance of supporting experts. Two of the most importing findings of the NIK relate to the lack of a general incentive system for investments in new generating capacities. This system should be based on the market rules and applied to all entities operating in an electricity market independently of their ownership.
The NIK also expressed fears about the implementation of the program for the nuclear power industry. Polish Energy Group (PGE), which is to build two nuclear power stations, recently cancelled its contract on the localization of the nuclear installations, postponing any decision to at least 2017. This indicates that the timetable of the nuclear program, predicting the commissioning of the first nuclear installation in 2025 is rather unrealistic. The cost of the nuclear power station is underestimated and it does not take into account the additional expenses of green field projects. The NIK evaluates that the investment cost for nuclear installations will reach over 5 billion Euro per 1GW.
Electricity consumption and the demand for power is gradually rising in Poland. Demand for power will increase to 40GW in 2035 and 41-42GW in the following 10-15 years. According to the NIK the production of electric energy will increase from 159TWh in 2015 to about 230TWh in 2030, at an annual rate of about 2.5%. This forecast seems to be overoptimistic as the currently observed increase of electric energy consumption oscillates around 1% per year.
The NIK points out that in 2050 only 5GW of existing capacity will be in operation – mainly hydro power stations. In Poland practically all power stations will reach the end of their service lives within the next 40 years. Between 2010 and 2014 power companies in Poland cancelled 10 large investment projects in power generation due to low electricity prices and a lack of return on investment. It is clear that without the introduction of a new incentive system for generating capacity the security of electricity supply will be endangered.
In 2014, a group of Polish power stations, in cooperation with the Transmission System Operator (PSE SE) designed a market for power in Poland. This power market copied British solutions; the capacity market and contracts for differences. There are currently discussions about merging the two aspects of the British approach – the capacity market and contracts for differences – into a single support system. However, the low clearing price in the first British auction for generating capacity in December 2014 seems to indicate that a capacity-market-only approach is insufficient to incentivise new, low-emission and flexible-in-operation units, which are required to not only meet the goals of climate policy, but also to increase electricity production from intermittent renewable sources.
Wladyslaw Mielczarski is a Full Professor in Power Engineering at Institute of Electric Power Engineering, Lodz University of Technology, Poland, www.mielczarski.neostrada.pl
Image: Bert Kaufmann, CC BY 2.0 license
- on Energy
Security of Power Supply in Poland
April 16, 2015 | 00:00
On Tuesday, (14.04.2015), the Highest Audit Chamber (Najwyższa Izba Kontroli - NIK) in Poland published a report on the security of power supply. The audit took place between May and October 2014 and was carried out with the assistance of supporting experts. Two of the most importing findings of the NIK relate to the lack of a general incentive system for investments in new generating capacities. This system should be based on the market rule...