What could an auction system for issuing grid connection conditions look like?

At the end of February, PSE presented the concept of introducing an auction system for issuing grid connection conditions and addressing the problem of issued but unimplemented conditions. Since each of these revolutionary ideas was presented on just a single slide, it is difficult to thoroughly analyze them.

Perhaps this is an invitation to launch a brainstorming session on how such an auction system could work. If so, I will attempt to outline what this could look like in detail.

I must admit that my inspiration comes from Spain, where such an auction system was introduced in 2020, although it has yet to be fully implemented.

The starting point was the same as in Poland — an excess of issued grid connection conditions. A moratorium was imposed on issuing new conditions, while already issued conditions had to be fulfilled within five years. Additionally, changing the location of an installation was permitted, provided the alternative sites were within a 10 km radius of the original location. At the same time, operators were required to publish available grid capacities for all substations, including capacities that became available due to the failure to implement previously issued conditions, even though applications for these capacities were generally not allowed.

Despite no auctions being announced since 2020, projects that received grid connection conditions before 2020 are still being developed. Additionally, installations under the cable pooling model (referred to in Spain as “hybridization”) are being built, including energy storage systems and, interestingly, quasi-direct lines. This means new renewable energy installations can be connected at points where large energy consumers are already connected. The capacity of such installations can be up to twice the contracted capacity of the consumer. For example, if a consumer’s contracted capacity is 50 MW, a 100 MW installation can be connected without the requirement to sign a PPA. The only condition is that the new installation and the energy consumer must be connected at the same grid point. This has created a significant market for agreements between developers and energy consumers, opening new opportunities for projects.

To this day, Spain has not even approved the framework conditions for auctions for new grid connection conditions. Since concerns have been raised in Poland that price bidding in auctions could negatively impact electricity prices, one concept considered in Spain is worth mentioning. The idea is that available capacities at a given connection point would be allocated through a competitive bidding process, where various evaluation criteria would be scored, and the project with the highest score would receive the grid connection conditions. This would ensure that the most advanced projects are prioritized—a concept familiar from grant competitions.

Additionally, participation would require a deposit, similar to Poland, but with significantly higher amounts in Spain (€40,000/MW for grid connection conditions + €60,000/MW for auction participation), with bank guarantees being accepted (as in Poland’s capacity market auctions).

Now, the key question is: Could such a system work in Poland?

• Yes, because the development risk is already very high today, and the “Spanish-style” auction system could even reduce this risk by ensuring that the most advanced project wins rather than the one that submitted the application first or offered the highest price in an auction.
• Yes, because for conditions issued before the moratorium, having a single final deadline for project completion is better than the milestone-based approach proposed by PSE, where meeting interim deadlines depends on multiple external risks beyond developers’ control.
• No, because such a long moratorium would be unacceptable for the wind energy sector, as very few viable wind farm connection conditions remain. However, a shorter moratorium seems to be a necessary element of system reform.
• Yes, because the regulations for direct lines in Spain are far more practical than in Poland, giving investors access to the grid while encouraging PPA agreements (since energy consumers have no incentive to sign agreements without securing benefits).
• Yes, because it enables the seamless development of energy storage and hybridization of existing renewable energy installations.

Is there anything else to add? I would like to revisit an idea I first proposed at a conference at least 10 years ago—without much success, as no one responded positively. The idea is to create a trading platform for issued grid connection conditions for a defined period (e.g., during the moratorium), allowing the transfer of project locations within a certain radius (e.g., 10 km, as in Spain). This would enable an objective valuation of connection conditions held by developers and investors who, for various reasons, could not use them. It would also provide an opportunity for at least partial cost recovery.

Grzegorz Skarżyński
Partner
Tundra Advisory