New law threatens to slash wind farm revenues

POLAND: Proposed reforms to Poland's renewables support sytem would take away guaranteed prices.

The Polish wind industry has reacted with horror to a long-awaited draft renewable law that would drastically cut wind farms' revenues.

The current support system for wind is based on green certificates issued for each megawatt hour of electricity and a guaranteed price for electricity equal to the mean price on the market. Green certificates currently stand at PLN 283/MWh (€64.5/MWh). Once the guaranteed electricity price is added, wind farm developers can receive up to PLN 478.3/MWh.

"The current system is not ideal, but it works and incentivises wind power investors," said Krzysztof Prasalek, president of the Polish Wind Energy Association (PWEA). The system is quite generous but lacks stability, because it is based on a decree by the economy ministry.

Although the support system is based on a legal act, this can be changed by a single minister's decision. Moreover, it only lasts until 2015, which creates uncertainty among investors. The current system also does not obligate grid operators to connect wind farms to the power network.

However, the new law proposes correction factors for green certificates issued for wind power. Onshore wind stations under 200kW will receive 1.3 certificates per megawatt hour, but those of greater capacity will get only 0.75 certificates. Offshore wind farms will receive 1.3 certificates. The right to certificates will be valid for 15 years after a wind farm goes online.

The new law does not set any guaranteed prices. Currently, electricity distributors are obligated to buy wind farm's electricity for no less than the previous year's mean electricity price. Industry experts are afraid that, since wind farms require balancing, electricity distributors will offer them much lower prices.

"The strength of the current support system lies just in this (price) obligation. Removing it will destroy the foundations of wind business," said Prasalek.

Also, the economy ministry has proposed a complicated algorithm to cap wind farms' revenues. According to this, the value of green certificates will depend on demand from the power companies - who will have to secure a set proportion of their sales from renewable sources. The proportion has yet to be decided.

Companies that do not fulfil the obligation will have to pay a substitution fee known as Oz, or buy green certificates. These are calculated by subtracting the unitary substitution fee, known as Ozj, from the mean electricity price from the previous year. The draft sets the value of the Ozj at PLN 470, increasing every year.

As a result, the value of certificates - assuming that demand drives the prices to the level of the substitution fee - would drop from PLN 283 to PLN 275.

Onshore wind power plants over 200kW capacity will only receive EUR46.8/MWh compared with EUR64.3 now. Offshore wind would get €81.1. The mechanism would lower the value of Oz and, consequently, the certificates when electricity prices rise.

PWEA intends to fight for changes in the proposed law before it comes into force in July. The law will not drive investment in wind energy, Prasalek said.

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