Situation on the electricity market
Production of electricity
Pursuant to the data published by Polskie Sieci Energetyczne the domestic production of electricity in 2016 amounted to 162,626 GWh.
Electricity generation structure in Polish power plants [GWh]
| Types of power plants | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial on bituminous coal | 92 111 | 93 133 | 86 550 | 84 274 | 89 212 | 90 811 | 84 492 | 84 566 | 80 284 | 81 883 | 81 348 |
| Commercial on lignite | 53 518 | 51 142 | 53 798 | 50 797 | 49 459 | 53 623 | 55 592 | 56 959 | 54 212 | 53 564 | 51 204 |
| Industrial | 8 280 | 8 216 | 8 045 | 8 204 | 8 923 | 9 000 | 8 991 | 9 171 | 9 020 | 9 757 | 10 130 |
| Gas | 4 046 | 3 908 | 3 988 | 4 052 | 4 166 | 4 355 | 4 485 | 3 149 | 3 274 | 4 193 | 5 776 |
| Commercial hydroelectric | 2 822 | 2 682 | 2 516 | 2 751 | 3 268 | 2 529 | 2 264 | 2 762 | 2 520 | 2 261 | 2 399 |
| Wind | 69 | 436 | 672 | 821 | 1 300 | 2 798 | 3 954 | 5 823 | 7 184 | 10 041 | 11 623 |
| Other renewable | 1 | 10 | 8 | 14 | 11 | 35 | 71 | 72 | 73 | 73 | 146 |
Source: http://www.pse.pl/index.php?modul=8&y=2016&m=12&id_rap=212
Domestic consumption of electricity
Pursuant to the data published by Polskie Sieci Elektroenergetyczne the domestic consumption of electricity in 2016 was higher by 1.97% than in 2015.
Intersystemic exchange
In 2016 the balance of intersystemic exchange was negative as a result of a surplus of energy imported from abroad over the energy exported in the amount of 1,990 GWh. For comparison, in 2015 the balance of intersystemic exchange of electricity amounted to +334 GWh.
Coal market prices
- Since May 2016 a constant growth of coal prices on the global markets has been observed. For producers of bituminous coal a boom commenced where transactions were closed at a price of even over 100 USD/t.
- In 2016 indices of power coal in ARA ports generally demonstrated an upward trend. The growth amplitude between the monthly minimum and maximum value was over 100%. The average annual index for 2016 amounted to 60 USD/t. What significantly affected such a path of development of the situation on the global markets was mainly China - as the largest exporter of that commodity in the world and its biggest consumer at the same time.
- The prices grew also on Richards Bay ports reporting growths on the level of 66.4% yoy in Q4 2016, with the highest average monthly transaction price in November 2016 on the level of 103.44 USD/t.
- Indicative process of the Australian fuel coal in the first half of Q4 2016 grew to almost 5-year maximums. Spot FOB Newcastle benchmark reached the values not seen since Q1 2012, reporting even 110 USD per tonne in November - with the average for that month totalling to 102 USD/t.
- A considerable revival on the American coal market and growths on the level of 72% yoy in Q4 2016 were demonstrated by the representative price benchmark of the commodity in New Orleans.
- The major factors resulting in growths in coal prices in 2016 include political decisions in China, where production capacities of mines were reduced in 2016 by further 100 mln tonnes, structural problems of the Indonesian producers and temporary interruptions in supplies from Australia and Indonesia as a consequence of intensive rainfalls.
Despite wintertime and dynamic growths on global spot markets, the index of the Polish coal, PSCMI1, in Q4 2016 dropped to the level of 46.85 USD/t, i.e. -17.34% yoy. The index value indicates two fundamental features of the domestic coal market:
- low impact of the situations on spot coal markets on the Polish market dominated by long-term contracts and merely observable content of flexible elements in such contracts
- domestic producers of energy and heat, in the situation of high growths on spot markets, search for coal with the quality worse than the model parameters, yet cheaper, which may be used for mixtures and therefore reduce the fuel price
Wholesale electricity prices
The average price on SPOT market in 2016 was higher by 1.4% in comparison with the same period of 2015. It was a result of e.g. higher prices in January and April, and most of all in June and December 2016, which stemmed from the following factors:
- no capacity in PPE system
- low wind generation
- hydrological problems
- growth in demand for energy
Average prices on SPOT market (PPE Day Ahead Market)
| Period | Average price [PLN/MWh] | Change [%] |
|---|---|---|
| 2015 | 156.95 | - |
| 2016 | 159.20 | é 1.4% |
Source: Own paper based on data from PPE.
We observed drops in electricity prices on the forward market. In 2016, the price of the most liquid product, BASE Y-17, dropped from 165.00 PLN/MWh at the beginning of January to 162.00 PLN/MWh at the end of December.
Prices on the forward market
| Product | Price at the end of quotations [PLN/MWh] | Change yoy [%] | Average pricefrom quotations [PLN/MWh] | Change yoy [%] |
|---|---|---|---|---|
| BASE Y-14 | 151.00 | - | 160.27 | - |
| BASE Y-15 | 177.00 | 17.2% | 168.13 | 4.9% |
| BASE Y-16 | 167.50 | 5.4% | 166.49 | 1.0% |
| BASE Y-17 | 162.00 | 3.3% | 159.31 | 4.3% |
Source: Own development based on data from PPE and TFS.
On PPE forward market a very low liquidity is observed - when comparing turnover in 2015 and 2016 then the turnover drop for e.g. BASE-Y amounts to ca. 50%. The main reason for this situation may be extinguishing of the so-called 100% exchange obligation related to Long-term Agreements.
The prices of BASE Y-17 changed similarly to PEAK Y-17 prices. At the beginning of January the market valuation for this product amounted to 225.00 - 227.00 PLN/MWh, and at the end of December 2016 to 207.00 - 208.00 PLN/MWh.
In 2016, the forward market reported a slow growth in electricity prices. It was related to e.g. a great volatility in prices of allowances for emissions of CO2 (a range between the maximum and minimum - 4.18 EUR/t). What had a great importance for the shaping of the market situation was also a significantly decreased, as compared to the volume of trade in BASE Y-16 in the same period of the previous year, volume of trade in BASE Y-17 on PPE.
Some factors of uncertainty are still:
- the question of the Great Britain’s exit from the European Union, which may cause potential changes in the Community Emission Trading Scheme and fluctuations of prices of allowances for emissions of CO2 (EUA) in a longer term
- direction of changes in the system and introduction of new solutions (e.g. capacity market) within guaranteeing relevant levels of power in Public Power System
In 2016, transactions were also concluded on BASE Y-18, however due to a distant delivery horizon, the trading volumes were significantly lower than for BASE Y-17.
Obligations with respect to obtaining energy certificates of origin
In accordance with the regulations being in force energy companies selling electricity to end users in 2016 were obliged to obtain and redeem the following types of certificates of origin:
- for energy generated in renewable sources, the so called "green" certificates - the obligation on the level of 15.0% of sales to end users realised in H1 2016 and 14.35% in H2
- for energy generated from agricultural biogas, new certificates under the amendment to the Act on renewable energy sources dated 20 February 2015 - an obligation on the level of 0.65% of sales to end users realised in H2
- for energy generated in methane-fired cogeneration, the so called "violet" certificates - the obligation on the level of 1.5% of sales to end users
- for energy generated in gaseous cogeneration units or units with the total installed capacity up to 1 MW, the so called "yellow" certificates - the obligation on the level of 6.0%
- for energy generated in other cogeneration sources, the so called "red" certificates - the obligation on the level of 23.2%
- energy efficiency certificates, the so-called “white” certificates - the obligation on the level of 1.5%
The contracting price structure on the PPE's session market for particular proprietary interests in 2016 is presented in table No. 3. The analysis excludes PMOZE "green" PIs due to lack of trading volumes and their entire replacement with PMOZE_A.
Prices on the certificates of origin market (PPE's session market)
| Average price in 2016 | Change in relation to Q4 2015 | Maximum price | Minimum price | |||
|---|---|---|---|---|---|---|
| % | PLN/MWh | PLN/MWh | PLN/MWh | |||
| OZEX_A ("green" proprietary interests) | 73.63 | -37.4% | -44.07 | 118.98 | 31.13 | |
| OZEX_BIO ("light blue" proprietary interests) | 295.52 | - | - | 301.50 | 271.00 | |
| KGMX ("yellow" proprietary interests) | 2015 | 118.85 | 0.9% | 1.09 | 122.00 | 118.00 |
| 2016 | 121.13 | - | - | 123.20 | 114.00 | |
| KECX ("red" proprietary interests) | 2015 | 10.77 | 0.3% | 0.03 | 11.00 | 9.20 |
| 2016 | 10.68 | - | - | 10.76 | 10.00 | |
| KMETX ("violet" proprietary interests) | 2015 | 62.24 | 0.4% | 0.23 | 63.00 | 61.80 |
| 2016 | 61.73 | - | - | 62.70 | 61.00 | |
| EFX ("white" proprietary interests) 1) | 977.35 | 1.5% | 14.40 | 1 230.00 | 930.00 | |
1) Values in PLN/toe
Source: own paper based on data from PPE.
Limits of CO2 emission allowances and their market prices
In 2016, the prices of allowances for emissions of CO2 (EUA), apart from fundamental factors, were affected e.g. by the macroeconomic situation in the world, issue of free allowances for the industry and progress of works within the reform of EU ETS system. Price levels were significantly affected also by events of December 2015, i.e. COP21 climate conference and a complaint lodged by Poland relating to an amendment to the start date of MSR (mechanism of steering the supply of emission allowances whose introduction is to eliminate the surplus to which units withdrawn from the market as part of the so-called backloading will be directed). The Polish government approved lodging a complaint for declaring invalidity of the decision determining operation of MSR before 2021, referring to the breach of e.g. the principles of: a loyal cooperation, legal certainty, protection of legitimate expectations and proportionality.
The European Union ratified the climate agreement adopted during COP21 in Paris, and therefore the criterion relating to the entry into force of its objectives was satisfied (ratification of the agreement by at least 55 countries generating at least 55% of the emissions in the world). For many followers of making the climate policy stricter the adopted obligations are insufficient,mainly due to a small engagement of the largest issuers (USA, China, India) and as a result will not translate into the actual reduction of emissions during the coming years.
Another, sudden price reduction in allowances for emissions of CO2 occurring in June was a result of a referendum in the Great Britain as a consequence of which the majority of citizens were in favour of Brexit. Even though the country announced that it would remain in the EU ETS system, determining the budget for the activities reducing the emission for 2028-2032, it confirmed the continuation of the climate policy, the prices of allowances significantly dropped.
EUA and CER price change
| Product | Price [EUR/t] | Change % | |
|---|---|---|---|
| Beginning of January 2016 | End of December 2016 | ||
| EUA Spot | 8.04 | 5.64 | 29.9% |
| CER SPOT | 0.49 | 0.27 | 44.9% |
| EUA Dec-16 | 8.11 | 5.09 | 37.2% |
| CER Dec-16 | 0.47 | 0.32 | 31.9% |
Source: own development based on data from ICE.
Pursuant to the most up-to-date data published by the European Commission over 97% of free allowances was issued for the industry (there are still ca. 22 mln allowances mainly for Spain, Italy and Great Britain). The allowances were issued with a delay. Italy issued the allowances for 2015 as late as in March.
According to the European Commission's publication dated 19 May 2016 the surplus of EUA in the system amounted to 1.78 bln after the realisation of the duty for 2015 (drop by 0.3 bln). The emissiveness in the Union dropped by 0.4%. The annual minimum achieved by the most liquid of forward products (Dec-16) was set on the level of 3,93 EUR/t.
The upward trend commenced at the beginning of September is a result of an agreement between the environmental (ENVI) and industry (ITRE) committees within the changes in the EU ETS system after 2020. The most important changes include withdrawing the allowances for the lost generation capacity or cancelling a specified pool of allowances withdrawn from the market to MSR. On 15 February 2017 a voting was conducted in the European Parliament, during which a package of amendments to the EU ETS Directive was adopted including e.g. withdrawal of 24% instead of 12% of allowances from the market during at least 4 years of MSR operation, redemption of 800 mln allowances withdrawn from the market as part of backloading increasing the linear reduction coefficient to 2.2% (from 1.74%).
