Poland - Industry prepares to fight 'destructive' draft rules

POLAND: This year may prove to be the toughest yet in the Polish wind sector's ten-year history. The industry was shocked by draft legislation on renewable energy issued by the government in December that removes the guaranteed price for wind-generated electricity and cuts by 25% the number of green certificates available for onshore wind farms above 200kW. The new rules apply to both existing and future wind farms.

Polish Wind Energy Association president Krzysztof Prasalek said the proposal "destroys the foundations of wind business". Under the proposed system, onshore wind farms that currently earn up to EUR111/MWh would end up with EUR50/MWh for a green certificate and unknown revenue from selling electricity. Average market prices in Poland currently stand at EUR45/MWh.

Even if market prices increased, revenues for wind farms would still be subject to a government-imposed cap that, broadly speaking, acts to reduce the value of green certificates when electricity prices rise.

The wind industry's main task for 2012 is to fight for changes in the proposed legislation. The draft, which is scheduled to start in July, has already had a negative impact on business as banks have begun to withhold finance for wind-farm construction.

Before these changes were proposed, the growth rate of Poland's wind capacity was already falling. According to the energy regulatory office, total capacity at end-2011 stood at 1,616MW, compared with 1,180MW the previous year. While capacity growth, at 436MW, is in line with the 455MW growth recorded in 2010, in percentage terms growth slowed from 63% to 37%. Industry experts are concerned that Poland's modest target of 6.6GW wind capacity by 2020 may be in doubt if the draft legislation is confirmed.

Offshore wind has yet to take off in Poland, but the pipeline stands at 25GW and the new legislation looks likely to boost growth in the offshore sector by increasing the green certificates on offer from the current 1/MWh to 1.3/MWh. However, offshore progress may be hampered by grid-connection problems not addressed by the new law. The onshore infrastructure needed to transfer offshore electricity to the south of the country - where most of the demand is located - is not well developed. There is a single undersea cable connecting Poland and Sweden, but this is already being used to its full capacity.