Monthly Magazine

August 2023 - summary 

August 2023, as in previous years, was characterized by a lower share of RES in electricity generation than in the other months of spring and summer. However, thanks to the dynamic expansion of renewable capacity (mainly photovoltaics), the share was 26.3%, which is higher than the values recorded before 2023. As a result, according to Forum Energii estimates, emissions from the electric power sector (7.9 million tons of CO2) fell by 22% compared to the previous year (10 million tons of CO2). Once again, the high volatility of RES required intensified operation of the only significant system-scale energy storage facilities - pumped storage power plants. Their utilization was the 2nd highest on record. 

Coal prices for thermal power plants (PSCMI2 index) fell by about 25% in 2 months - to 33.2 PLN/GJ. As a result of such a dynamic decline, for the first time in 7 years this coal is cheaper than the one for the power industry (PSCMI1 index - 33.6 PLN/GJ). Although the price of gaseous fuel has increased by about 5 PLN/MWh relative to July (to about 335 PLN/MWh), it is still at a much lower level than last year. In 2024, its price should fall - in August contracts for supply for 2024 was traded at around 260 PLN/MWh. 

The weighted average price of electricity delivered in a given month is made up of past futures contracts and spot market transactions. The relatively lower price of energy on the spot (thanks, among other things, to a fairly high share of RES) - about 510 PLN/MWh - reduced the average price of delivered electricity to 820 PLN/MWh. If electricity had been supplied solely on the basis of futures contracts, the value would have been 960 PLN/MWh. 

The volume of electricty tarded in August was the lowest in five years, at 6.9 TWh. In 2017-2022, it averaged 13.6 TWh. This is a consequence of the abolition of the obligation to sell 100% of electricity publicly. 

• The average monthly power demand in August 2023 was 17.8 GW (1.0 GW less than a year ago), reaching a maximum of 22.5 GW (minimum - 12.0 GW).  

• Electricity consumption was 13.3 TWh (5.1% less than last year), while gross generation was 12.7 TWh (8.5% less y/y). 

• Net electricity imports amounted to 0.6 TWh, or about 4.3% of domestic consumption. Last year, net imports amounted to 0.1 TWh. 

• Electricity production from RES accounted for 26.3% of the generation mix, a share that increased 9.6 p.p. from last year. 

• Pumped storage plants were responsible for 1.2% of electricity production. This is 0.4 p.p. (38.4%) more than a year ago. 

• Fossil fuels accounted for the remaining 72.5% of electricity generation: hard coal 41.7% (5.0 TWh), lignite 21.3% (2.5 TWh), natural gas 7.5% (0.9 TWh), and other fossil fuels 1.9% (0.2 TWh).  

• Among renewable sources, wind farms produced 10.2% of electricity (1.2 TWh - 38.7% of RES production), photovoltaics were responsible for 13.4% (1.6 TWh - 51.0% of RES), 1.1% came from hydropower (0.1 TWh - 4.0% of RES), and 1.7% from biomass (0.2 TWh - 6.3% of RES).  

• Coal prices for power plants (PSCMI1 index) fell 1.8% during the month, to 33.6 PLN/GJ (about PLN 730/ton), 111% higher than a year ago. Coal for district heating plants (PSCMI2 index) costs 33.2 PLN/GJ (about 780 PLN/t; 107% more than a year ago), down 10.5% on the previous month. The weighted average price of natural gas delivered in August rose 1.4% against July, to 335.3 PLN/MWh. 

• Emissions from the electricity sector were estimated at 7.9 million tons of CO2, down 22% from a year ago. 

• The power exchange has seen further gentle declines. Baseline delivery in next year was traded 3% lower, at an average of 634.63 PLN/MWh, and in peak hours (PEAK5) 2% lower, at 706.03 PLN/MWh. The valuation of supplies on the SPOT market (DAM) fell by 6%, to 511.06 PLN/MWh. 

• The weighted average price of CO2 emission allowances (EUAs) on the primary market was 84.78 EUR/tCO2, 2% lower than a month earlier. In August, Poland's budget received 340 million euros as a result of the sale of CO2 emission allowances on the primary market (EEX exchange). Since the beginning of the year, the amount is €3.59 billion, and since 2013 22.18 billion euros. 

• The CDS (Clean Dark Spread), an indicator of the margin of coal-fired power plants, amounted in August to 155.50 PLN/MWh, representing 19% of the weighted average wholesale price of electricity delivered that month. Over the year, the index has increased by about 167 PLN/MWh (at the time it was -11.56 PLN/MWh). According to the current forecast, the CDS for the rest of 2023 will be at the level of 310-360 PLN/MWh, representing 33-36% of the weighted average wholesale price of electricity delivered. 

• The CSS (Clean Spark Spread), the equivalent of the CDS for gas-fired power plants, was 123.53 PLN/MWh this month. In August 2022, it was about 369 PLN/MWh lower (then 245.31 PLN/MWh). 

• The sum of volumes of concluded futures contracts in electricity market fell by 24.7% year-on-year. In August 2023, it amounted to 6.9 TWh, compared to 9.2 TWh a year earlier. 

The chart shows the electricity generation mix in Poland, divided into different technologies using fossil fuels or renewable sources. The primary source of electricity is hard coal and lignite, but the share of natural gas and RES is still growing.

Knowledge of the structure of electricity generation allows for the calculation of carbon dioxide emissions from power sector. CO2 emissions are calculated using reference fuel emission factors adopted by the Forum Energii (lignite: 1065 kg/MWh, hard coal: 900 kg/MWh, natural gas: 450 kg/MWh).

The chart shows a comparison of monthly electricity consumption and production in the current and previous year. Seasonality is clear - total energy consumption is highest in the winter months.

In the long run, the consumption is influenced on the one hand by economic development (which results in the increase of consumption) and on the other hand by progressive efforts in the field of energy efficiency (which results in the decrease of consumption). 

 

The total load in the Polish power system varies between 10 GW and 25 GW. The average value illustrates the situation in a respective month. Observing the monthly minimum and maximum values, leads to a conclusion that the summer months are characterized by significant variability of load and high demand peaks around noon.

The chart shows a comparison of weighted average monthly prices on Polish Power Exchange. The Commodity Forward Instruments Market covers about 80% of the electricity volume traded on the Polish Power Exchange.

The two most important instruments relate to energy supply 24 hours a day (BASE) and 7:00 - 22:00 (PEAK5). The contracts are concluded with future delivery (max. 3 years). The vast majority of transactions on the exchange concern purchase of energy with supply in the nearest calendar year (n+1).

The chart shows the Clean Dark Spread calculated based on: historical contracts (BASE, PEAK, OFFPEAK) weighted by the share of deliveries in a given month (POLPX Commodity Futures Market), spot market contracts (POLPX Day-Ahead Market), coal prices (PSCMI1) and CO2 emission allowance prices (EEX primary market). 

Clean Dark Spread (coal-fired power plants' variable cost spread indicator) is the difference between the price of electricity and the estimated variable costs associated with coal-fired power generation (fuel and emission allowances). Clean Dark Spread is an indicator correlated with the profit of a power company, producing electricity from coal (in reality, it is still necessary to take into account transportation costs, operating costs, incurred and planned investment costs, etc.). Analysis of changes in this value, together with CSS, allows estimating the current financial situation of electricity companies. 

The start of the bands corresponding to fuel or allowances below the horizontal axis is due to the negative value of the CDS. The values on the gray background represent forecasts for 2023. 

The chart shows Clean Spark Spread calculated based on: historical contracts (BASE, PEAK, OFFPEAK) weighted by the share of deliveries in a given month (POLPX Commodity Futures Market), spot market contracts (POLPX Day-Ahead Market), natural gas prices (POLPX Commodity Futures Market) and CO2 emission allowance prices (EEX primary market). 

Clean Spark Spread (gas-fired power plants' variable cost spread indicator) is the difference between the price of electricity and the estimated variable costs associated with natural gas-fired power generation (fuel and emission allowances). Clean Spark Spread is an indicator correlated with the profit of a power company, producing electricity from natural gas (in reality, it is still necessary to take into account transportation costs, operating costs, incurred and planned investment costs, etc.). Analysis of changes in this value, together with CDS, allows estimating the current financial situation of electricity companies. 

The start of the bands corresponding to fuel or allowances below the horizontal axis is due to the negative value of the CSS. The values on the gray background represent forecasts for 2023. 

The current situation in the power sector, hour after hour, can also be followed by looking at Forumetr.