Poland’s decade-old capacity market mechanism has cost nearly 200 billion złoty, prompting calls for clearer strategy to avoid excessive expenses.
Unclear Long-Term Strategy
After nearly a decade of the capacity market mechanism’s operation, its long-term strategy remains unclear, according to Forum Energies in their analysis “Capacity at Any Cost? What Has Poland Achieved in 10 Years of Work on the Capacity Market”. The authors point to the need for a clearly defined objective to organize the system and avoid its over-sizing.
How the Capacity Market Works
The capacity market rewards installations for their readiness to produce electricity rather than for actual generation. This is intended to help ensure system stability and maintain conventional units that are needed for fewer parts of the year. The mechanism also served as an investment incentive for new gas units and electricity storage, as well as interest in demand reduction mechanisms (DSR).
Benefits and Challenges
The support is considered public aid and is awarded through auctions, with the cheapest offers to provide capacity winning. The authors note that while the mechanism helped fill the capacity gap, analyses are necessary to ensure system costs are not too high, avoiding a “capacity at any cost” strategy.
