Risk management

PGE Group companies, like other entities from the energy sector, are exposed to risks and threats resulting from the specific nature of their operations and presence in specific market and regulatory & legal surrounding.

PGE S.A., as the Corporate Centre managing the Capital Group, creates and implements integrated risk management architecture at PGE Group.

In particular, it shapes PGE Group’s risk management policies, standards and practices, designs and develops internal IT tools to support these processes, specifies global risk appetite and adequate limits as well as monitors their levels.

PGE Capital Group companies, as well as other entities from the electrical and power sector, are exposed to a number of risks and threats resulting from the specific operating activities and operating in specific market and regulatory environment.

At PGE Group, risk management is carried out on the basis of the GRC (Governance – Risk – Compliance) model, i.e. the concept of three lines of defence (Business – Risk – Audit). It makes it possible to adapt and integrate the process at all management levels in each area of the Group’s activities. At the highest management level, there is a Risk Committee, whose objective is to control risk exposures and limit the extent of risks incurred to an acceptable level in relation to the implementation of PGE Group’s strategy and business objectives. The Risk and Insurance Department at PGE SA integrates the Group’s risk management processes, measures and reports on market and corporate risk, manages credit risk and insurance. The recipients of information and reports on risk are primarily the Management Board of PGE SA and the Management Boards of PGE Group companies. The rules of managing these issues in PGE Group are described in the following procedures: insurance management, market risk management in trading activities, corporate risk management, determination of internal rating, credit risk management and in the rules of the risk committee and in the policy of corporate risk management in PGE Group.

The PGE Capital Group has consequently developed a comprehensive risk management system. The Group measures and assesses risks in the key companies of the Group.

Mechanism allowing identification of areas exposed to risk and risk level measurement methods are constantly verified and developed. Thanks to that, the significant risks concerning various areas of operations are identified and kept within the assumed limits by reducing negative effects of such risks and by taking preventive or corrective measures.

All identified and assessed risks relating to the Group’s current activities are recorded in the risk register (risk books) maintained by the Risk and Insurance Department in PGE S.A.

Risk books reflect changes in the value of particular risk parameters along with information on implemented mitigating activities (reducing the probability of occurrence and minimising negative consequences of a risk) and its operational efficiency.

The effectiveness of the mitigating actions implemented is denoted by the following three categories:

• effective,
• to be improved,
• to be changed.

Among the most significant risks for PGE Group (presented in the table below) approx. 86% are mitigating actions from the effective category and approximately 14% from the category to be improved, while there were no mitigating actions from the category to be changed.

Risk identification covers the full spectrum of the Group’s activities. The scope and complexity of the analysis is determined by the significance of a given risk on the scale of both a given company and the entire PGE Group. The higher a given risk is ranked, the more thoroughly it is analysed and subject to more complex reporting rigour.

Such an approach guarantees, on the one hand, that full knowledge of the most significant risks and mitigating tools applied is obtained, and on the other hand, it ensures that no stakeholder is overlooked in the reporting process.

The division that determines the type of risk assessment determines the time horizon over which risks are invested:

• current perspective – is the valuation of risks for the next year,
• medium-term perspective – 2 to 5 years, concerns investment initiatives,
• long-term perspective (more than 5 years) – addresses the impact of technological, economic and social trends on PGE Group’s operations.

As a separate category, climate risk, defined as the impact of awareness of the irreversible consequences of climate change and associated regulatory policies, on business operations is assessed over similar time horizons.

The table below presents the most significant risks identified in the PGE Capital Group together with their assessment in 2023 EOY perspective. A risk level indicates a risk’s potential financial impact on the Group’s results, and a risk prospect (trend) indicates the probable direction of risk development. Potential events determining risk assessments in the previous report are now partially described in other sections of this report as period events.

The current scenario (2023 perspective) includes the potential carve-out of PGE Group’s coal assets (Conventional Generation segment).

The main risks and threats of PGE S.A. and the PGE Group are presented below along with their assessment and outlook for year 2023.

Risk level	Low	Medium	High	Mitigating actions and main tools used for the management of the risk
Risk outlook in the next period
	Decrease	Growth	Stable
Low level	Risk does not pose a threat and may be tolerated
Medium level	Risk which needs preparation of the proper reaction based on analysis of costs and benefits
High level	Intolerable risk, which needs immediate and active reaction, leading simultaneously to limitation of possible consequences and of probability of occurrence thereof
Market and product risks Related to prices and volumes of offered products and services	Gross margin on electricity from the production assets of the PGE Capital Group and on trading in related products – its amount results from the uncertainty as to the future levels and volatility of market prices (electricity prices and the prices of key energy products – CO2, fuels, including in particular hard coal, gas and the prices of certificates)			Most important actions: Optimization of generation assets – definition of production scenarios for updated market parameters of electricity, CO2 and fuels. Margin-based approach to market risk limits rather than volume-based. Using consistent guidance in respect of process organisation in the context of commercial strategy and mid-term planning (strategy for hedging key exposures in the area of electricity and related product trading that correspond to the adopted risk appetite in the mid-term). Establishing position hedging levels with consideration given to the results of analysing pricing risk in respect of electricity and related products, VaR-based. Target hedging levels are specified taking into consideration the Group’s financial standing, in particular its strategic objectives. Monitoring exposures for individual areas in relation to the set limits and hedging strategies defined by the Risk Committee or the Management Board of PGE S.A. through operational reports prepared by the Department of Risk and Insurance Research, monitoring and analysing the electricity markets and sector trends in order to optimally use generation and selling capacities. Using the administrative appeal path provided for in the Energy Law and the Code of Civil Procedure. Acquiring new customers – diversification of channels to reach final off-takers and diversification of target groups by maintaining an extensive product portfolio and adapting offering to market. Current clients retention – a diversified portfolio of customer loyalty schemes and special offers dedicated to former clients who moved over to the competitors. Care for a high level of customer service by developing employees’ competences and building relations with business and retail clients. Use of tools to supporting customer relations processes allows the Group better sales planning and organisation of sales. Ensuring the expected level of operational readiness of the individual capacity market units.
	Electricity and heat production – related to production planning and the negative impact of factors determining production capacities
	Electricity sales volumes – this risk derives from uncertainty related to the development of macroeconomic indicators affecting the demand for electricity and energy goods, including inter alia energy crisis, economic slowdown, war in Ukraine and undertaken countermeasures.		1
	Tariffs (regulated prices) – resulting from the requirement to approve rates for distribution services and electricity and heat prices for particular groups of entities
	The Capacity Market – resulting from threats related to compliance with the capacity obligations of Capacity Market Units		2
Property risks Related to development and maintenance of the assets	Failures and damage to property –  connected with the operation and degradation over time of energy equipment and facilities and protection of energy equipment and facilities against destructive factors ( including fire, effects of weather phenomena, intentional damage)			Most important actions: Diversification of the current structure of the production sources, Introducing a technology reducing the negative impact of atmospheric factors. Active pursuing of a strategy for building up and modernization of the production capacities. Performing maintenance repairs in line with the highest sector standards. Insurance of the most important production assets in the event of breakdown and property damage. Assets are insured based on an analysis of insurance costs, capabilities of insurance markets for specified risks or for particular types of assets, costs related to asset replacement and potential lost revenue. The systematic improvement of reliability of the power supply to the end users through modernization of the distribution grid. Continuous monitoring of environmental laws and regulations regarding environmental protection, and the energy policy.
	Tangible investments – related to the strategic development directions of the PGE Capital Group and the possibilities of obtaining financing for these projects
	Asset management and maintenance investment – related to risks arising from the maintenance of production assets in good condition
Operational risks Related to pursuing of ongoing economic processes	Fuel management  –  connected with uncertainty regarding the costs, quality, timeliness and volumes of fuel supply (mainly coal) and production raw material as well as the effectiveness of inventory management processes		3	Most important actions: Optimisation of equipment lifecycles and the availability of key assets. Timely inspections, repairs and modernisation of the existing assets. Optimisation of costs inter alia through monitoring of fuel prices and reserves and securing supply through long-term contracts with suppliers and through price fixing formulas. Monitoring of legal changes and changes in technical standards in the field of by-products. Investments in improving the efficiency of the combustion process. Constant monitoring of service availability. Creating Business Continuity Plans for critical systems, developing and testing emergency procedures. Continuous contact and cooperation with the Risk and Insurance Department and the Company’s organisational units with regard to identified new risks or gaps in current insurance policies. Commencement of the internal broker’s operational activity – PGE Asekuracja S.A. Centralisation of the claims handling process. Ongoing monitoring of changes in legal regulations. Training in regulations preventing money laundering and terrorist financing. Requirement to read Best Procurement Practices and the Code of Conduct for Business Partners of PGE Group companies. The approval path and internal regulations concerning the purchasing process. Control of the work environment. Training of employees in the field of occupational health and safety. Informing about threats, restrictions and rules related to the COVID-19 (dedicated tab on the Intranet). Conducting an intensive and effective dialogue in order to avoid escalation of potential disputes with the social partners and to work out the most favourable solutions with regard to employment and employment costs within PGE Capital Group connected therewith. PGE Group’s active participation in internship programmes and cooperation with educational institutions in order to secure a pipeline of qualified personnel. Assessment and training of personnel in order to make optimal use of it within the Group’s structures.
	Cybersecurity – the risk of deliberate disruption of the proper functioning of the information processing and exchange space created by IT systems operating at the PGE Capital Group
	Oversight of insurance policies – risks arising from the failure to tailor insurance policies to the  needs or the Company’s failure to comply with the terms of insurance policies which may result in lack of receiving a claim in whole or in part	4
	Reputation – associated with the negative perception of the entity’s image by its customers, counterparties, investors, Shareholders as well as the general public
	Procurement – related to the ineffectiveness and incorrectness of the purchasing process		5
	Human Resources  –  pertaining to difficulties in provision of personnel with the relevant experience, competences and ability to perform specific tasks
	Social dialogue –  related to the failure to reach an agreement between the Group’s management and the social partners, which could lead to strikes / collective disputes
Regulatory and legal risks Related to compliance with external and internal legal provisions	Environmental protection – resulting from industry regulations specifying which „environmental” requirements energy installations should meet and what are the principles for using the natural environment		6	Most important actions: Monitoring of the changes being introduced or proposed provides that our operations in key business segments are carried in compliance with the law and that PGE Capital Group has solutions which take into account potential changes in the legal environment. Social dialogue. Exercising operational supervision of planned and ongoing investment and modernisation measures with respect to their compliance with environmental requirements. Improvement of activities aimed at protecting and improving the state of the environment by implementing technological and organisational solutions ensuring efficient and effective management in this area. Reduction in the emission intensity of PGE Group’s generating assets, development of low- and zero-carbon energy generation sources. Adaptation of internal regulations and practices to make sure that the activities are in compliance with the power sector regulations and binding law. Monitoring and analysing PGE Group’s legal environment at an international level, together with risk assessment. Assessing the impact on PGE Group of proposed regulatory changes at an international level. Issuing opinions and influencing changes with regard to the legal environment at an international level in a strategic dimension. Managing cooperation and contacts with stakeholders as regards international regulations, including through the activities of PGE S.A.’s office in Brussels. Managing PGE Group companies’ memberships in industry organisations, including as part of Eurelectric (via the Polish Electricity Association), COGEN Europe, Eurogas, WindEurope, EURACOAL (through the Union of Employers: Association of Lignite Miners) and others, and cooperating with trade organisations. Effective raising of external financing and state aid for the development of planned low- and zero-carbon investments by PGE Group.
	Employee safety – associated with failures to provide safe working conditions
	Climate – commitments on the EU and national level and under strategic objectives arising from the EU’s climate and energy policy
	Concessions – resulting from the statutory requirement to hold concessions with regard to conducted operations
	Reporting and Taxes – related to changes in tax regulations and their interpretation as well as their practical, correct implementation
Financial risks Related to finance management	Credit risk – connected with the counterparty default, partial and/or late payment of receivables or a different type of breach of contractual conditions (for example failure to deliver/collect goods or failure to pay for any associated damages or contractual penalties)		8	Most important actions: Prior to executing a transaction, a counterparty assessment is carried out and forms a base for applying credit limits, that are regularly updated and monitored. Exposures that exceed established limits are hedged in accordance with the Group’s credit risk management policy. The level of utilisation of limits is monitored on a regular basis, payment of receivables is monitored on an ongoing basis and early recovery procedures are in place. Applying a central financing model, which assumes – as a rule – that external capital is raised by PGE S.A. PGE Group subsidiaries use a variety of intra-group financing sources and liquidity risk is monitored using periodic planning for operating, investing and financing activities. As regards currency risk and interest rate risk, PGE Group has implemented internal management procedures. PGE Group companies execute derivative transactions involving interest rate- and/or currency-based instruments (IRS, CCIRS, FX Forward) only in order to hedge identified risk exposures. Regulations in force at the PGE Group do not allow, with regard to derivative transactions based on interest rates and currencies, to enter into speculative transactions, i.e. transactions which would be aimed at generating additional gains resulting from changes in the level of interest rates and changes in exchange rates, while exposing the Group to the risk of incurring a potential loss on this account.
	Liquidity risk – connected with the possibility of losing the ability to meet current liabilities and obtaining financing sources for business operations
	Interest rate risk – resulting from the negative impact of changes in market interest rates on PGE Group’s cash flows
	Foreign exchange risk – resulting from negative impact of exchange rate movements on PGE Group’s cash flows denominated in currencies other than domestic currency

¹ The change in the risk trend is conditioned by the introduction of regulations regarding the abolition of the power exchange obligation.
² The decrease in the risk trend is due to the stabilisation of the regulations on the capacity fee.
³ The stabilisation of the risk trend results from the normalisation of fuel availability and prices in the country.
⁴ The level and trend of the risk was conditioned by the situation related to the planned carve-out of coal assets to NABE.
⁵ Increased risk trend related to the need to verify contractors in supply chains (sanctions lists).
⁶ Stabilization of the risk trend related to the sale of coal assets.
⁷ Stabilisation of the risk trend related to the sale of coal assets.
⁸ Increased risk trend related to significant price increases despite the implemented legislative solutions.
⁹ Stabilisation of the trend related to the slowdown in the growth of domestic interest rates.

The description of risks, threats and limitations in the medium term concerns the most important investment initiatives implemented in the PGE Group, which have a significant impact on the direction of the Group’s development.

The main obstacles to their implementation and the potential effects of delays are identified. The time horizon of undertakings varies, depending on the specific task. It ranges from approx. 2 years for PV projects to approx. 5 years for offshore wind farms.

The subject of the assessment are the challenges and risks facing PGE Group over the next decade. Each long-term risk is assessed in terms of its impact on the achievement of business objectives, the company’s image and business continuity. The score presented is the dominant one (the value most frequently occurring in the results) from these three aspects.

Chart: Map of long-term risks. Own analysis.

The positioning on the map based on the assessment (materiality level) shows the impact of a given risk for PGE Group in three different aspects of impact, in turn, on the achievement of business objectives, the corporate image and business continuity.

The map of long-term risks was created on the basis of the elements dominating the responses, according to the subjective perception of the development of these risks as assessed by PGE Group’s top management (Board Members and Division Directors).

PGE Group is aware of the impact of its activities on the climate, as well as the threats posed by climate change to the Group’s operations. It is well known that our business activities both influence and depend on the climate, this interdependence generates both risks and opportunities for growth.

We therefore understand the expectations of stakeholders in terms of reporting on the environmental impact of the business, recognising climate risk management as a key element of strategic management, with a direct impact on financial aspects.

PGE Group focuses not only on risks but also on opportunities to ensure its resilience to risks and to increase sustainable revenues of the Group. PGE Group has taken a number of actions in 2022 aimed at achieving climate neutrality in 2050, already indicated in PGE Group’s Strategy to 2030, and continues to work on the implementation of PGE Group’s ESG Strategy, focusing on 4 areas: competitiveness in the financial market, a leader in green transformation, a corporate culture that supports sustainable development and active communication on sustainable development with all stakeholders.

The Group is also implementing measures to meet regulatory requirements, both national and European. This includes, among other things, the EU Taxonomy, preparation for the Corporate Sustainability Reporting Directive (CSRD), as well as the expectations of financial institutions, investors and customers.

Climate risks are subject to the rigours and guidelines arising from the enterprise risk management process. The body responsible for overseeing PGE Group’s enterprise risk management process, including climate risk, is the Risk Committee, as in the case of financial risks.

Having a Risk Committee at the top executive level that reports directly to the Management Board ensures supervision over the effectiveness of risk management processes across the entire Group. This positioning of the risk function allows for an independent assessment of individual risks, their impact on PGE Group and the mitigation and control of significant risks through dedicated instruments.

Climate issues are assessed centrally in PGE SA, taking into account all activities of the Group and its constituent entities. This means that the result of the assessment is reported jointly, at the level of PGE Group.

The approach to the issue of climate risks is inspired by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), however, the method adopted regarding the inventory and assessment of risks, is an internal PGE concept.

In 2022, PGE Group once again took part in an international study on the company’s environmental impact, i.e. Carbon Disclosure Project – CDP (https://www.cdp.net/en). The Group responded to global investor queries on the climate and water resource impacts of its operations and identified both the risks and opportunities involved.

There is an interdependence between the risks and opportunities for businesses related to the climate. Any business is affected by two types of climate risk:

• physical risks, related to the physical effects of climate change, i.e. real threats in the form of extreme weather events, drought, flooding, access to raw materials;
• transition risks (also known as transformation risks) towards a low-carbon and climate-resilient economy; these relate to meeting regulatory requirements, implementing new technologies or the impact on a company’s reputation.

The changing climate and climate change mitigation and adaptation efforts simultaneously provide new opportunities and chances for business development. This is why PGE Group focuses not only on risks but also on opportunities so as to ensure resilience to risks and to increase sustainable earnings. Climate-related opportunities at PGE Group primarily concern:

• resource efficiency, e.g. by working on waste management solutions and recovering valuable products from wind turbine blades,
• new energy sources, e.g. through investment in offshore and onshore wind farms, as well as PV farms, the construction of emission-free hybrid electricity storage,
• new products, e.g. expanding the product portfolio with PRO EKO initiatives – products that align with low-carbon heating systems, developing products/offerings that promote low-carbon activities, following changes in consumer preferences or developing insurance solutions for Offshore Wind Farms,
• increased resilience to climate change in the form of, among other things, competence building in the offshore wind power industry as part of PGE S.A.’s cooperation with secondary schools and universities in Poland, the establishment of scientific and research cooperation between PGE S.A. and institutions from the offshore wind power industry in Poland, or underground cabling.

PGE Group defines climate risk in five areas:

• securing aid funds and investment incentives in national regulations – related to increasing the impact of climate requirements relevant to the allocation of aid funds and investment incentives in national regulations,
• international regulations – related to EU legislation on energy and climate policy, in particular as part of the current Fit for 55 package,
• CO₂ emissions – related to the rising costs of emission allowances, which may adversely affect the profitability of generating units or lead to discontinuation of production in these units,
• operations – related to extreme weather events or changes in climate conditions that may adversely affect the assets and operating activities of PGE Group,
• investments – concerning PGE Group’s failure to meet its investment commitments, aimed at green transition, at EU, national and own strategic objectives.

Each climate risk area is assessed in the short term, medium term and long term. The adopted time horizons are due to analogies with ongoing external research.

Global warming, changing precipitation patterns, rising sea levels and extreme weather events are increasingly posing serious challenges to the resilience of electricity systems, increasing the likelihood of disruption.

Climate change directly affects every segment of the electricity system: both generation potential and capacity, heating and cooling demand, the resilience of transmission and distribution networks and demand patterns.

PGE Group, being aware of the risks posed by climate change, as part of the first phase of the climate risk management process, conducted an assessment in 2022 of the relevant climatic physical (material) risks – which could have a negative impact on its operations, supporting adaptation to climate change and enhancing resilience to climate risks.

Climatic factors in the form of mainly temperature, precipitation and wind and their negative impact on key activities in the Group were assessed.

An assessment of the risks associated with climatic physical hazards in the PGE Group in 2022 was carried out in the current and long-term perspective using scientific models describing possible climate scenarios, i.e:

• RCP 4.5 – the optimistic scenario, which assumes the introduction of new technologies to achieve a higher reduction in greenhouse gas emissions than is currently the case, assuming an increase in global average temperature of approx. 2.5° at the end of the 21st century relative to the pre-industrial era and
• RCP 8.5 – a pessimistic scenario that assumes a continuation of the current rate of increase in greenhouse gas emissions, on a business-as-usual basis, assuming that, by the end of the 21st century, the Earth’s average temperature will have risen by 4.5° relative to the pre-industrial era.

The assessment carried out showed a low to medium impact of risks related to climatic physical hazards on key activities in the Group in 2022. According to the criterion adopted, risks whose assessment showed a high impact were tested.

An important role in the impact assessment process is played by, among others, the implementation of adaptation measures developed in PGE Group to increase the resilience of the power systems to climate change in the form of the use of more weather-proof solutions in the form of a cabling program (replacement of overhead transmission networks with cables placed in the ground), preventive management of key infrastructure elements affecting the continuity of operations, insurance against events related to weather phenomena or precise analyses of land for new investments.

The PGE Group’s transitional climate risks mainly relate to areas affecting the transformation towards achieving the planned climate neutrality by 2050, i.e., among others: requirements and regulation of existing products and services (area: policy and law), replacement of existing products and services with their low-carbon counterparts (area: technology) and stakeholder concerns/negative feedback (area: reputation).

In order to mitigate risk at PGE Group, a team for the calculation of the carbon footprint of the PGE Group was established, a joint initiative was created within the Polish Association of Combined Heat and Power Plants to develop a sectoral guide for the uniform recognition of the carbon footprint of power plants, combined heat and power plants, including heat transmission and distribution, and electricity distribution activities, and the staffing of organisational units involved in processes related to reporting, decarbonisation and risk assessment was increased.

PGE focuses not only on the negative aspects of the risks analysed, rather treating them as challenges and taking advantage of the opportunities presented by the dynamically changing conditions in which PGE Group operates.

Such an approach allows us to build and develop our position on the market. Effective implementation of solutions developed in the Group translates into more efficient management of the Group’s resources across the entire value chain and enhances the quality of energy services provided.

Thanks to dedicated investment support aimed at developing specific production sources (such as RES or co-generation), PGE can effectively change electricity or heat energy production technologies, in terms of investment expenses, and thus reduce the level of exposure to such factors as prices of emission allowances or fuel.

We consider energy transition not only as a risk, but as a development opportunity for the organisation. The main identified opportunities are:

Poland needs to invest in large-scale nuclear power to replace coal-based conventional power in the future. Together with investments in RES, this will form the basis for energy security. This is particularly important in view of the global energy crisis and the restrictions on the fossil fuel market caused by Russia’s invasion of Ukraine.

With this in mind, PGE decided to sign a letter of intent with ZE PAK and the Korean company KHNP on October 31, 2022 regarding a plan for the development of a nuclear power plant at the Pątnów site. The intention of the Parties is to assess the possibility of developing cooperation in the construction of a nuclear power plant at the Pątnów location to provide cheap and clean energy to Poles.

The project is intended to support the independence and stability of the Polish energy system. On the basis of the preliminary analyses carried out so far, it has been assessed that it is prospective to site at least 2 APR1400 reactors with a total capacity of 2800 MW. Two reactors could supply Polish homes and businesses with about 22 TWh of energy, or about 12 per cent of today’s energy consumption in Poland. Commissioning of the first unit of the power plant is possible as early as 2035.

As part of the implementation of the project, PGE and ZE PAK signed a preliminary agreement to establish a joint special purpose vehicle to implement the nuclear power plant project in the Konin region.

In April 2023, the PGE PAK Energia Jądrowa company was established. The company will be in charge of carrying out location and environmental studies, obtaining financing and preparing, together with the Korean side, a detailed investment schedule, and in subsequent stages, also obtaining permits and administrative decisions.

This will be followed by the establishment of a company formed by PGE PAK Energetyka Jądrowa and KHNP, which will be responsible for the construction of the power plant.

• Development of onshore wind farms – 1 GW of new capacity by 2030, including through acquisitions. A faster delivery of this target will be possible in particular if current regulations (the so-called 10H Act) are relaxed. In 2022, PGE increased its onshore wind portfolio with the acquisition of three wind farms with a capacity of over 84 MW.
• Commercial Hybrid Electricity Storage System in Żarnowiec – this project is intended to combine the existing 716 MW Żarnowiec pumped-storage plant with a battery electricity storage system of no less than 200 MW and a capacity of over 820 MWh. The resulting innovative hybrid installation with a power rating of at least 921 MW and a capacity of more than 4.6 GWh, equivalent to the capacity of the largest conventional units in Poland, will be able to provide a full range of regulatory system services and serve to restore the energy system. The electricity storage facility will avoid emissions of approx. 1 million tCO₂e in absolute terms, but will also contribute to increasing the flexibility of the NPS and improving the energy security of the country, especially the northern region of Poland. It will also ensure the integration, optimisation and flexibility of the operation of ESP Żarnowiec.
• Młoty pumped storage power plant – PGE and the National Fund for Environmental Protection and Water Management are working together on the „Młoty” Peak and Pumped Storage Power Plant project. The implementation of the „Młoty” ESP project supports the national energy transition and will ensure the future stability of the operation of the National Power System in southern Poland.

Pumped storage power plants (ESPs) – are the only large-scale energy storage technology to date. They are needed not only to develop RES, but also to support Poland’s energy security in crisis situations. The 'Hammers’ ESP with a planned total capacity of over 750 MW is the most advanced ESP construction project in Poland. The project builds on mining work that began in the 1970s and was suspended in the early 1980s. As part of the investment, two water reservoirs are to be built, which, thanks to their specific functioning, would additionally perform flood control functions in the Bystrzyca Kłodzka municipality. The power station will be connected to the NPS with a 400 kV high voltage power line, increasing the energy security of the region.