Ladies and Gentlemen,

I have the honour to present the latest Report on the impact of the activities of Polskie Sieci Elektroenergetyczne on the economic, environmental and social development of the country. It is the fifth social report of our organisation, the second impact report of PSE and the only such document in the Polish energy industry. Thanks to this publication, you will be able to learn not only about all the areas of the transmission system operator’s activity and the environment in which it operates, but also about the challenges we have to face in performing our duties.

The electricity sector in Poland and Europe is undergoing a transformation. This is influenced by the growing role of consumers, as well as new ellectricity generation technologies and their increased share in meeting national demand. The need for climate protection is causing a growing demand for green energy from onshore and offshore wind farms and photovoltaic installations. All this poses challenges in the form of the need to ensure system balancing with a significant share of distributed generation.

The regulations stemming from the Clean Energy for All Europeans package have set a new operating framework for transmission system operators. Technologies, in particular the digitalisation of the electricity sector and the resulting changes in consumer behaviour, as well as the development of electromobility, will shape new areas of activity for operators. The study you have before you shows a holistic picture of our actions and their impact on the environment.

We are one of the largest transmission system operators in Central and Eastern Europe. As a strategic company, we are responsible for the security and reliability of electricity supply to all regions of Poland. We perform this task through efficient operational management of the power system. Our values, defined objectives and strategic directions adopted are based on the energy security of the country and the concern for the future of current and future generations.

We consciously manage our company's impact on the economic and human development of the country. We are proud of the results achieved. The direct added value generated by PSE in the electricity production and transmission branch in 2018 amounted to PLN 4.36 bn. In addition, we have estimated the total added value generated by us in the domestic economy at PLN 6.73 bn. In 2018, PSE's activities contributed to the retention of 17.5 thousand jobs in Poland. We have paid PLN 1.17 bn in taxes, charges and contributions to the state budget and to local government budgets, thereby supporting the development of regions.

One of the objectives of our strategy is to actively participate in building a common European electricity market. After two years of intensive preparations, on 19 November 2019, the Polish bidding zone joined the Single Intraday Coupling (SIDC) mechanism implemented with the use of the XBID platform. For PSE, Poland’s joining the SIDC was a challenge that required measures including a thorough remodelling or replacement of parts of the IT systems used to manage market processes. Since the operational launch of the mechanism, the operation of the whole process managed on a 24 hour basis by the PSE dispatch services, i.e. the National Dispatch Centre. This made our system more flexible, to the benefit of market participants.

A significant event for the whole electricity sector last year was the implementation of the capacity market aimed at ensuring the security of electricity supply to consumers. As the capacity market administrator, our organisation performed general certification, main certification, and four main auctions for delivery periods in the years 2021-2024 The introduction of the capacity market means as change in the architecture of the capacity market from the energy only market to the dual-commodity market, in which not only the generated electric energy will be traded, but also net available capacity, that is, readiness to supply electricity. From 2021, capacity market participants will receive remuneration for readiness to provide capacity or for demand reduction.

In order to reduce the risk of a difficult balance situation in the PPS, we included in the catalogue of services performed for DSOs’ purposes the Demand Side Response (DSR) service, i.e. demand reduction by consumers on instructions from the transmission system operator. In 2018, PSE allotted another tender for the purchase of the DSR service under the Current Programme and the Guaranteed Programme. The total acquired guaranteed capacity which can be reduced on instructions from the TSO is 362.5 to 534.5 MW in the summer season. Responding to the needs and capabilities of market participants, we also introduced a simplified Current Programme, under which the DSR service can be provided also by smaller entities and electricity consumers.

At the same time, we were working on ensuring the secure system operation in the future. We implemented an investment project implementation model to facilitate the running of investment projects and improvements in cost-effectiveness. In 2018, we incurred expenditure on infrastructure investments amounting to PLN 1.81 bn, and by the end of 2027 we are planning to earmark a total of PLN 12.8 bn for the purpose.

Maintaining operational stability of the entire power system requires constant development and deployment of advanced solutions. In 2018, we undertook many initiatives aimed to make an optimum use of new technologies in the power sector. One example is the Special Protection Scheme for smart grids, which automatically remover transmission and distribution line overloads during periods of high generation from renewable sources and contributes to RES development.

Within the organisation, we have built and are developing a culture of work safety. We have established the Health, Safety, Environment, Quality standard covering employees’ behaviour, environmental protection, as well as equipment and infrastructure security.

We closely cooperate with entities responsible for cybersecurity of the country and the power sector. In 2018, we organised, for the first time, the PolEx conference, modelled on the American GridEx, and a series of workshops for energy cybersecurity experts.

We are a socially responsible company, having regard to the wellbeing and development of local communities. We engage in dialogue with residents of the regions in which we implement infrastructure investment projects. In 2016-2018, nearly 2,000 meetings were held with residents, of which 688 took place in 2018. We want to be a good neighbour and therefore take up many initiatives for the communes in which our infrastructure is or will be located. One of them is the grant scheme “Empower your environment”.

We care about the environmental dimension of PSE’s activities. Sustainable development is important for us and we understand it as continuous improvement of efficiency, while reducing negative impact on the environment. In 2018, our company was certified for the effective implementation of the integrated environmental and OHS management system. We deliver all investment projects in a manner that allows key threats to nature to be minimised and the risk of biodiversity loss to be avoided.

Our successive impact reports are enhanced with additional content. In the face of climate change, we have decided to measure PSE’s carbon footprint. It will be one of the indicators taken into account in assessing the activities of our organisation in the area of energy efficiency. It is PSE’s direct response to one of the biggest challenges facing humanity in the decades ahead.

The shape of PSE’s Impact Report has also been influenced by our Stakeholders’ questions and proposals, submitted at the last, fourth dialogue session attended by more than 100 participants. In order to ensure transparency and high quality of the data presented, this publication has been prepared on the basis of the best practices and international standards including the Global Reporting Initiative, International Integrated Reporting Council, and GHG Protocol Corporate Accounting and Reporting Standard. In order to ensure credibility of the data presented, the whole report was subjected to an external verification, and for the Readers’ convenience we present the data in an interactive format. In the interests of the environment, PSE has decided, for the third time now, to publish the report in a digital version.

On behalf of PSE Employees and on my own behalf, I wish you interesting reading.

Eryk Kłossowski

President of the Management Board
Polskie Sieci Elektroenergetyczne