Energy Regulatory Office Polish electrical power engineering and gas sector operations between 2023 and 2024 — The latest report from the President of the URE - News

Pursuant to the Polish Energy Law^[1], every two years the President of URE prepares and publishes a report that summarises the conditions of commercial business in the Polish electrical power engineering and gas fuel sectors, along with the security rating of electricity and natural gas supply.

The report also details the capital investments performed by domestic electricity and gas grid operators, along with the President’s recommendations for regulatory amendments that should contribute to an improvement of business operations on the Polish energy market while boosting the effectiveness of the activities done by the sector regulator.

A dynamic situation in electrical power engineering

In 2023, two extensive amendments to the Energy Law^[2] and the RES Law^[3] were passed, introducing new solutions to the Polish legal system. These solutions are intended to accelerate the energy transition process and the development of distributed power engineering. They include: direct line, modified definitions of the energy cluster and hybrid RES generation plants, energy communities, energy aggregation service and energy aggregators, regulatory sandboxes, and dynamic-pricing electricity sales contracts. Some of the solutions became functional in formal terms already in 2024, expanding the obligations and competences of the President of the URE.

Major events in the world of electrical power engineering over the past two years include the Balancing Market Reform Stage Two implementation of 14 June 2024. The Reform has significantly affected the reality of how the PSE-managed market functions, especially by introducing the 15-minute non-balancing periods. The Reform increased the number of entities on the market from 149 in June 2024 to 171 by the end of 2024.

Another major event was the second ever call for power markets to generate by PSE between 4:00 p.m. and 7:00 p.m. on 6 November 2024, caused by a low forecast power generation volume from RES coupled with an insufficient capacity of conventional power generating units.

A highlight in the fuel gas market was 17 October 2023, on which day the first Gas Fuel Storage Code was approved for Gas Storage Poland, a gas fuel storage system operator. On 25 October 2023, the first Code was approved for the LNG Terminal operated in Świnoujście.

Concentration of the electricity generation market is reduced

The electricity generation sector has demonstrated a noticeable drop in the market shares of the largest corporate groups to the benefit of small, independent power generators. The market share of PGE Polska Grupa Energetyczna, the largest domestic power generator, fell from 40.8 per cent at the end of 2022 to 35.8 per cent by the end of 2024. The market share of small power generators grew from 20.8 to 31.2 per cent in the same period, mainly due to the growth of PV generation systems.

Fig. 1. Corporate group share in the exported electricity volume, years 2022-2024 (as of Dec 31st each listed year)

A gradual slump in wholesale prices of electricity was seen between 2023 and 2024. The average annual competitive market price fell by 31.7 last year, from 759.29 PLN/MWh in 2023 to 518.81 PLN/MWh.

The annual Next Day Market electricity price on the TGE was 424.94 PLN/MWh in 2024, 108.67 PLN/MWh less than 533.62 PLN/MWh in 2023.

High numbers of electrical service connection denial persist

The last two years saw another major increase in the denial to conclude electrical service connection contracts, from 10,775 (for a total of 65.66 GW) between 2021 and 2022 to 15,277 (for a total of > 157 GW) in 2023-2024.

Note that the total power capacity in all service connection requests filed with and denied by DSOs and TSOs does not have to be an actual power capacity which failed to be connected to service. More than once, each business was allowed to repeat their service connection request repeatedly. A consequence is that the total connection capacity in denied requests could be actually higher than the capacity which saw no service connection requirements issued.

On the gas fuel market, the number of denied gas service connection requests was 55,526 in the years 2023-2024, a number comparable to that in the years 2021-2022.

An increasing number of grid investment projects

The investment CAPEX by grid operators grew between 2023 and 2024, a consequence of the operations under the Polish Electricity Distribution Grid Transformation Charter, an understanding established by the initiative of the President of the URE.

The investment CAPEX amounts committed by the largest five DSOs in 2023 were 118 per cent of the plan, to a more than 11.7 BPLN, peaking almost at 12.5 BPLN in 2024, or 97 per cent of the plan. To compare, the investment CAPEX committed by the DSOs was 7.2 BPLN in 2021 and nearly 9.4 BPLN in 2022.

In the years 2023-2024, PSE (Polskie Sieci Elektroenergetyczne) continued to pursue their investment CAPEX plans below the amounts committed by the DSOs, comparably to the levels in 2021 and 2022. In 2023, 76 per cent of the investment CAPEX was committed by PSE at an amount of 1.85 BPLN, compared to just 64.7 per cent in 2024 (slightly more than 2 BPLN). The 2025-2034 PSE Development Plan approved by the end of 2024 provides for continued growth of investment CAPEX.

The gas market revealed a significant slump in the investment CAPEX coordinated by Gaz-System (the NG transmission pipeline operator), from nearly 88 per cent in 2023 to a bit more than 40 percent in 2024. Around 70 per cent of Gaz-System’s investment CAPEX went to the construction of system pipelines.

Age structure of TSO and DSO assets

In the electrical power engineering sector, the age structure of TSO and DSO assets in the last two years remained comparable to that in 2021-2022.

53 per cent of overhead power lines and 61 per cent of power substations operated by PSE is more than 40 years old, while nearly 90 per cent of PSE’s buried power lines is 20 to 40 years old. Transformer substation projects have been completed with the installed power of less than 20 years old transformer units grew from 53 to 57 per cent of the total.

It is similar for the five largest DSOs in Poland; 49 per cent of their overhead power lines is more than 40 years old, with another 31 per cent more than 20 years old. More than one half of buried power lines of the five DSOs has not reached 20 years of life; however, the share of those built 40+ years ago increased to 20 per cent. The DSOs have been investing in power substations, increasing the share of this infrastructure less than 20 years old from 34 to 36 per cent.

Fig. 2 Age structure of the assets of the TSO and five largest DSOs, end of 2024

Is the RES market going mature?

The interest in the RES support auction system dwindled between 2023 and 2024. Only two auctions per each of the two years were completed for PV and wind power. The remaining auctions held saw insufficient bids.

Only 785 certificates of auction participant eligibility were issues in the same two years (397 in 2023 and 388 in 2024), compared to 1,974 between 2021 and 2022. The volume and value of energy sold on auction shrank by more than 60 per cent and 50 per cent, respectively.

The year 2024 was the first time that the number of winning bids for 1+ MW installed capacity generating plants topped the >1 MW plant bids, which has increased the contracted volume of electricity.

For the certificate of origin system on the TGE in 2023, the Next Day Market had more than six hours of negative energy prices for the first time ever. This triggered the regulations that limit the support for RES generators, challenging them with the need to adjust their certificate of origin requests. The TGE featured negative prices of energy also in 2024.

Proposed regulatory amendments

The legislative operations of the President of the URE in 2023 and 2024 focused on solving the growing number of electricity service connection denials. This was among the challenges the RES industry identified among the main factors inhibiting its growth.

Work has been under way to streamline the issue of grid service connection requirements under certain projects, two of which are the Polish Electricity Distribution Grid Transformation Charter, and — since March 2024 — the efforts of dedicated expert panels. A part of the solutions developed in both these project have already been implemented into law (like the service connection commercial requirements) or is being cast in the draft bills scheduled for the Polish legislators to proceed with in 2025.

Among the initiatives of the URE is the argument for waiving the ban on energy storage systems which applies to closed distribution system operators and the proposals to amend the High-Performance Electricity Co-Generation Law which would improve the effectiveness of government support for the sector.

Another major argument advocated for was to restructure the system of financial fines imposed by the President of the URE, with the intent to abandon fixed rates in favour of fine brackets, permitting a more individual approach to the fine amount in each case pursued.

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This information are just a small fragment from more than 200 pages of the Report by the President of the URE concerning the state of electrical power engineering and gas sectors between 2023 and 2024. You can find the full Report on the URE official website (in Polish).