Poland's energy storage system bidding volume declines for the first time

The results of Poland's capacity market tenders were recently released, and the number of winning bids for Battery Energy Storage Systems (BESS) projects declined compared to last year, influenced by a reduction in the depreciation factor for energy storage technology.

The state-owned transmission system operator (TSO) PSE released the list of winning bids, with a total capacity obligation of 6,887.639 MW to be fulfilled starting in 2030.

The capacity market is the cornerstone of the business model for large-scale energy storage projects in Poland. In the 2022, 2023, and 2024 tenders, battery energy storage system projects with a total capacity obligation of 165 MW, 1.7 GW, and 2.5 GW were awarded, respectively.

However, in this year's tenders, BESS technology only won bids for approximately 685 MW of capacity, marking the first decline for this technology.

Arthur D. Little, an executive at the Polish branch of developer and operator Harmony Energy, told Energy-Storage.news that this was mainly due to a significant reduction in the depreciation factor for BESS to 13%, compared to 60% in 2024 and 95% in 2023. The de-rating factor, also known as the "availability correction factor," is a restriction on the proportion of capacity a project can participate in bidding for, designed to reflect the reliability of the technology being called upon.

Michal Maćkowiak, Managing Director of Harmony Energy Poland, stated, "It's clear that the TSO wants to curb the market share of BESS to support natural gas; they've made that clear." His colleague, Piotr Czembor, pointed out that due to the de-rating factor, the actual total capacity of the BESS projects that won the contracts in this round is approximately 5GW, representing only about 13% of total revenue.

Meanwhile, natural gas projects won contracts for approximately 2400MW. In January of this year, the Polish government adjusted bidding parameters to strengthen its support for natural gas, demonstrating its stance. It is also noteworthy that this recently concluded capacity market bidding was the last under the current system, and Poland is currently negotiating a new framework with the EU.

"Most capacity market tenders this year were primarily aimed at attracting gas-fired power investors, with tender parameters clearly skewed towards natural gas rather than storage—a stark contrast to the dominance of storage technology in previous years," said Wojciech Swiercz, a partner at Arthur D. Little. "The storage availability adjustment factor, which directly impacts capacity contract revenue, was set at only 13.39%, a significant drop from over 60% last year and 95% two years ago." Despite this headwind, the number of successful storage contracts was still surprising.

"Both natural gas and storage investors are currently facing time pressure to fulfill contracts within five years. It is foreseeable that the industry will face significant challenges in the future, including a global gas turbine shortage, regulatory uncertainty surrounding storage, and high financing costs." Notable developers and operators winning BESS project contracts this year include R.Power, Nala Renewables, Axpo, RWE, and Tauron, while state-owned power company PGE secured numerous contracts across various technology areas, including BESS. Enel X Polska, a subsidiary of ESU, won several contracts for demand response services.

The announcement of the results of this capacity market tender came just a few working days after Poland announced the shortlist of candidates for its €1 billion energy storage project grant.