Poland - Uncertainty and falling revenues hit industry

POLAND: Although wind capacity grew by more than 50% last year, 2013 may see the worst performance in a decade due to a huge drop in the price of green certificates and lack of a new renewable law.

Uncertainty is growing for the Polish wind industry. A renewable energy law was intended to come into force in January, but has not yet been sent to parliament. The draft document has been amended several times and has been a subject of debate and lobbying by various renewable and non-renewable industries.

The main support system for renewables is green certificates, issued for each megawatt hour of electricity produced. For many wind companies and investors it has become clear that unless the new law limits the number of green certificates for co-firing biomass with coal, development of wind energy will be thwarted.

The market is suffering from an oversupply of green certificates, which have mainly come from the co-firing of biomass. Prices dropped from PLN 283/MWh (EUR 68.20/MWh) in January 2012 to PLN 119/MWh in February 2013. Green certificates constitute 60% of wind farm owners' sales, and the price drop has resulted in a 30% drop in energy sold over the past 12 months. The Polish Wind Energy Association (PWEA) is predicting the bankruptcy of several wind farm owners.

The lack of a new law has caused banks to withhold financing for wind. "Investors and developers are losing confidence," PWEA president Jaroslaw Pole explains. This year, PWEA is focussing attention on maintaining a proposal the government made last year to lower the number of green certificates for biomass co-firing from 1/MWh to 0.15/MWh. Onshore wind farms will receive 0.9/MWh if installed this year and 0.83/MWh from 2017.

Another problem for wind developers in the draft law is a provision that wind farm owners will lose the right to obtain certificates once they sell electricity at a price above 105% of the medium price of electricity in Poland, currently EUR 49. However, many operators sell electricity on the free market rather than through long-term contracts, earning more in periods of peak demand.

The offshore industry has had more luck with the draft law. The Polish Offshore Wind Energy Society has succeeded in implementing pro-offshore wind provisions so that offshore farms will see an increase in green certificates they earn from 1.8/MWh to 2.3/MWh.

Despite these issues, installations of wind farms were not seriously affected in 2012 since the drop in green certificate prices was most intense in the second half of the year. Onshore capacity grew by over 54% to 2.5GW. Although no offshore installation came online in 2012, the year was still decisive for this sector in Poland. The government awarded 15 licenses for some 8-10GW offshore, with several more expected this year.

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