Europe: Green Certificates - Polish support favours biomass

The Polish deputy prime minister, Waldemar Pawlak, wants to extend the green-certificates support system for renewable electricity and increase the share of electricity from renewables by 50%.

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But most of the certificates will probably go to plants burning wood, leaving little for wind farms.

The wind industry in Poland has been shocked by the latest government idea on how to fulfil Poland's climate commitments. At the end of July, Pawlak, whose portfolio covers energy and economy, presented the draft of a new directive on the green-certificates support system.

Electricity suppliers in Poland have to accumulate the certificates to demonstrate they are sourcing a set proportion of their sales from renewable energy sources. The draft directive gives a green light for large-scale wood burning power plants to join the elite Renewable Energy Sources (RES) club.

The idea is a U-turn on biomass burning rules. Under the present directive, the maximum share of forest biomass that large plants - more than 20MW - can burn to receive green certificates is set to decline from the current level of 80% to 40% in 2017. The rest of the biomass must come from agriculture.

Under new directive, the share drops less, to 60% by 2019. Moreover, the coal plants that are adapted to burn biomass before the end of 2015 or new biomass plants built before that date will retain the right to burn 80% forest-originated biomass. Pawlak has also changed the definition of forest biomass. The present definition limits the material to wood waste only, whereas the new one will allow the burning of material that could be used in the construction, paper or furniture industry.

"This project is intended to fulfil most of the country's climate obligations through wood burning in coal-power plants," says Maciej Stryjecki, president of the Foundation for Sustainable Energy, which is critical of the new directive.

In Stryjecki's opinion, it will definitely have a negative impact on the wind industry. "These coal plants that will be modernised to burn wood are already connected to the grid, so they do not require costly grid investments that wind stations do," he says.

"This means a decrease in grid investment and that will make the realisation of a substantial number of wind projects impossible," Stryjecki explains. "Moreover, wood burning plants will compete with wind farms and other RES for green certificates. The substantially lower investment costs of biomass burning will let these investments be realised faster. And the bigger green certificates supply from wood combustion will lessen the profitability of other RES investment."

This scenario has a solid foundation in the current green-certificates market. Although, according to the Polish Chamber of Renewable Energy (PCRE), the number of green certificates issued every year for RES has grown from 3.76 million in 2005 to 8.3 million in 2009 (see chart), the share of green certificates issued for RES based on biomass combustion has increased from 23.3% to 47%.

Since the mean price of green certificates in 2009 was close to PLN 250 (EUR60), this means that biomass combustion, still mostly dependent on wood, received support of PLN 975 million (EUR244 million) last year alone. "This money could be spent on real RES projects," Andrzej Dejneka, PCRE's director comments. And "real" RES needs not only a support system, but also costly grid investments.

How costly they are is best shown by the example of northern Poland grid operator Energa, which has just launched a grid investment programme valued at PLN 7 billion (EUR1.75 billion). The investment will enable the company to connect 3GW of wind capacity.

Positive changes

But the directive is not all bad news for the wind industry. It calls for the extension of the green certificates scheme to 2019 rather than 2017 under the present directive. More important, the share of green electricity in the market is to be raised from 12.9% to 18.7% and the number of green certificates will increase by 45%.

These changes are a move in the right direction, says Alexandra Schweda, project manager at Enertrag Polska, one of the main players in Polish wind market. But Dejneka points out that a two-year extension is not enough for investors. "RES investments take 15 years to pay back," he says.

According to PCRE, the green certificates scheme should be extended until 2035 so that projects launched in 2020 could enjoy 15 years of support. Yet Schweda claims that this problem does not affect wind projects because grid operators sign 15-year contracts for green certificates delivery.

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