Concern over likely policy support delay in Poland

POLAND: The renewables industry fears that the Polish government is unlikely to introduce a support policy for wind power and other renewable energy sources due to delays in finalising the details and the looming national parliamentary elections, scheduled for October.

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The original plan was for the new legislation to be passed this year, but members of Poland's renewable-energy sector claim this goal is impossible. A delay will result in investor uncertainty, especially because the new policy is widely expected to reduce the growth of financial support for wind energy.

Poland's economy ministry has been working on the new renewable-energy support legislation for almost a year, and has yet to publish a draft. Instead, ministry officials have offered information several times on the principles that will act as the foundation of the regulatory changes. Some of the changes being considered would be unfavourable to the wind sector.

Deputy economy minister Joanna Strzelec-Lobodzinska has stated that the intention is to match future support for wind farms to the new capacity foreseen by Poland's National Renewable Energy Action Plan. In other words, the government wants to give financial support only up to the target capacity of 6.7GW by 2020. Meanwhile, the wind industry asserts that 13.5GW of total capacity is achievable by the same date. The country currently has 1.1GW of installed wind capacity.

Moreover, the ministry plans to differentiate support via its green-certificates according to the source of renewable generation. Biomass co-firing by coal power plants is expected to receive the highest level of support, with wind-generated electricity earmarked to receive 20% fewer certificates than it currently does.

Slowing growth

The ministry has also indicated that the new terms underpinning financial support will be calibrated to decrease in line with increases in electricity prices.

These ideas have attracted strong criticism from renewable-energy supporters.

"If the planned law introduces such mechanisms it would be a scandal and would make meeting Poland's 2020 renewable-energy target impossible," argues Maciej Stryjecki, president of the country's Foundation for Sustainable Energy.

Changes to the law should instead focus on ending support for old hydropower generating plants and biomass co-firing by coal power plants, says Michal Cwil, director general of the Polish Chamber of Renewable Energy.

"The current mechanism does not really support investment in new renewable generation," says Cwil, pointing out that half of Poland's electricity from renewable sources comes from biomass co-firing and a further 30% from old hydro plants.

No minimum

The current regulatory framework is not seen as perfect by much of Poland's renewable energy sector. In the first instance, it only applies until the end of 2019. More importantly, there is no minimum guaranteed rate for either of the two elements in the support package.

All renewable-electricity producers in Poland currently receive one green certificate per MWh generated and are entitled to sell their electricity at a price no lower than the previous year's mean market price. The mean price of electricity in 2009 - valid for 2010 electricity contracts - was PLN 197.2 (EUR49.3). The figure for 2010 is not yet available.

Green certificates, in turn, can be traded on the Polish Commodity Energy Exchange, where they are currently valued at PLN 280.48. The demand for green certificates is driven by obligations imposed on Polish electricity suppliers, which are required to secure a prescribed proportion of the electricity they sell from renewable sources.


Being short by some 1.8TWh last year, according to the Polish Wind Industry Association, electricity suppliers had either to make a substitute payment, called Ozj, or buy green certificates equivalent to the volume they lacked.

Suppliers are encouraged to act, as failure to do so incurs a penalty fee amounting to 1.3 times the Ozj. The original value of the Ozj substitute payment is set by the energy law and increased annually in line with the national rate of inflation. Currently, the Ozj substitute payment is PLN 274.92 and is forecast to reach PLN 348 - a predicted 28% increase on 2010 levels after allowing for a 2.5% inflationary rise.

Shortcomings aside, the current regime offers a high level of support for wind electricity. Adding the 2009 mean electricity price to the mean PLN 256.9 green-certificate price for 2010 indicates that last year wind electricity producers were entitled to more than EUR100/MWh.

As regulations stand, this could rise to as much as EUR220/MWh. But if electricity prices continue to rise, as is widely expected, and the new rules are introduced along the lines that are being indicated, then wind generators would see their support decrease.

According to European Wind Energy Association estimates, the EU mean electricity price by 2020 will reach EUR89/MWh. In Poland, the price could rise by 50%, to something in the region of EUR133, due to the higher carbon intensity of the country's electricity.

Higher costs are not unexpected in Poland - the country needs to replace half of its coal plants within the next ten years and upgrade electricity transmission lines.

Overall, the cost of such a multi-faceted overhaul of Poland's energy sector is estimated to be EUR50-75 billion, the bulk of which will be shouldered by electricity consumers.

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