The RES Act's amendment which is of key importance to investors has landed in Parliament

by Piotr Mrowiec

18 May 2018

After months of preparation, the RES Act amendment bill was submitted to Polish Parliament on 26 March 2018. On 11 April the bill was sent for the first reading in the Energy and Treasury Committee.

Although it still a long way before the amended act enters into force and it cannot be ruled out that there will be further significant changes to the bill, it is worth having a look at some of the bill's important details.

After two auction rounds for new RES installations (held in December 2016 and June 2017), the implementation of the support scheme for installations with an output above 40 kWp has been suspended for many months. Investors are waiting for new regulations that would govern the auctions in 2018 and the following years. Poland promised the European Commission that it would ensure full compliance of the Polish RES Act (of 20/02/2015) with the state aid regulations (notification procedure in case SA.43697 (20 15/N) – Polish support scheme for RES and relief for energy intensive users). Despite the assurances that RES are an important issue and the approaching deadline for achieving the EU's climate goal, the work on the amendment to the RES Act is still underway. Until the amendment's effective date it is not certain when and on what conditions the auctions will be held.

Introduction of energy mixes

The new regulations provide for several auction rounds for individual technologies. This does not mean that auctions will be held for each technology separately. In particular, onshore wind and photovoltaic systems will compete with each other, just as they did at previous auctions. Separate auctions will be held for agricultural biogas power plants. Offshore wind farms, hydropower plants and geothermal power plants will also be auctioned together.

What is astonishing is the option to hold auctions in paper form. The government justifies it by arguing that they want to expedite the auctions in 2018. Although, after the false start in 2016, the online auction platform proved its worth during the June 2017 auction, its adaptation to the requirements of the new act (introduction of energy mixes) may be a time-consuming process. Therefore, the legislator has introduced a 'safety valve' mechanism in the form of auctions in paper form.  However, the rules for holding auctions in paper form have been included in the final provisions governing auctions in 2018 only, and are regarded as a temporary and emergency solution.

Sale of energy only on the energy exchange

A more important amendment added during the last step of the legislative process is the introduction of the obligation to sell energy. This obligation is subject to the reservation that the entire generated energy is fed into the grid and sold on the commodity exchange or on the market run by the operator of the regulated market in Poland. Energy producers will thus have to calculate their operating expenses taking into account the costs of handling the energy sale on the energy exchange.

The legislator has also shortened the deadlines for the construction of RES installations and starting to sell energy. The proposed general deadline is 36 months (formerly 48 months) with reduced deadlines being set for:

1. photovoltaics – 18 months (instead of 24 months), and
2. onshore wind farms – 36 months (instead 48 months).

Feed-in tariffs for selected technologies

The RES Act has introduced the EU-recommended auction system for all installations with an output above 40 kWh. The amendment to the RES Act provides for some technologies an important exception that is very convenient to the owners and developers of such installations, namely, the support in the form of a feed-in tariff.

The support should apply to RES installations, both newly designed and currently in use, that produce energy from:

• agricultural biogas, or
• landfill gas, or
• sewage treatment plant gas, or
• biogas other than that specified in items 1–3,
• water (hydropower).

The proposed provisions support installations with an output of up to 1 MWp (Article 70e(1)). Those installations should receive a fixed purchase price of 90% of the reference price applicable on the date of filing the statement on joining the support scheme or the statement on switching over from the system of coloured certificates applicable to installations connected to the grid before July 2016. Like the bid prices, the feed-in tariffs should be indexed on an annual basis.

Very important and good news for investors is that the legislator has given up the previously considered idea according to which the new act would apply to entities that won the auctions in 2016/2017. The provisions allowed the old provisions if they were “more lenient”, but the application of such a blurred term implied problems with the interpretation of laws. At present, the amending act (Article 4) stipulates a clear rule according to which “the provisions, in their current wording, of the act being amended will apply to renewable energy producers operating RES installations whose tenders won auctions that were completed before the effective date of this act”.

A piece of news that has been long awaited by many investors is that the amendment bill includes a provision according to which an auction for installations with an output above 1 MW will be organised this year. The two previous auctions were held exclusively for smaller projects.  The amendment bill provides for contracting a record-high amount of energy, that is, 45,000,000 MWh with the total value of PLN 15,750,000,000 for large photovoltaic installations and wind farms. If these amounts remain unchanged, this will be by far the largest renewable energy auction to be ever held in Poland, which will enable numerous investors to implement their projects.