Poland plans first power capacity auction in November -ministry

WARSAW, Sept 4 (Reuters) - Poland plans to hold its first power capacity auction in November as part of a planned scheme in which electricity producers are paid for their readiness to provide electricity when needed.

Poland generates most of its electricity from coal, mostly in outdated power plants, many of which need to be shut down in the coming years, raising risk for its security of supply.

The government, which was elected in 2015 partly on promises to sustain the coal industry, has changed direction this year and acknowledged the need to increase its low-emission energy capacity.

State-run utilities still have a few coal-fuelled power stations under construction or planned, however, and are facing trouble finding financing for them.

Poland hopes the capacity market will help finance the projects and guarantee stable power supply, while critics say the scheme will only strengthen Poland’s reliance on coal and result in higher electricity prices.

“The power market will ensure stable electricity supply to households and industry in the long-term horizon. It is also the most cost-effective way to ensure the right amount of power,” the energy ministry said in a statement.

On November 15 utilities will compete to receive funds in 2021. On December 5 a capacity auction for 2022 will take place and on December 21 capacity for 2023, the ministry said.

The energy minister has estimated the size of the capacity market scheme at 2-3 billion zlotys ($537-805 million).

EU state aid regulators in February approved power back-up schemes in Germany, France and four other EU countries, saying that these would ensure security supply in the event of blackouts.

Italy and Poland were also cleared to set up such schemes.

$1 = 3.7245 zlotys Reporting by Agnieszka Barteczko; editing by Jason Neely