Business strategy

The power sector is awaiting a deep transformation. This is influenced by the increasing role of consumers, new energy generation technologies and their increased share in meeting domestic demand. Market and regulatory changes are taking place.

Actions in the field of climate neutrality result in an increased demand for green energy. Challenges are emerging in the form of the need to ensure balancing of the system with a significant share of distributed generation.

All these issues are the cornerstone of PSE Strategy for 2020-2030.

Business strategy

Business strategy 2020-2030

The power sector is at the crossroads. It is not clear which electricity market model will dominate the future. On the one hand, EC and ACER promote the concept of integrated wholesale power markets for Europe as a whole, and, on the other hand, the development of distributed, prosumer generating units and storages aimed at energy self-sufficiency of local communities takes place. Other strategic decisions, including investment decisions, are required for market development on the basis of integration of business functions and making available own transmission capacities on the European market, and other for the future built with the use of prosumer energy infrastructure, which is an alternative to meet energy needs.

Many dilemmas and difficult decisions to be made are ahead of us. However, regardless of the road taken by the sector, it will remain the role of the transmission system operator to ensure the current security of energy supplies. PSE will develop a model for providing added services to the transmission service, which will be a compelling value proposition, and will increase the standard of security and quality of electricity supplies. These services primarily encompass those to ensure cyber security of the consumer systems, services of the metering information operator – the metering data center, and services to make the power system resistant to hazardous conditions and failures of various scales.

All these issues form the cornerstone of the PSE strategy and are reflected in the priority initiatives of our organization.

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PSE values

The key values of PSE are reliability, credibility and responsibility.

Reliability

PSE is a reliable partner for electricity consumers, generators, distribution system operators, market operators, power exchanges, the regulator, and the Government of Poland. The company ensures continuity of short- and long-term electricity supply based on actions leading to efficient management of threats to continuity of electricity supply from the transmission network.

Credibility

By its activities, PSE confirms that it has all competence necessary to perform its duties and fulfil its mission. Operation stability and lasting relations with business partners are guaranteed in our organisation by stringent compliance with corporate governance and internal procedures.

Responsibility

In all its activities, PSE cares about future generations, the natural environment, energy security of the country, and the position of Poland’s economy in the world.

The defined values of our company give rise to ideas which guide the conduct of all employees of our organisation. These ideas are: modernity, professionalism, partnership, development, openness. Acting in line with those ideas ensures smooth and effective work as well as undisturbed professional and personal development.

PSE’s strategic challenges and objectives

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PSE’s new Strategy is a vision of a modern energy market. It was designed with the use of the Jibility platform. This placed PSE among global leaders whose business strategies rely on an ambitious capabilities-based planning method.

PSE’s Strategy for 2020-2030 was prepared with the use of the capabilities-based planning method. The method, developed by the US RAND Institute, consists in defining challenges, identifying objectives and initiatives, allocation of resources to initiatives, and tracing the progress of the initiatives and their results.

PSE has identified 6 main challenges and 17 objectives to be achieved within 10 years.

PSE challenges

Transformation
cost

Climate neutrality

Import / export

Social acceptance

Excessive complexity

Generational change

Transformation cost

The electricity transition in the current model of the European electricity market, in which large bidding zones are treated as “copper plate”, only electricity is traded on the market, and wind and solar sources are preferred among non-emission sources, will put pressure on transmission system operators, including PSE, to bear greater risks and costs.

These costs arise from divergences between the market model and its actual implementations, which are significantly affected by physical phenomena. Operator’s activity, understood as ensuring the feasibility of electricity flows and securing its supply of “last resort”, is also becoming a matter of interest from exchanges, regional coordination centres for the secure operation of the system, as well as the European regulators: ACER and the European Commission. It should be stressed that the cost of non-adaptation to the forthcoming changes will primarily come at the expense of society (households) and the economy (industry). For PSE, the key to a proper contribution to the electricity transition will be a fair allocation of costs to individual users of the European electricity system. Cost relations in the field of market infrastructure, i.e. cost sharing between exchanges, distribution system operators and the transmission system operator, and, on a pan-European basis, between transmission system operators, in terms of a joint effort to maintain the operation of synchronously connected electricity systems by all TSOs, will also be important.

Goals:

Increase in the share of non-tariff revenues
Integration with RCC based on reservation and verification of RCC results
Improvement of tariff accuracy
Improvement of budge accuracy
Keeping the churn rate at a minimal level

Climate neutrality

The currently promoted concept of climate neutrality is moving away from technological neutrality towards a preference for two types of renewable energy sources: wind farms and photovoltaics, which are expected to be supplemented over time by the storage of electricity in hydrogen and chemical batteries. Preferred types of RES will be distributed and will be characterised by weather-dependent generation variability, resulting in increased uncertainty about generation levels in the transmission network and distribution networks.

Due to the development of prosumers, the level of demand will also be fraught with great uncertainty. Nuclear generation will be an important element in the implementation of climate neutrality, by supporting the operational security of the power system due to its capability of stable operation.

Goals:

Implementation of PRSP
Creation of balancing mechanisms and ancillary services supporting transition to low-carbon electric power

Import / export

The rising cost of purchasing carbon rights, the increasing share of zero-variable-cost units and the over-production of electricity from RES in neighbouring countries have led to a situation where the use of fossil fuel generation capacity is decreasing. For this reason, ageing and successively phased-out national generating units are not fully replaced by new sources which would allow the PPS capacity and energy needs to be met internally in the future.

In addition, legal changes at European level increase the pressure to maximise cross-border exchange capabilities, which can also contribute to reducing the use of domestic fossil fuel generation sources in favour of increased imports of cheaper electricity produced abroad.

The possible division of the market into bidding zones (and the possibility of subdividing zones into smaller zones) raises legitimate concerns about domestic generating units and their competition within the zones for access to the electricity market and cross-zonal capacity.

In view of the above, an important challenge for the PSE will be to foster cooperation with neighbouring countries, so as to, on the one hand, ensure the operational security of the system in a situation that prevents balancing with the use of only national sources and, on the other hand, to avoid an excessive expansion of cross-border networks and interconnections, the role of which may diminish over time.

Goals:

Ensuring compliance with CEP70
Ensuring schedule accuracy

Social acceptance

New infrastructure investments are becoming increasingly challenging due to growing public engagement caused by a lack of acceptance for investment projects or a lack of acceptance of how they are implemented.

The challenge for the PSE is therefore to carry out effective measures to increase public acceptance of investment in transmission infrastructure among local communities, while ensuring the reliable operation and development of the PPS.

Goals:

Clearing the legal status of infrastructure
Optimisation of capital expenditure

Excessive complexity

European regulations impose a number of new legal requirements on TSOs that deeply interfere with operator processes at both EU and regional or national level.

The new requirements are aimed at increasing the use of transmission infrastructure and thus reducing safety margins.

The system works much more often at the limit of its capabilities. This approach clearly increases the system's vulnerability to external threats, including cyberattacks. Their probability is high due to the far-reaching digitisation and automation of these processes.

Goals:

Providing for planning uncertainties
Providing for criticality
Ensuring internal backup for outsourced functions
Reducing the incident management time

Generational change

A generational change is visible in the labour market, which has a huge impact on the functioning of companies and the approach to employing workers. Representatives of the youngest age group present different attitudes and expectations towards work. In addition, the labour market has become an employee's market, which is also confirmed by the demographic changes taking place in Poland.

What remains a challenge for PSE is to create an offering that addresses employees’ expectations regarding employment conditions while protecting the employer’s needs, e.g. with regard to:

Effective talent management – securing qualified and prepared successors for all key positions.
Changes in incentive schemes – the working atmosphere or development opportunities play an equally important role in recruiting employees, not just the pay level.
Multigenerational team management – diversity management policies should take into account increasingly diversified (also in terms of age) teams of employees.
New technologies – making the working environment more flexible, offering employees a greater sense of freedom while increasing efficiency and ensuring communication free from traditional time and location constraints.
Work-life balance – work should make it possible to reconcile work and private life, which can be done, for example, by providing flexible working time or remote work.
Employer branding – representatives of the younger generation of employees seeking career are guided by the image of the organization, hence the need for proper management of the employer's brand.

Goals:

Implementation of the model of competence and competitiveness of remuneration
Building a knowledge-based organisation

PSE Strategy (2-year horizon) ─ Supplement

The SARS-CoV-2 pandemic poses an additional challenge for PSE. According to the forecasts by epidemic modelling experts, the pandemic can cause a significant decrease in economic activity over a timespan of even more than two years and therefore also a decrease in capacity and energy demand, which may be relevant to many strategic initiatives of PSE. Taking these circumstances into account, PSE has decided to develop a supplement to the Strategy for the next two years, leaving the Ten-Year Strategy unmodified. The document identifies 6 challenges and 8 strategic objectives which PSE will have to address during this period.

PSE Strategy (2-year horizon) ─ Supplement

Limited redundancy
of units

Maintaining business
continuity

Decline in demand

Generation adequacy

Decontamination
of electricity market

Import/Export

Goals:

Reskilling of a part of available human resources
Attracting and recruitment of new people

Goal:

Ensuring the redundancy of facilities

Goals:

Reduction of operating costs
Reduction of operating costs

Goal:

Developing a risk assessment methodology for generation adequacy

Goal:

Trying to gain time (Current analysis of the financial condition of electricity market participants)

Goal:

Maintaining the continuity of the investment process

Activities of the Crisis Team and PSE during the COVID-19 pandemic

In January 2020, the Management Board appointed the Crisis Team for the implementation of preventive measures and responding to the current situation related to the spread of the coronavirus (SARS-CoV-2).

In connection with the development of the epidemic situation, in March the Team was divided into four sub-teams and the Team for Medical Protection and OHS was set up. The outcomes of the work of this Team include the development and implementation of a range of internal instructions designed to minimise the risk of occurrence and spreading of the COVID-19 disease among the company’s employees, including those related to temperature monitoring of personnel entering the premises of PSE and responding whenever infection is suspected. The Team members participated in checks of compliance with the new regime, collected reports on signs of concern from employees and updated internal requirements according to changes in the external environment and inside the company. The Team’s responsibilities also included the provision disinfectants for the company and personal protection equipment for employees.