Market Status: Poland - Support system proposals fall short of expectations

POLAND: The future of Poland's wind energy industry remains uncertain, despite installed capacity growing by a healthy 63% in 2010, because of planned changes in the green certificate support system which the wind sector believes bow to grid constraints.

At the end of last year economic affairs deputy minister, Joanna Strzelec, announced that the government was considering limiting wind farm entitlement to green certificates to match the ambition contained in Poland's draft National Renewable Action Plan (NREAP), the document detailing how Poland intends to reach its obligations under the EU renewable energy directive. The NREAP only sees room for 6.6GW by 2020, of which 500MW would be offshore.

That 6.6GW limit was set by the Polish government based on the Polish grid operator PSE's assessment of the maximum capacity possible for connection to Poland's grid system. The wind industry is much more optimistic. The Polish wind energy association, PWIA, predicts that up to 17.8GW of wind power could be connected to the grid.

The ministry is also considering setting a cap for green certificates by multiplying the certificates produced by wind farms by a factor of 0.8, which would mean a drop of 20% in support for the wind sector. Currently there is no overall cap on wind electricity and green certificates provide wind farm operators with up to 60% of revenue.

A further change being proposed by the ministry is extending the green-certificate support system until 2019 - it is currently set to expire in 2015. The PWIA says that this extension period is too short as investors need at least 15 years of secured support.

Some in the wind power industry believe the government's caution is a result of an energy policy aimed at preserving electricity generation dependent almost exclusively on coal. Letting coal power plants burn biofuels like wood to receive green certificates, which is also a ministry proposal, is seen as more evidence of this thermal generation-friendly policy.

The government's perceived lack of enthusiasm for resolving grid issues, one of the main bottlenecks limiting the development of wind power in Poland, is also an issue. According to data from the energy regulator, half of the Polish grid is between 16 and 35 years old. Almost one-fifth of the grid was built before 1974 and only one-third of the transmission network was built in the last 15 years.

Although the grid requires substantial investment in order to connect renewable capacity, Poland's grid operators feel no pressure from the government to upgrade their assets. As a result, wind power development occurs mostly where the grid network is in the best condition, not necessarily where wind resources are most favourable.

Poland's total wind power capacity

More positively for the wind sector in Poland, overall remuneration for electricity and green certificates reached EUR115/MWh in 2010, compared with EUR95/MWh in 2009. The recent discovery of shale gas fields in Poland could also, paradoxically, help wind development. One of the arguments brought up by opponents of wind is that reserve gas power stations would be very costly due to reliance on Russian imports. With shale gas prices currently 2.5-3 times lower than Russian natural gas export prices, the cost of reserve gas power plants using Polish shale gas could be substantially lower.

According to official figures, installed capacity of wind farms in Poland at the end of 2010 stood at 1,180MW, compared with 725MW the year before. New capacity came mainly from foreign investment. Vortex Energy added 68MW, EDP Renovaveis 126MW, Dong Energy 81MW, RWE 32MW and E.on almost 80MW.

Although progress in 2010 was much faster than in 2009, total installed capacity, at just under 1.2GW, shows that the country is far from fulfilling its potential.

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