Polish electricity representative: Derogations needed to ‘make capacity market work’

Filip Grzegorczyk, Vice President of the Polish Electricity Association (PKEE). [EFE/EPA]

This article is part of our special report Electricity market reform: A European tour.

European Union negotiators will turn their attention to revamping the bloc’s electricity market rules under the Austrian Presidency but the issue of so-called capacity mechanisms continues to define the debate.

Filip Grzegorczyk is vice president of the Polish Electricity Association (PKEE).

He spoke to Agencia EFE / EURACTIV-Spain ahead of an EFEfórum Energy debate, supported by PKEE, held in Madrid.

Why did you introduce a capacity market? Was it really necessary?

Yes, it was absolutely necessary. It is predicted that in the following years there will be a 24% increase in energy consumption, so we really needed to introduce the capacity market, which is already notified to and accepted by the European Commission and is completely in tune with European rules. It is very important to have it.

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What is your opinion on the new EU legislation referring to the energy market ?

It is a difficult question. EU legislation on the electricity market is a complex set of rules. It is as if we were in a triangle: we have security, climate protection and the market. Our opinion is that the European Union is too interested in climate and not enough in security  of supply, so that would be the disadvantage.

Regarding the latest legislation which is currently in process, the so called “Winter Package”, we have a lot of question marks here, due to the fact that the winter package has such a strong connection with the capacity market. We would like to achieve some derogations to make the capacity market work. If we don’t have this derogation, the capacity market will never work.

The most important element here is the EPS 550, that is the real problem. We cannot introduce this EPS 550 to the capacity market because it would create a non-working market. We think that we should be treated equally in the European Union, so if in the case of a strategic reserve in Germany this EPS 550 is not applied it should not apply to the Polish capacity market either, because the schemes are more or less the same. If the situation is the same we cannot be discriminated.

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If the aim is to ensure energy security, wouldn’t it be more rational to concentrate efforts on supporting the development of renewables, especially the production from wind and the increase of interconnectors capacity?

At first hand, I would say that you are right, but the issue is that all renewable sources, especially wind, regardless of its offshore or onshore, need reliable backup and conventional sources. It is a kind of paradox, we have to develop conventional sources of energy to enable renewable sources of energy to be developed. Polish energy companies are leaders in the pace of transformation into renewable sources, but each time we talk about wind farms we still have to think of back-up. We really need this capacity market to be operating so we are able to develop renewable energy sources. The paradox is that we need to support the conventional energy sources, to develop renewable energy sources that are in tune with European guidelines.

What do you think is the perception of small and medium sized enterprises on the retail market on the costs of the capacity market?

We don’t estimate very high costs, but when we talk about costs we always have to ask ourselves, what would the alternative of a blackout be? Entreprises are quite aware of the fact that the cost of a capacity shortage would be much higher than additional payment for the functioning of capacity markets. That is why we think that this regulation will be well welcomed. If you want to be secured you need to pay for it. In general, I do not see any obstacle in the perception of small businesses.

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Will the introduction of the capacity market eventually hinder the development of the internal energy market of the European Union?

I absolutely disagree. We already have some examples of capacity mechanisms in Europe. Everything we did in Poland, as far as capacity markets concern, was in tune with European guidelines. For example, we have a bid and interconnectors that allow everyone to take part in this system. We do not discriminate any type of energy, so its technological neutral. Everything is transparent and in tune with European rules. If we look at the European energy market as a combination of more than twenty domestic markets cooperating well that is absolutely okay in terms of EU rules.

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