The Bilateral ContractNarrow moat

Ask what competes with the Polish Power Exchange and the instinctive answer is another power exchange. The real answer is a piece of paper signed between a generator and a buyer with nobody in the middle.

Electricity does not need an exchange to change hands. A utility and an industrial consumer can agree a price bilaterally, over the counter, on terms nobody else sees, and neither party pays a clearing or transaction fee. What an exchange offers instead is a published price, an anonymous counterparty, and a clearing house that removes credit risk — genuinely valuable things, and not always valuable enough to overcome the simplicity of a phone call between two companies that have dealt with each other for years.

Poland's legislators concluded long ago that this was a problem. If most electricity trades privately, there is no reliable public price, the regulator cannot verify tariffs, and a vertically integrated group can move power between its own subsidiaries at whatever price suits it. The answer was to make exchange trading compulsory, and the history of that obligation — imposed in 2010, extended to all Polish electricity by 2018, repealed in 2022 with effect from 2023, and now proposed again, at 80 percent in the current draft¹ — is the subject of the Energy Companies the Law Sent to TGE page under Major Clients.

The competitive point here is narrower. TGE's volumes rest on a comparison between the cost of trading on an exchange and the convenience of not doing so, and that comparison is decided by parties who are frequently large enough to do either. Volatility helps: when prices swing, a published reference price and a clearing house become worth paying for, which is part of why TGE's electricity and gas volumes have been strong.

The number to watch is the share of Polish electricity consumption cleared through the exchange. If it falls while volumes rise, the growth is coming from price, not from the market choosing to trade here.