Assessment of the impact of the balancing market reform on the application of allocation constraints in the national power system in the period 14.06.2024–30.06.2025 and recommendations for further actions
The President of the URE has published a report on the application of allocation constraints in the national power system (KSE) following the implementation of the balancing market (RB) reform. Allocation constraints are applied by the transmission system operator – PSE – in order to ensure the secure operation of the KSE.
- The obligation to monitor the application of allocation constraints was imposed on the President of the URE under the National Recovery and Resilience Plan. One of the milestones assigned to Poland is for the Regulator to assess the effectiveness of actions aimed at reducing these constraints and to present recommendations for further measures.
- According to the analysis prepared by the President of the URE, the implemented changes, in particular the reform of the Polish balancing market, have contributed to reducing the scale of allocation constraints, particularly for electricity exports.
- The report includes a specification of actions that should contribute to a further reduction in the frequency of allocation constraint activation.
Common energy market
Building a common electricity market in Europe involves a set of coordinated regulatory, technical and organisational actions aimed at ensuring the efficient, competitive and secure functioning of cross-border electricity trading. A key element of this integration is the harmonisation of the rules governing energy markets in individual Member States. This includes, among others: harmonising rules for determining cross-border capacities and allocating transmission capacity, standardising balancing and settlement rules and of the functioning of the intraday and day-ahead markets; uniform market coupling mechanisms; developing platforms for reserve and balancing exchanges; as well as measures that reduce the need to apply allocation constraints.
Purpose of allocation constraints
Allocation constraints are used to ensure the secure operation of the system and may relate to various conditions of the power system’s operation, including:
- a country’s electricity exchange balance;
- the total flow limit on a given set of transmission elements;
- the number of polarity changes of a direct current (DC) interconnector;
- the maximum value of the ramping requirement (ramp) of a DC connection between neighbouring market time units.
Allocation constraints towards the export of electricity from Poland support ensuring, within the KSE, the required production capacity for (i) maintaining the required upward balancing capacity (upward regulation) and (ii) meeting the electricity demand of domestic consumers. Conversely, constraints towards the import of electricity to Poland support ensuring, within the KSE, the required downward balancing capacity (downward regulation) and the generation mix needed to meet the secure system operation conditions regarding inertia levels, short-circuit capacity and voltage regulation.
Impact of the balancing market reform on allocation constraints
As part of implementing the capacity market, Poland committed to carry out a reform of the electricity market in five areas, including balancing and allocation constraints. Changes in the balancing market were also required due to the need to implement the provisions of EU Regulation 2017/2195.
One of the elements of the balancing market reform was the introduction of a separate process for the procurement of balancing capacity prior to the gate opening under the single day-ahead market coupling mechanism. The broader availability of balancing energy bids obtained in this way enabled a reduction in the activation of allocation constraints.
Data presented by the President of the URE show that the scale of allocation constraint activation has significantly decreased. Since March 2023, allocation constraint activity in the export direction has remained below 9 per cent of imbalance settlement periods.
In the case of import constraints, an increase is visible only in 2023, with a downward trend in subsequent years.
The data analysis indicates that the nature of allocation constraints is seasonal. Higher values are recorded in the summer months, when significant generation from RES makes it necessary to limit electricity imports.
Selected recommendations for further actions
To improve balancing – and consequently reduce the activation of allocation constraints – it is necessary to manage the surplus of energy from RES. This may be supported by encouraging consumers to use electricity during periods of high renewable generation, stimulating prosumers’ self-consumption and developing energy storage.
Timely integration of all market participants with CSIRE is important from the balancing market perspective.
It is also essential to introduce mechanisms that incentivise owners of Electricity Generating Modules (MWEs) and Electricity Storage Facilities (MEEs) to submit accurate work schedules. Currently, not all entities obliged to submit work schedules for their units fulfil this obligation, or they fulfil it only to a limited extent.
For the transmission system operator, the number of entities capable of providing regulating capacity services is very important. In order to increase the regulating capacity available to PSE, the operator should analyse whether there are areas governed by the Balancing Conditions (WDBs) in which the qualification rules for balancing service providers can be simplified.
It is also necessary to introduce mechanisms that ensure PSE, in coordination with DSOs, access to regulating capacities of resources connected to the distribution grid but not participating in the balancing market.
Incentives encouraging market participants to improve their balancing performance should also be strengthened. The current level of imbalance results in a significant scale of activation of balancing energy, which generates increased demand for reserves.
Detailed guidelines on further actions recommended by the President of the URE can be found in the report (in Polish).