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Company behind UK capacity market suspension files action against Polish scheme

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Company behind UK capacity market suspension files action against Polish scheme

Tempus Energy Ltd., the demand-side response aggregator that has brought the U.K.'s power capacity market to a standstill through an EU court case, has filed a similar legal challenge to force changes in the Polish backup electricity scheme.

The company's CEO, Sara Bell, said on March 15 that it has challenged the European Commission's approval of Poland's capacity market, which pays generators and providers of services like demand-side response for standby capacity to prevent grid outages. Tempus successfully filed a similar case against Britain's scheme with the EU's General Court last year, forcing the U.K. government to suspend tens of millions in monthly payments to companies including RWE AG and Electricité de France SA.

Although a decision on the case could take several years, a similar ruling in Poland would jeopardize capacity contracts for several of the country's largest utilities that are planning to build new gas and coal power stations, and whose investment cases are based on the subsidies.

Tempus' challenge to Poland's capacity market faults the European Commission for approving the scheme without opening an in-depth state aid investigation "to examine the evidence, in particular on cleaner, cheaper alternatives to fossil fuel," Bell said. The CEO says that different contracts available to new or planned coal and gas plants and demand-side response companies, running for 15 years and one year respectively, and other designs of the policy put companies like Tempus at a disadvantage.

The Polish government launched its capacity market in 2018 after getting approval from the European Commission along with Belgium, France, Germany, Greece and Italy. Contracts for a total of around 33 GW of capacity in 2021 and 2022 were awarded under the Polish scheme over the past few months, according to S&P Global Platts, with most of it going to coal and gas-fired power plants and a bulk of the capacity secured by PGE Polska Grupa Energetyczna SA.

Polish utilities ENEA SA and Energa SA in December 2018 secured a 15-year contract to deliver 853 MW of capacity in 2023 from their €1.4 billion, 1-GW Ostroleka C project, likely the last large coal plant constructed in the country. The utilities had previously said that the plant would only be built if it received subsidy support.

Tempus operates in the German and Swedish power markets, which are connected to the Polish electricity market via cross-border transmission lines. The company said it also plans to set up operations directly in Poland as part of a wider European expansion.

In the U.K. case, which used similar arguments to Tempus' Polish challenge, the European Commission opened an investigation into the scheme in February after the court ruled last November that it should have done so originally, before approving the scheme. Tempus expects the investigation to run for six to 18 months.

The commission is separately appealing the November court judgment, and the U.K. government has said that it expects the country's scheme to be allowed to return eventually, at which point the government would pay out lost revenue to market participants. Tempus, meanwhile, is also taking legal action in the U.K. in a bid to force the government to recoup the money already paid out to capacity providers.

S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.