Integrated annual report 2017 edition

9 Security for future generations

We are a guarantor of security and stability of the power system in Poland.
We feel responsible for the security of future generations.
Being aware of the condition of national infrastructure, challenges and trends that affect the development of the system, we perform upgrade work and new investment projects in order to ensure its stability and security.
We want to strengthen awareness and educate society in the field of power market operation.

Implementation of the capacity market

GRI 103  It is our obligation is to supply energy to all areas of the country, so as to that the current and expected electrical energy and power demand in the PPS is met in the medium and long term.

There are many factors that determine the certainty of electricity supply. In the first place, it depends on the availability of sufficient energy generation sources to at least that cover the electric power and energy demand, that is, the adequacy of generation capacity. Owing to a low flexibility of demand and variability of supply, arising from an increasing share in the power system of facilities using variable renewable energy sources (RES), where generation depends on weather conditions which are not always predictable, it is necessary to maintain the generating capacity volume required in the system.

The energy only electricity market currently in operation has proved to be an insufficient mechanism to generate necessary long and medium-term investment signals that would lead to the creation of new, stable generating capacities and upgrades of the existing ones. The consequence of this is the phenomenon of capacity shortfall characteristic of the energy only market.

Adequacy analyses conducted for the coming years suggest a certain probability of periods occurring, during which, due to the unavailability of generating resources, the TSO will not be technically capable of balancing power in the PPS. However, despite the expected power shortfall, investors do not decide to invest in new generating capacity, as they are not sufficiently certain of the profitability of such investments.

Maintaining the current energy only model of the electricity market will result in a further aggravation of the problem of capacity shortages in the system. The fact that the problem is a real phenomenon could be seen in August 2015, when it became necessary to impose constraints on electricity supply and consumption throughout the country to maintain the PPS operation security. To avoid such situations in the future, it is necessary to take resolute steps.

The need to prevent generating capacity shortfalls has prompted the decision to introduce a centralised capacity market in Poland. Our company actively participates in introducing capacity mechanisms, supporting the Ministry of Energy in work on the main piece of legislation – the Capacity Market Act – and in talks with the European Commission on the notification of the Act.

As part of the proposed capacity market mechanism, PSE will obtain commitments to deliver adequate power to the system during risk periods and to be ready for its delivery. The commitments – called capacity obligation – will be offered in auctions by capacity providers: generators, operators of energy storage facilities and controlled electricity loads (demand reduction), and also by entities representing groups of generators or consumers (so-called aggregators). Capacity auctions will take place at a specific point in time in advance of the period for which capacity providers offer their product.

The proposed capacity market will comprise of primary market and secondary market mechanisms in accordance with the diagram below

The primary objective of capacity market implementation is to ensure the security of electricity supply to final consumers in the medium and long term while maintaining cost effectiveness. It will also support the potential development of renewable energy sources without a negative impact on the security of electricity supply to final consumers.

The capacity market should generate necessary investment incentives supporting the construction of new generating capacity, restoration of withdrawn capacity and upgrades of existing units. It should also make it possible to implement an effective, competition-based mechanism for the coordination of the construction and withdrawals of generating capacity and the development of the interruptible load service, while ensuring the minimisation of costs incurred by final consumers.

The capacity market will operate in parallel with the energy market, without limiting its operation or replacing supply and demand-based price formation in the energy market. The objective of effectively meeting the desired supply security standard will be achieved by making demand in the capacity market dependent on the calculated forecast power demand.

From PSE's point of view, implementation of the capacity market in Poland is an opportunity to eliminate the problem of capacity shortage in the PPS. It will also enable the environmental impact of the power sector to be reduced by upgrading the existing generating units and construction of new ones, in compliance with more stringent emission standards.

The capacity market is a solution that ensures the operational security of the PPS not only in the next few years but also in the long term.

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New model of infrastructure investment project implementation

GRI 103  In 2016, we carried out a comprehensive review of the existing investment project implementation model based on the EPC (engineering, procurement and construction, or turnkey) method. We have carried out a detailed audit of projects and organisation of the investment process. We have gathered stakeholders' opinions – especially of our contractors.

So far, several departments have been engaged in the implementation of investment projects – our organisation and the subsidiary PSE Inwestycje, which plays various roles, including that of contract engineer. Based on the knowledge and experience gained, we had developed and introduced as of 1 May 2017 a new investment project implementation model (NMRI). The unit coordinating its implementation is the Central Investment Unit (Centralna Jednostka Inwestycyjna, CJI) a part of the PSE's internal organisation structure.

Objectives of the new investment project implementation model



the investment process and enhancing its effectiveness with a particular focus placed on managing projects and the investment portfolio in line with a clear investment project lifecycle.



specific roles in the investment process by allocating responsibilities for meeting specific project goals.



process transparency and assurance of key stakeholders as far as the real-time risk management in projects and the monitoring of contractors' activities are concerned.



uniform qualitative and quantitative parameters for the evaluation of the investment process.



a uniform investment business unit that holds full responsibility for implementation of investment projects, with its own competences covering the procurement, legal, engineering, designing and financial issues, and supporting the implementation of investment projects.

Lower risk for investors

The new project implementation model provides for running projects in a transparent, flexible manner, according to clear principles and standards. It will be conducive to effective monitoring of risks and the ability to diagnose them at an early stage.

It is the investor, and not the contractor, who will indicate the line route and define its concept. The proposed model changes bring us closer to the standards widely used in the world.

Efficient tendering process

We are planning to make significant changes to the tendering process. We intend to adopt and apply – in cases justified by the object of the contract – non-price criteria of bid evaluation. Potential risks in the entire investment process will be analysed in each case and taken into account in the contractual documentation instead of being fully transferred to contractors. The new practice will be to lend flexibility to contractual provisions and the capability to make changes during the term of the agreement. The changes will include both contractual provisions, implementation schedules, tendering requirements, subcontractor acceptance procedures and occupational health and safety requirements, as well as issues related to payments for completed works. The mechanisms applied should be conducive to the development of the contractor sector, the correct allocation of risks between the contracting authority and the contractor and the timely execution of work carried out in accordance with quality requirements by applying the highest HSEQ (health, safety, environment and quality) standards.

Transparent process of public consultations

We will attach even greater importance to maintaining exemplary relations with local communities and local governments representing them, in whose areas we plan and implement investment projects. In the new model, priority is given to a transparent public consultation process. Owing to the elimination of intermediate supervision links, all social stakeholders at every stage of the project implementation process will be in direct contact with PSE as an investor. This will also apply to the critical stage of acquiring transmission rights of way.

Grid assets standardisation and R&D

Standardisation of grid assets

The purpose of standardisation is to apply uniform patterns – standardisation in terms of dimensions, materials used, construction and testing procedures. It supports cost reduction, repeatability of solutions, interoperability of solutions from different suppliers, and reduction of the diversity of reserves.

The above advantages of the process are most clearly visible with regard to construction or purchase of new grids assets, where reference to relevant standards is sufficient, with no need to develop detailed requirements in each case.

Standardisation has been implemented by PSE in different areas and to a different extent for a dozen or so years. In 2016, we had about 140 Technical Standards in place, published on the website. PSE's Technical Standard is defined as a set of functional, technical and environmental requirements with universal content. Thus a standard is to enable the introduction of modern and cost-effective solutions that can be offered by many suppliers. The standards in force at the company are subject to obligatory cyclic verification (every 5 years at maximum), in particular in terms of:

  • the application of terminology consistent with the terms and definitions of the IEC 60050 International Electrotechnical Vocabulary and those used at PSE, 
  • the relevance of laws, regulations and norms related the standard concerned,
  • checking links to other standards in order to avoid discrepancies and maintain standardisation integrity,
  • the possibility of merging standards dealing with the same subjects into one standard, so as to simplify, eliminate repetitions and reduce the number of applicable standards,
  • testing the market for the feasibility of meeting the provisions of a standard while preserving competitiveness.

In 2016, we updated or developed from scratch more than 20 standards on lines, substations and power protection automation (PPA).

We are preparing to achieve in the years to come the highest level of standardisation, i.e. unification of solutions in order to simplify the process of construction, installation, commissioning and operation of the transmission network.

R&D related to grid assets

In 2016, we completed 6 research and development (R&D) projects related to grid assets

  • Testing protective properties of waterborne paint sets for corrosion proofing of supporting structures.
  • Modern low-loss wires for electricity transmission to EHV power lines.
  • Feeding HV/MV auxiliaries with the use of photovoltaic systems.
  • Substation automation based on the EC 61850 communication protocol with the use of GOOSE (Generic Object Oriented Systems Events) messages.
  • The section protection system design for HV lines and the use of current sensors or analogue-to-digital converters.
  • Construction of a line panel with the use of digital technology.

Social dialogue accompanying investment projects

Social communication

GRI 102-43 At the investment planning stage, we establish direct relations with opinion leaders and local authorities at the province, county and commune levels. We initiate and conduct educational actions concerning the role of PSE in the Polish Power System and the significance of our activities promoting energy security of the country. We explain to local communities the need to develop the transmission network in Poland.

In cooperation with contractors to whom a contract is awarded under a tendering procedure, we provide them with relevant guidelines on the preparation and implementation of social communication programmes in the form of appendices to agreements concluded. The geographical location of a power line project usually spans the territory of many communes, several counties, or even provinces. In most cases, prior to the commencement of a line right-of-way project, only points between which it will run are known. This makes it necessary to consider a number of line route options and to identify key stakeholder groups in the context of each option.

All investment projects we implement are supported by social communication programmes (100 percent). We have been continuously analysing their impact on local communities.

For each investment project performed, we prepare a web page and information guides addressed to local communities, which contain reliable information on the investment concerned, including its environmental impact. The main objects of public interest from the point of view of potential impact on human health are electromagnetic fields and noise. This is why we diligently convey our knowledge on research conducted throughout the world as well as applicable laws and regulations – each of them is strictly observed. Prior to putting a facility into service, we perform measurements of electromagnetic fields, which are then subjected to verification by environmental protection administration.

The process of planning and preparing linear right-of-way projects lasts several times longer than the construction itself. Owing to the need to take into account what are often mutually exclusive interests of all interested parties, it requires utmost diligence. Each our investment is prepared and implemented in compliance with all laws and regulations and following the best construction and operating practices, both Polish and international. The final line route and substation locations represent a compromise between the expectations of the local communities and technical capabilities. 

Line route

Infrastructure investment projects require "continuity" to be maintained. Any attempt to move the line route to a different location gives rise to consequences in the adjacent area. Taking into account legal and environmental constraints, we always consider several route options. We take into account local and regional spatial development plans, development directions of each commune, detailed environmental and landscape conditions, protected areas, and other elements that may conflict with a line route.

Participation of the public in the line route planning process is highly desirable. A jointly selected line route option is better and less conflicting, which allows the arduous stage of procuring decisions and authorisations required by law to be completed faster. Designers seek to set out a line route so as to avoid proximity to residential development; however, the increasing level of urban development across the country makes it significantly more difficult to find compromise solutions which are satisfactory to local communities. Near large cities and urban agglomerations, the problems multiply. Preference is given to agricultural land without development rights, as a power line is no obstacle to farming. We also use forest land, in which case lines carried by over-forest pylons are designed. However, it is easier to locate a planned transmission line along existing linear infrastructure – railway routes, expressways or previously built power lines. Unfortunately, no line location option exists which is completely collision-free. Therefore, being aware that the line route is of foremost importance for local communities, we propose several location options for the same line. Different options are developed in cooperation with local authorities, as even the best digital map does not contain development plans for regions and communes or plans for their future spatial development, which must be analysed when selecting an optimum route. At this stage, in the case of planned routes across areas of high natural value, environmental NGOs are additionally involved in the process, which very often become a valuable source of knowledge on local natural features and forms of natural environment protection.

In the case of an electrical substation project, acceptance is usually required of several plot owners, and therefore a compromise solution is easier to arrive at than for a line.

Acquisition of transmission rights of way

Construction of transmission lines requires the establishment of a property right. Depending on the type and design, a tower/pylon occupies an area of 50–120 m². In addition, it is necessary to factor in land occupancy in the rights of way under lines, mainly for maintenance and operation purposes. Depending on line voltage, technical solutions and environmental conditions, it is 50-80 m in width.  

Transmission rights of way represent a legal encumbrance on land. Usually, it limits the use of land to a very small extent. Crop growing and animal breeding is possible under lines, and farming equipment can be used. We sign civil-law contracts in the form of notarial deeds with land owners. They specify the extent to which a transmission undertaking can use third-party property on which their transmission equipment is or will be situated. Transmission rights of way reduce the value of property, for which we pay compensation in accordance with a property appraiser's valuation. The degree of property value loss depends on land use and requires a property appraiser's individual assessment. We usually manage to come to an agreement with owners of plots situated under power lines. In the absence of the land owner's consent to sign the public utility project rights of way agreement, following the completion of the entire negotiation process, a negotiation process is triggered in accordance with the requirements of Article 124 of the Property Management Act.

Based on our best practice, upon completion of work we carry out necessary reclamation. In agreement with plot owners, we pay amounts due for any damage caused in the course of construction. In the absence of an agreement, the amount due is assessed by a property appraiser.

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