Can Decarbonisation and Capacity Market Go Together? The Case Study of Poland

Abstract

In recent years, numerous countries have introduced or considered capacity markets as remuneration mechanisms for long-term capacity adequacy. Since adequacy is frequently linked with thermal power generation, there is an ongoing debate as to whether this instrument could impact decarbonisation. In this context, the paper presents a quantitative assessment of the consequences of introducing a capacity market on decarbonisation pathways. The Polish power system is taken as an example due to its heavy dependence on fossil fuels. To this end, a computable model of the Polish power system is developed and applied to the study of two research scenarios. The first scenario presents the power system without introducing a capacity market, while the latter considers the system with a capacity market in place. The analysis shows that the introduction of a capacity market delays the decarbonisation of the power system and has a negative impact on carbon neutrality. Even though coal-fired units are phased out, they are mainly replaced by natural gas. The method and model developed within this study can be applied to countries where a capacity market is being discussed, and fossil fuels continue to play a dominant role.

Capacity Market and (the Lack of) New Investments: Evidence from Poland

“…Zamasz et al (2020) compared support mechanisms for new combined heat and power plants assuming the time horizon of 2050 [30]. Komorowska (2021) presented the impact of the capacity market on the decarbonization process in Poland until 2040 [18]. Je żyna et al (2020) questioned 50 companies about their expectations and plans related to the participation in capacity marked compared to other DRS schemes [31].…”

“…Main conditions and principles regarding the centralized capacity market deployed in Poland under the act of 8 December 2017, Dz.U. 2018, item 9 [34] are presented in [18,29,30]. It needs to be highlighted that the capacity market deployment in Poland aimed to ensure middle-and long-term energy supply security that would be economically justified, nondiscriminatory, and respecting sustainable development principles.…”

“…They are implemented in many European countries (i.e., the United Kingdom [5], Germany [1,6], Italy [7], Ireland, and others [8][9][10]), as well as in the United States [11][12][13][14], and others throughout the world [15,16]. According to the literature and policymakers, their main goal should be to ensure appropriate investment incentives for power generation units [2,13,17] to secure stable and economically efficient power generation [18,19].…”

The Impact of Fleet Electrification on Carbon Emissions: A Case Study from Poland

“…Total carbon emission for a group g with fuel f over an analysed period is given in Equation (6). It is a product of the total average mileage for a group of cars g with fuel f and average carbon emissions in a group of cars g with fuel f [18].…”

“…The structure of electricity production in 2019 is shown in Figure 1. Additionally, because of because of the introduction of the capacity market, changes in electricity production structure are not expected to happen in the coming years [4][5][6].…”