Warsaw — The lower house of the Polish parliament approved Wednesday a bill to introduce a capacity market to secure sufficient generation capacity in the Polish network in the coming years and enable existing coal plant to modernize to meet emissions standards.
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Lawmakers voted 243 in favor of the draft law with 181 against and seven abstentions. The bill will now go to the senate, the upper house of parliament, for voting.
The governing Law and Justice party also has a majority in the senate and while senators can introduce amendments to the bill, they are not expected to vote against it. Once approved by the senate, the president has to sign the bill into law.
Ahead of the vote, deputy energy minister Grzegorz Tobiszowski said that without a capacity market there would be "no electricity in the sockets in two years' time."
Poland's Electricity Association (PKEE) estimates that 23 GW of coal plant, almost all the country's firm generation capacity, requires retrofitting to meet revised BREF emission standards for SOx, NOx, mercury and dust, which take effect in 2021.
PKEE estimates the retrofitting cost at Eur2.5 billion ($2.95 billion). The capacity market will be key to financing those investments.
Poland's transmission system operator PSE estimates it will not be able to balance the system after 2019 if units are not retrofitted.
The bill introduces an annual auction system, technologically neutral, for capacity to be delivered in five years' time, with the lowest bid securing the contract. The first auction is scheduled for December 2018.
Plants would receive contracts of between five to 15 years duration depending on their investment requirements to meet EU emissions standards.
Units that emit less than 450 g of CO2/kWh would receive two-year extensions to their contracts. Foreign companies will be allowed to participate in the auction as coupled units until 2021 and directly afterwards.
The Ministry of Energy estimates the cost of the capacity market will be around Zloty 4 billion/year ($1.12 billion/year) although the final bill will depend on the results of the auctions.
Households will pay well below an extra Zloty 10 on their monthly electricity bills as a result, according to the ministry.
Law and Justice parliamentarian Wojciech Zubowski told parliament the additional cost would be less than Zloty 2 (47 euro cent) each month.
As a form of state aid, the capacity market requires European Commission approval.
The government has already notified the Commission about the bill and, having already made concessions in its provisions, expects it to win approval.