PL
ENThe energy sector is characterised by long-term planning, many years ahead. In this chapter, we want to show the trends that we are taking into consideration when planning our development.
Most of the energy in Poland (85%) is generated at utility thermal power plants. In this group, 70% of boilers and 2/3 of turbosets are over 30 years old, meaning that many of these units are getting close to the end of their lifecycles. Naturally, this is an opportunity to bring in new technologies, more efficient and more eco-friendly. This is also an opportunity to diversify the system's fuel and technology mix.
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ENERGY SECTOR TRANSFORMATION |
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LEGACY (YESTERDAY) |
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ENERGY OF TOMORROW |
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Increase in energy demand correlated with GDP growth |
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Increase in energy demand less predictable, more abrupt. Pressure on efficiency |
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Renewable energy sources as development technology, negligible share in domestic energy consumption
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Renewables as important element of energy supply
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One-way energy: from plant to consumer |
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Two-way energy with networks collecting energy from dispersed installations |
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Production based on economies of scale and system power plants. Monoculture energy - based almost entirely on fossil fuels |
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Eco-awareness in the society. Restrictive environmental norms, best available technologies only. Incentives for low-emission economy |
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Energy companies as suppliers of electricity and district heating |
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Energy companies as providers of comprehensive service |
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Conventional plants operating in base formula (24/7) - costs covered thanks to volume of energy generated |
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Conventional plants compete with renewable sources which have priority of reception for its output and also financial support scheme. Two commodity energy and capacity market enumerates also readiness to work.
The development of renewables brings changes in model of the power market and the way that conventional generation units operate. Lower load factor means that volume based remuneration will not be sufficient to cover full costs of generation units. The decline of profitability may cause losses of capacity in the system and the shortage may be perceivable in periods when weather driven supply is missed. The readiness to operate is the service that has the real value for the economy. |
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Energy as a good that cannot be stored (basic rule on wholesale energy markets, which explains intraday price volatility) |
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R&D budgets are being directed at energy warehousing technologies, progressing commercialisation of energy warehousing on an industrial scale. |
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Automotive industry based on crude oil, as element of surrounding |
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Electricity-based automotive (electric vehicles as additional source of demand). Potential for EVs to stabilise the system around the clock |
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Simple consumption model for energy |
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Smart homes, smart grids and the Internet of Things, in which devices exchange information needed to optimise energy consumption. |
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Energy industry with relatively stable demand and prices |
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Greater volatility resulting from growing share of uncontrollable sources and increased supply from weather dependent sources. |
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Poland as a self-balancing isolated market |
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Poland as part of integrated European market, growing volume of cross-border exchange |
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We are not arguing with the direction of transformation but we want the transformation from the traditional model to the future model to be harmonised, thought-through and coordinated. |
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How do we do this?
Subsidising renewables and the prosumer's dilemma
As technology becomes popular, it also becomes more efficient and cheaper. But in the development phase, new technologies must be supported. Support systems are financed from fees for energy paid by all customers. Prosumer energy, while representing one of mega trends related to dispersed generation, utilizes support financed by the whole society.
Increasing changes in surroundings
The increasing dynamics of changes in surroundings influences the volatility of electricity prices. One of conclusions from Company’s strategic analysis is the need for increased flexibility.
Reasons for changes - including:
- technological changes (development of renewables and implications for the fossil fuel market),
- in the future: demand for energy from electric cars and partial substitution of oil
- weather conditions - weather has impact on demand and supply, determines wind- and sun-based generation; also the freezing and later melting of hydro plants, high temperatures, low water levels in rivers all create risks for cooling conventional power plants,
- changes in fuel production structure: (depletion of old deposits, discoveries of new resources)
- progress in telecommunications, integration of financial markets and global swings
- administrative reduction of supply (ETS, CO2) or demand (level of certificate redemptions)
- development of international transmission infrastructure and transport terminals, cross-border connections, land routes, rail-roads and inland waterways
- geopolitical factors (OPEC decisions)
Implications of changes
Changes in the surroundings create significant challenges for long-term planning, reduce overall risk appetite and increase the significance of risk management and hedging policies. In a changing environment, sources of advantage include operational and financial flexibility, diversified sources of revenue, moderate debt and conservative planning, adequate to resources.
PGE Group's advantage is vertical integration, which introduces elements of natural hedging. For example, we are at the same time the seller and buyer of property rights (colour-coded certificates).