Auction rules and the auction in support of renewable energy sources

by Piotr Mrowiec

15 March 2017

In accordance with the Polish Renewable Energy Sources Act ("the RES Act") adopted on and effective since 1 July 2016, the renewable energy support scheme based on green certificates has been replaced by the so-called auction system. Consequently, the President of the Energy Regulatory Office (ERO) has been obligated to organise the auctions. Before the first auction was held on 30 December 2016, the Auction Rules had been published in the Public Information Bulletin (PIB) of the Energy Regulatory Office on 28 November 2016.

In the auction system the government orders a certain amount of renewable energy. In order to buy it, the government organises an auction attended by renewable energy producers. The bidder who offers the best (lowest) price for the production of the ordered energy quantity wins the auction. The auction procedure is regulated by the RES Act (in general) and the said Auction Rules whose full title reads: "Rules of auction for sale of electricity produced in renewable energy plants".

Auction Rules

The Auction Rules form the actual basis for conducting the auction. Anyone who wishes to participate in the auction must read the Auction Rules. The Rules describe:

• the auction procedure and how the winner is selected;
• the rules for processing the data of producers, includingauction participants;
• the technical requirements for accessing the OAP (Online Auction Platform);
• the methods of ensuring security and correct conduct of the auction;
• the terms on which access to the OAP may be suspended.

As you can notice, the scope of the Auction Rules is broad. It is noteworthy that the Auction Rules refer to the legal status as of 17 October 2016.

Before the auction...

At the outset, an announcement is published in the ERO's PIB which includes the auction date, auction type and auction parameters. The announcement must be issued at least 30 days before the auction date. As regards the auction types, the Auction Rules provide for two: ordinary auctions and supplementary auctions. The auction parameters describe the auction characteristics. Importantly, §2(1)(25) of the Auction Rules includes the word "especially" which suggests that the list of parameters is open. In other words, the announcement may specify parameters other than those listed in the Auction Rules. Of course, to be admitted to the auction you have to fulfil all the parameters listed in the announcement.

Another thing is that a producer (an entity that wishes to participate in the auction and produces electricity in a renewable energy plant located in Poland, including its exclusive economic zone) must register and activate his account on the Online Auction Platform. It is a dedicated platform for holding auctions administered by the ERO. You can register by filling out a registration form.

One very important and sensitive formal aspect is the validity of your declarations made in the OAP. The Auction Rules require a trusted ePUAP signature or a qualified electronic signature to be made by the person authorised to represent the producer or a holder of a power of attorney. If you grant a power of attorney, you have to additionally pay a stamp duty to the bank account of the authorities competent for the place where the ERO is established (currently the Warsaw City Council, Ochota District). Significantly, the bid for sale of a certain amount of energy produced in a RES plant cannot be signed by an attorney or a commercial attorney (prokurent). The bid must be signed by the person authorized to represent the producer in accordance with the statutory rules of representation. The ERO has announced that at the 2016 auction as many as 15 bids were submitted against the rules of representation and therefore were disqualified. That is why, we remind all potential auction participants about this formal requirement.

Then, the producer must submit an electronically signed application for a certificate of admission to the auction or a declaration of auction attendance. In addition, the Auction Rules and the RES Act require the participants to establish a bid security. It may be in the form of a deposit or a bank guarantee. Whichever form you choose, the security amount must be PLN 30 for every 1 kW of installed capacity of your RES plant. As regards the deposit, the producer must pay it to an individual bank account number generated by the OAP after his application or declaration is approved. As regards the bank guarantee, it must be, among other things, unconditional, irrevocable and payable on first demand of the ERO's President. Additionally, depending on the plant type, the guarantee must be issued for a period specified in the Auction Rules.

Once the producer meets all the requirements set in the Auction Rules, including fulfilling the auction parameters, having a valid certificate or an approved declaration, and having his security positively verified, he may attend the auction.

Auction procedure

According to the Auction Rules, an auction session must last at least eight hours and the session start and end date cannot be on a public holiday in the meaning of the Polish Public Holidays Act. That is why an auction may end on a Saturday (as it is not a statutory public holiday). Producers may submit their bids in the OAP only. §12(7) of the Auction Rules says that a producer may submit only one bid per a RES plant. During the session, producers may modify or withdraw their bids up to one hour before the end of the auction session. If a producer withdraws his bid for a certain RES plant within the permissible time, he can submit a new bid for the same plant.

Auction closing and verification

Once the auction is closed, bids cannot be supplemented or refined. A bid is considered submitted if it meets the requirements set in the Auction Rules in §12(8)–(9) (required bid elements and the declaration) and in §5(1)–(2) (valid signatures). If you withdraw and re-submit or modify a bid, only the most recent one will be considered. Producers must place at least three non-rejected bids for an auction to close and to choose the winner. If there are fewer bids, the auction is ended without a winner. If a bid's price increased by state aid per unit exceeds the reference price (as regards ordinary auctions) or the maximum price (as regards supplementary auctions), the bid is rejected. Once the auction session closes, the ERO President immediately informs the public on his website about:

• the auction results, unless the auction has been invalidated or ended without a winner;
• invalidating the auction;
• ending the auction without a winner.

If an auction has ended successfully (has not been invalidated or has not ended without a winner), the ERO President additionally announces:

• the producers who submitted the winning bids;
• the minimum and maximum price per 1 MWh in PLN, accurate to 1/100 PLN, for which the electricity from renewable energy sources has been sold by auction;
• the total amount in MWh and value in PLN, accurate to 1/100 PLN, of the electricity from renewable energy sources sold by auction, broken down by consecutive calendar years.

If you are the winning bidder, you have to remember about the further steps. Pursuant to Article 72 of the RES Act, producers must fulfil post-auction obligations. As regards the auction of 30 December 2016, these obligations are detailed in the ERO President's Information no. 8/2017 of 16 January 2017 about obligations of renewable electricity producers who won the auction in 2016. Obviously, since the subject of the auction system is quite broad, this article is very general and could not deal with all aspects of the Auction Rules and the auction system. Therefore, please do not hesitate to contact us in case of any doubts.