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Energy Market in Poland From the Point of View of Large Consumers

Energy Market in Poland From the Point of View of Large Consumers. Presented by: Wojciech Cetnarski – Vice President of Izba Energetyki Przemysłowej i Odbiorców Energii (Association of Industrial Power and Energy Consumers) For AEM / SVSE Conference in Praha, 14-15 September 2005.

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Energy Market in Poland From the Point of View of Large Consumers

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  1. Energy Market in Poland From the Point of View of Large Consumers Presented by: Wojciech Cetnarski – Vice President ofIzba Energetyki Przemysłowej i Odbiorców Energii (Association of Industrial Power and Energy Consumers) For AEM / SVSE Conference in Praha, 14-15 September 2005

  2. Presentation Outline • Introduction of IEP • Outline of Polish Energy Market • Generation / consumption / distribution • Regulation • Sales and Prices • Main Issues From Industrial Consumer Point of view • System inefficiencies • TPA implementation /barriers • Tax policy AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  3. Introduction of IEP • IEP has been created in 1998 • The mission of IEP is to represent and defend the interest of industrial energy consumers in confront with: • Generators/distributors lobbies • Government institution / bodies • Regulatory Office (URE) • IEP is composed currently of 72 members, of which 41 members belong to the Large Energy Consumers Section • IEP actively co-operates with main Industry Associations in Poland, such as, chemical, steel, mining, pulp&paper, glass • In 2005 IEP applied to become the member of IFIEC Europe AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  4. Outline of Polish Energy Market • 20 condensing power plants (5 on lignite), privatized – 5 • 32 CHP Plants (non industrial), privatized – 18 Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  5. Outline of Polish Energy Market Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  6. Outline of Polish Energy Market Source: ARE Statistics of Polish Power Industry 2004 • 2004 deliveries for the end-users: 106 189 GWh • 2004 sale to end-users: 97 760 GWh AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  7. Outline of Polish Energy Market Cross-border electricity trade in 2004 Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  8. Outline of Polish Energy Market • In 2004 there was 164 Power Autoproducers in Poland (industrial power plants), while in 2003 - 169 Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  9. Outline of Polish Energy Market • Distribution system in Poland is consists of over 555.000 km of power lines and 227.000 transformers (HV,MV,LV) • Sector’s structure is composed of: • „PSE Operator” – exist from July 1st, 2004, (state owned) responsible for the HV transmission system operations and balancing (400, 220 kV) • Polish Power Grid Company – „PSE” (state owned), responsible for Lon Term PPA fulfilment and cross-border trade • Historically – 33 local distribution companies (of which 2 have been privatized), now divided into 6 regional groups – final division and composition still not agreed Source: TOE TPA Report 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  10. Regulations • The foundation act for Polish Energy Market is the Energy Law of April 10, 1997 (26 changes till now). • EL includes all form of energy carriers (electricity, heat, gas, fuels) and assumes creation of liberal, open and competitive energy market, with some regulated areas: • where the natural monopoly system exist (transmission and distribution), and • where energy is delivered to retail customers • EL requires legal split between trading and distribution services activities, even within the same company • Implementation of the EL and regulatory duties are executed by the independent Regulatory Office (URE), using as the tools: • Concessions • Decisions • Tariffs • By-laws to EL are issued by Ministry of Economy AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  11. Sales and Prices • Electricity sale structure reflects the changes of the Polish Energy Market • Still over 40% of electricity is traded under the long term PPA (KDT) by PSE • Distribution companies are forced to reduce the trade volumes in favour of TPA customers, trading companies and Pool Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  12. Sales and Prices Summary of average wholesale (PolPX) and retail prices 2003-2005: Centrel (PL, CZ, SL, HU) Source:DG Energy and Transport QUARTERLY REVIEW OF EUROPEAN ELECTRICITY AND GAS PRICES AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  13. Sales and Prices • Competitive electricity wholesale market forced producers to reduce prices, even more then there were able to reduce their cost Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  14. Sales and Prices • URE efforts in controlling the tariff prices is visible as „cross subsidizing” of smaller customers by larger is being reduced • Unfortunately, the electricity prices still grow despite their reduction by producers Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  15. Lack of law stability and clarity • Uncompleted privatisation • Unsolved Long Term PPA (KDT) • TPA implementation barriers Main Issues From Industrial Consumer Point of View • The most important problems slowing down development of the free and competitive Energy Market in Poland: Energy price higher then it should be ! AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  16. Main Issues From Industrial Consumer Point of View • System inefficiencies: • Incomplete privatization is causing lack off real game of interest on the market – State owns generation, transmission and distribution assets and is regulating the market at the same time • Unsolved KDT are strongly influencing the electricity price and whole system of electricity trade – only 50% of electricity in Poland, potentially, can be freely traded • EL, after 26 changes is lacking consistency and clarity – some obvious solutions have been introduced only recently, as in the past were strongly blocked by lobbies opposite to market opening • Solving the above inefficiencies should allow a fair relationship between the customers and electricity suppliers willing to accept tariff system AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  17. Min. Purchase No of eligible Volume Market open. No of customers Data per y. (GWh) customers (TWh) degree [%] benefiting from TPA 1 January 2002 >10 641 38 37% 19 44 1 January 2004 >1 c.a. 6.600 53 51% 6,6 TWh acc. URE 78 acc. TOE 44 all 1 July 2004 c.a. 1,9 mln 69 68% Companies 9,8 TWh all 1 July 2007 c.a. 15,6 mln 102 100% ??? Customers Main Issues From Industrial Consumer Point of View • TPA implementation barriers • Market snapshot(2005 TOE estimates): • There is294 Electricity Trading Companies (ETC) licensed by URE • In reality only 20-22 ETC actively trades on the market • Estimated volume of electricity traded by ETC - 32 TWh • No of customers dealing with ETC – 44 Source: TOE TPA Report 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  18. Main Issues From Industrial Consumer Point of View Source: ARE Statistics of Polish Power Industry 2004 • In case of the TPA customers, despite the significant increase in volume, price increase for transmission services was 5 X bigger (!!!) then for the tariff customers • Vertical consolidation of the power sector, promoted by government will increase the squeezing of new ETC, which are the cheapest seller, in favour of existing players Source: ARE Statistics of Polish Power Industry 2004 AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  19. Main Issues From Industrial Consumer Point of View • TPA implementation barriers • Extremely high demand from transmission system operator (PSE Operator) and local distributors regarding the accuracy and redundancy of the measurement equipment and data transfer systems – no standards • Lack of possibility to balance the market locally and with the accuracy smaller then 1 MW • Lack of standardized Transmission Agreements and procedures for change of energy supplier • Calculation of cost of balancing the market not based on real cost incurred by the participants AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  20. Main Issues From Industrial Consumer Point of View • TPA implementation barriers • The barriers are well known and defined • IEP, together with other market participants (mainly ETC) developed several solutions which should be implemented • Some of the postulates have been accepted by URE and government and implemented to the last amendments to the EL (March 10,2005): • Legal and organizational separation of the energy trade activities from transmission anddistribution services • HV/MV transmission systems operating instruction will be subject to the approval of URE • IEP hopes that by continuing thelobbying efforts and cooperation with key market players will be able to change the today’s pictureof the energy consumer trying touse its TPA rights AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  21. Main Issues From Industrial Consumer Point of View Source: 2005 ENEA Tariff for A23 Group customers • Critical issue for industrial consumers of energy in Poland is the level of energy taxation • EU imposes only minimum excise tax requirement on member states: EUR 0,5-1,0 • Last government announcement of increasing the excise tax on electricity up to EUR 5,4 will put Poland among top 5 countries with highest excise tax (D, FIN, S, DK) AEM/SVSE Conference, Praha, Sept. 14-15, 2005

  22. THANK YOU Presented by: Wojciech Cetnarski – Vice PresidentIzba Energetyki Przemysłowej i Odbiorców Energiiul Poleczki 21 02-822, Warszawa Tel.: +48 22 545 0365 Fax : +48 22 545 0366 iep@iep.org.pl www.iep.org.pl

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