Amended Renewable Energy Law in Poland

19 November 2018

Incentive: You need to have nerves of steel to invest in renewable energies in Poland Just before the end of the previous year, the government postponed for another six months the effective date of the provisions regulating the auction system.

The postponing was not only of a technical nature to gain more time for the auction preparation, but was necessary to develop an amending law which fundamentally changed the incentive system before the auction system came into force. The fundamental amendment of the Polish Renewable Energy Law took effect on 1 July 2016.

The current government has retained the concept put forward by its predecessor and the auction system has been implemented as the basic incentive system for renewable energies. However, Polish auctions will look different from those in Germany, where the bidder specifies the size of the installation and the price at which he is ready to sell the whole energy to be produced by him. In Poland the amount is crucial – the bidder specifies the amount of energy which he will sell at a certain price during a certain period, usually 15 years.

Brand new as compared to the previous solution is the organisation of auctions as part of the so-called technology baskets (auction baskets). The use of such auction baskets as such is nothing new – this solution is being widely used also in other countries. However, in Poland the allocation to the individual seven auction baskets is based on the following criteria:

1. The first basket includes renewable energy plants with rate of installed capacity utilisation higher than 3504 MWh/ MW / year (in total, regardless of the energy source).
2. The second basket includes plants in which biodegradable fractions of industrial and municipal waste of animal or vegetable origin, including residuals from waste processing plants and waste from water and sewage treatment, especially waste water, are used to generate electricity – according to the provisions of the laws on waste concerning the qualification of such part of the energy which is obtained from waste thermal processing.
3. The third basket includes renewable energy plants with CO2 emissions of less than 100 kg / MWh with rate of installed capacity utilisation higher than 3504 MWh / MW / year.
4. The fourth basket includes renewable energy plants in which only agricultural biogas is used to generate electricity.
5. Two other baskets in the auction system include renewable energy plants which belong to the members of either micro-or macro-clusters. The energy clusters are based on civil law agreements between different legal entities (natural and legal persons, associations of local authorities) on the common generation of energy within the territory of a municipality (micro-cluster) or of a district (macro-cluster).
6. The seventh and the last basket includes plants other than those mentioned above which cannot be allocated to any of the above groups.

The auctions will be organised for each auction basket separately, and the classification into groups of plants with an installed capacity of up to 1 MW and those with an installed capacity of over 1 MW will be maintained. This means that, for new renewable energy plants alone, up to 14 separate auctions may be held in each auction round. The legislator has abolished the requirement included in the so far "frozen" provisions according to which 25 percent of electricity purchased in one auction round must come from plants with a capacity of up to 1 MW.

Four auctions in 2016

A very important change is that the Council of Ministers will each time determine the chronological order of auctions at the request of the Ministry of Energy. For each year, the amount of energy will be determined for which contracts are to be concluded during all auctions held in that year. In August 2016, the drafts of the first regulations prepared for the first renewable energy auctions in Poland were presented. At the end of September 2016 the regulations were changed. According to one of the draft regulations, only four auctions will be carried out in 2016. These will be the auctions for the existing agricultural biogas plants with a capacity of up to 1 MW; plants with a capacity of over 1 MW and renewable energy plants with CO2 emissions of less than 100 kg / MWh and with rate of installed capacity utilisation higher than 3504 MWh / MW / year; plants with a capacity of up to 1 MW (the operators of smaller wind energy plants will be allowed to take part in this auction); and volatile plants with a capacity of up to 1 MW which will be put into operation after the end of the auction.

The Ministry for Energy justified the limited number of auctions saying that the first auction round was only a test round and auctions from all technology baskets would be held first in 2017. As far as auctions for smaller volatile power plants are concerned, the Ministry assumes that the auctions will bring 100 MW of newly installed solar photovoltaic capacity. The calculation was based on an average annual plant output of 1050 MWh/MW. Of course, operators of wind energy plants may participate in the auction system as well – the auctions are available for all planned plants with capacity lower than 1 MW and an average maximum annual output of 3504 MWh/MW. Within this scale, photovoltaics will demonstrate their strength and it should not be expected that there will be many players from the wind energy sector on the market.

At the same time a draft regulation was adopted that sets the maximum allowed tender prices which can be placed by bidders in the 2016 auctions rounds. The Ministry determined reference prices for all technologies. Luckily, some of the pessimistic forecasts have not come true and the reference prices have not significantly changed as compared to the previous regulation. In the case of smaller plants, the maximum price was increased by a symbolic PLN 5 ( EUR 1.16 per 1 MWh) as compared to the previous regulation.

The prices for photovoltaics should be as follows:

Promotion of energy generation in micro-scale power plants

Let's face it: the opportunities for developing photovoltaic industry in Poland are rather small due to the current legal framework. However, photovoltaics should be one of the leading technologies to be used in the development of smaller local renewable energy sources. The new law has also significantly changed the incentives for micro-scale power plants. The previous law implemented the already known and proven system of guaranteed tariffs for renewable energy providers in that it provided for appropriate incentives whose amount depended on the plant-size and the energy generation technology. The draft replaces the feedin tariff system with a system of barter settlements. According to such a system, operators of micro-scale power plants (with capacity lower than 1 kWh) would be entitled to draw 0.7 kWh of electricity from the grid in return for each kWh of electricity fed into the grid. Prosumers of energy generated in micro-scale power plants with capacity over 7 kWh would be entitled to draw only 0.5 kWh from the grid, and in the case of subsidised micro-scale power plants (even those with a capacity of 2–3 kW) this would be as little as 0.35 kWh. Additionally, prosumers would not pay any fees for the distribution of the electricity drawn from the grid according to these rules.

It is still to be seen whether the new incentive system will find broad acceptance or will be popular only among renewable energy enthusiasts or eco-citizens. However, the legislator has ensured that the principles of incentives are simplified and unnecessary reporting obligations introduced by its predecessor are eliminated, while at the same time maintaining the simplified procedure to connect micro-scale power plants to the grid. It has also strengthened the position of consumers in potential disputes with energy companies and more rights will be awarded to them.