Energy Regulatory Office Activities of the President of the URE for the development and modernisation of grid infrastructure - News -

In Poland, nearly half of the electricity networks, especially the overhead lines, were built more than four decades ago. The situation is similar for substations. At the same time, according to estimates, the projected installed capacity of renewable sources connected to the DSO grid could increase by as much as 230 per cent by 2030, relative to 2021, and exceed 50 GW (51.6 GW) if prosumers are included.

The Charter for Effective Transformation of the Distribution Systems of the Polish Energy Sector (KET) – project implemented from 2021.

Faced with the enormous challenges of expanding and modernising electricity grids and the need to find sources of funding for these investments, the President of the URE has come up with an initiative involving key stakeholders in the sector in developing optimal solutions.

The Steering Committee comprised representatives of the Ministry of Climate and Environment, the Ministry of Funds and Regional Policy, the Ministry of State Assets, the Ministry of Development and Technology, the Government Plenipotentiary for Strategic Energy Infrastructure, Polish Power Transmission and Distribution Association (PTPiREE), small distribution system operators affiliated to the All-Poland Association of Independent Electricity Distributors, PSE, independent market experts, including representatives of science and industry practitioners.

At a later stage, the Ministry of Digitalisation, the Ministry of Industry and the National Fund for Environmental Protection and Water Management also joined the work.

The first meeting of the Charter Steering Committee was held in October 2021. Since then, 19 meetings have been held, involving Steering Committee members and external experts – energy market participants willing to contribute to the work of the project.

On 7 November 2022, as the culmination of the first phase of work, the President of the URE and the heads of the five largest electricity distributors in Poland signed the historic agreement that is the Charter for Effective Transformation of the Distribution Systems of the Polish Energy Sector (KET). It creates a stable regulatory environment for energy companies over a multi-year time horizon for making investments in grid modernisation and development. Thus, it contributes to simplifying the investment decision-making process, makes it easier for DSOs to raise investment funds from sources other than the tariff.

The work planned under the Charter is being carried out by seven task forces:

• legal, Network Operations and Flexibility, Investment, Tariffs: appointed November 2021,
• for smaller DSOs as well as smart tariffs and flexibility: established in October 2023,
• electricity and heat sector cooperation: established in October 2024.

From 2024 onwards, Distribution System Operators (DSOs) whose grid does not have direct connections to the transmission system (smaller DSOs – Polish: OSDn) and organisations that declare support for the KET objectives can also join the project. A joint declaration by the President of the URE and the entity concerned serves this purpose. A total of 28 entities have joined the Charter since 2022.

The President of the URE listens to the market

Between 2023 and 2025, further stakeholders have been involved in the KET collaboration to support the project with their knowledge and expertise. Among them: National Chamber of Energy Clusters, Polish Wind Energy Association, Lublin University of Technology, Polish Association of Photovoltaics, Polish Association of Solar Energy, Polish Chamber of Energy Storage, Polish Association of Energy Storage, Forum of Electricity and Gas Recipients, Hynfra,  Polish Confederation Lewiatan, Google Cloud, Microsoft, Energetyczny Klaster Oławski, Polish Association of New Mobility, Foundation for the Promotion of Electric Vehicles, AGH University of Krakow, Technical University of Denmark, Forum of Electricity and Gas Recipients, Economic Chamber of Heating, and Polish Association of Thermal Power Generation.

During meetings devoted to the presentation of the role of individual market players in ensuring security of energy supply and their possible involvement in fulfilling the KET project, recommendations were developed in the area of, among others:

• improving the possibilities of connecting RES sources to the electricity grid,
• flexible connection conditions,
• network and balance problems,
• energy storage,
• networked energy clusters and their role in providing system services such as flexibility services,
• improve transparency on the availability of connection capacities,
• commercialisation of connection conditions,
• digitisation of the energy sector (e.g. digital twin),
• market coupling (combining the heat and power sectors).

Currently district heating businesses are also involved, who, together with DSOs, are working out possible forms of cooperation related to the integration of the electricity and district heating sector. Another very important group of stakeholders invited by the President of the URE to work on the project is the e-mobility industry, with whom members of the Steering Committee are in dialogue on the need to strengthen and expand transmission and distribution systems resulting from the market introduction of electric cars. Conclusions from the meetings also include the possibility for the electromobility sector to support the grid infrastructure, which, as a new industry and economy, could become one of the key elements of the energy transition. 

The Charter is all about investing in networks

The primary commitment of KET participants is to increase investment to enable the efficient connection of further renewable sources and energy storage to the DSO grid, to enable the development of local energy and the use of flexibility services at distribution system level, and to improve their energy efficiency.

The results of the work are already visible, including an increase in the level and use of DSO funds for grid investments. In the development plans agreed with the operators for 2023-2028, they have increased by more than 70 per cent compared to the plans for 2020-2025 (from PLN 42 billion to PLN 72 billion). In the development plans for DSOs to be approved this year, an increase in capital expenditure can also be expected.

Grid investment expenditure is also increasing for the transmission system operator. In the Transmission System Development Plan for 2025-2034, approved by the President of the URE in December 2024, these are provided for at a level of PLN 64 billion, while the plan for 2023-2032 was around PLN 36 billion. This represents an increase of nearly 78 per cent. Among other things, thanks to the Charter measures, DSOs and PSE have more than PLN 130 billion guaranteed for grid investments in the periods indicated.

It is worth noting that the level of realisation of planned investments has also increased in recent years, which in the case of DSOs is already almost 100 per cent.

KET also has the effect of ensuring that participants in the agreement are guaranteed stable financing conditions for grid investments by the President of the URE by valorising the justified weighted average cost of capital ratio (WACC) by a reinvestment premium over the period 2023-2028. The adjusted rate guarantees the largest DSOs a minimum return on investment of 8.5 per cent per year.

The work carried out under the Charter has also made it possible to identify the most significant problems related to the operation and development of distribution systems, as well as the aforementioned issue of refusal of connections. Among other things, the leading role of energy storage and the need to apply a broad definition of it was pointed out. Current work is focusing, among other things, on the issue of harnessing the potential of the heating and industrial sectors for energy storage.

The long-term goals of KET include the digitalisation and automation of the grid, which will significantly increase its flexibility potential, as well as enable the development of new products and services in the energy market and increase the activity of all its participants. Also important in this context is the projected by the end of 2030. 100 per cent installation rate of remote reading meters.

URE report – monitoring of refusals of connection

The number of grid connection refusals and the total volume of capacity in negatively granted applications are continuously monitored by the President of the URE, and the data from this monitoring are published in the annual Regulator Reports.

In 2023, the sum of the capacity from all negative connection requests submitted to operators was 83.6 GW. This is not, however, the real capacity volume that has been refused connection to the grid. At the same time, this is not the real volume of capacity for which no connections have been obtained in 2023.

Under the current regulations, the only procedure that allows an energy generator to verify the availability of connection capacity in a given, specific, location on the grid is to apply to the operator for connection conditions. It follows from the above and from the information provided to the Regulator by the operators that, on many occasions, a given trader submits the same applications for connection to different locations in the network several times. Consequently, the total volume of capacity in the applications that were refused is higher than that for which connections were not obtained.

In the opinion of the President of the URE, the solution to the problem of refusal to issue conditions for connection of energy sources to the grid, as well as the way to streamline and improve the transparency of this process, is its digitisation and wider use of the possibility of connection on a commercial basis.

The President of the URE maintains a dialogue with stakeholders

On 25 March 2024, the President of the URE prepared information (No. 15/2024) explaining the most frequently raised concerns in the area of grid connection, which became the basis for the establishment of another platform for dialogue for sustainable grid development between investors, grid operators, academics, government and the Regulator.

On 27 March 2024, a meeting was held at the URE on, inter alia, the issue of refusals to determine the conditions for connection to the electricity grid under public law and the reasons for them, the conclusion of grid connection agreements under commercial law and regulations enabling an increase in the use of available connection capacity such as cable pooling. The meeting was attended by representatives of the Ministry of Climate and Environment, the largest distribution system operators and the electricity transmission system operator, as well as industry organisations for renewable energy producers and energy storage. 

As a result, expert teams have been set up to work on solutions for harmonising the rules for issuing grid connection conditions and maximising the use of available network resources.

Referring to the conclusions of the meeting, the President of the URE also presented further proposals for amendments to the Energy Law Act, as postulated by stakeholders, concerning, among other things:

• making it compulsory to submit the application for the determination of connection conditions electronically,
• introducing a 14-day time limit for the operator to send a request for completion of the connection application,
• including in the Regulation on detailed conditions for the operation of the electricity system of provisions specifying criteria for assessing the technical feasibility of connection to the grid,
• reducing the validity period of the connection conditions issued from 2 years to 6 months,
• introducing the possibility of assigning obtained connection conditions during their validity period.

Proposed amendments to the Energy Law

As a result of the work carried out within the KET, a number of recommendations for changes to grid connection regulations have been developed, some of which have already found their way into legislation. These include, for example, the assessment of the connection application taking into account the basic parameters determined by the connected entity (e.g. the right of the applicant to determine a connection capacity lower than the power of the equipment to be connected), or the principles of connection under commercial conditions.

In recent years, the President of the URE has also addressed specific proposals to the Minister of Climate and Environment for amendments to the Energy Law Act, mainly in Article 7 of the act. The aim is to increase the flexibility of the rules for connecting RES installations and energy storage to the grid.

The regulator's legislative proposals include the introduction of new solutions to connection agreements, including:

• introducing the possibility of installing devices to ensure that the connection capacity is not exceeded by installations whose installed capacity is greater than the connection capacity
• to include agreed limitations on the operation of energy storage facilities and the injection of power into the grid by RES installations in connection agreements.

Another amendment to Article 7 of the EP proposed by the Regulator is the extension to all RES installations of the possibility to include in connection applications commitments to limit, in agreement with the grid operator, the power injected into the grid during selected periods of the day and year (amendment of paragraph 3ba).

The next proposal is to extend to the transmission system operator the obligation to re-verify, in the event of a refusal of connection, the possibility of the technical and economic conditions  to obtain such a connection after taking into account the declaration on the application of power limitation (amendment of paragraph 8d2a of Article 7 EP).

The regulator has also proposed extending Article 8 of the Energy Law Act, which deals with the settlement by the President of the URE of disputes related to, for instance, refusal to connect to the grid, to include the possibility of requesting an additional expert opinion on the correctness of the refusal to connect (at the expense of the entity requesting the settlement).

KET and what's next? Guidelines on the direction of network development and the implementation of priority investments

Thanks to amendments to the Energy Law Act of 2023 The President of the URE has been given the prerogative to develop guidelines on the direction of network development and the implementation of priority investments to be included in network development plans so that their systematic and coordinated development is ensured at national level.

The latest Guidelines for Distribution System Operators were published at the end of July 2024. Their aim is to facilitate the DSOs' fulfilment of their statutory obligations on the one hand, and to streamline the proceedings for agreeing development plans and clearing ongoing priority investments on the other.

The DSOs were additionally given the opportunity to increase, starting from 2025, the return on capital employed by an additional return of 35 per cent of the amount of capital expenditure planned and included by the President of the URE in the tariff calculation for that year.