Growth constrained by lack of grid access -- Poland plods along

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Poland added about 125 MW of new wind power capacity in 2008, increasing total wind capacity to just over 400 MW. A further 235 MW is to be commissioned this year to help meet annual targets for the proportion of national electricity to be met by renewables (table). These were introduced by the government in August, which is aiming at 12.9% by 2017, from a target of 8.7% for 2009. But there are considerable hurdles for wind power developers to overcome in Poland, foremost among them a lack of transmission capacity and a volatile currency threatening returns for overseas investors in Polish wind plant assets.

Wind plant owners in Poland sell their production for the average wholesale price of electricity in the country and augment that revenue by selling the green energy certificates associated with their generation. Last year, the average combined payment for wind power production was about PLN 0.37/kWh (EUR 0.08/kWh), says Stefan Ebeling of wind project developer Sevivon, a subsidiary of Germany's Windkraft Nord. Poland's electricity companies must acquire and submit green energy certificates to demonstrate they are supplying the required proportion of green power to consumers to meet the government's targets. Alternatively, electricity companies can buy out of the requirement by paying a sum roughly equivalent to the price of green certificates, which on average sold for PLN 0.244/kWh (EUR 0.05/kWh) last year. The sum is determined by the government authority that oversees the renewables market. Failure to satisfy either obligation carries a stiff penalty.

Meantime, however, lack of transmission capacity and the way capacity on the existing grid is allocated is becoming an ever more serous barrier to development. "Around 35 GW of mainly wind capacity have been registered for connection to the grid, although there's no way all this will be built. It's generally just an attempt to secure grid capacity," says Ebeling. A likely remedy will be to demand advance payments from wind developers booking space on the wires as proof of intent and ability to realise plans. "The government is proposing incentives and plans and everybody knows something has to be done. The situation has to change, but the question is when," says Chloe Durieux of developer and investor Green Bear, majority owned by property and investment firm Ott & Co. The company acquires, develops and operates wind plant in Poland, the Czech Republic and Slovakia.

Currency risk

Another challenge is currency volatility caused by the global economic crisis, making financing of Polish projects more difficult. In autumn, payments for wind power denominated in Zloty were worth about EUR 0.10/kWh but had dropped to EUR 0.08/kWh by last month after a 25% decline in the Polish currency against the euro, says Ebeling. Added to that, Polish electricity market participants are reluctant to adjust to new market mechanisms. Project financing requires wind plant operators to secure ten to 15 year commitments from electricity companies to buy their renewable energy certificates. Electricity companies generally prefer to buy out of their obligation to submit certificates to the government, rather than draw up long-term certificate procurement contracts. "This is changing, but slowly," says Ebeling.

Plans on the table

Green Bear is hanging on for better times. It owns one 10.8 MW plant in Poland and was looking to complete three more this year. Durieux says plans have slowed somewhat. Back in June, the company said it would commission about six projects in 2009 and as many as 12 in 2010, but now a maximum six are slated for next year. Each would be at least 50 MW, says the company.

Martifer Renewables, the power generation unit of Portugal's Martifer group, is building two wind projects in the Krosno region: the 10 MW Leki Dukielskie plant and the 18 MW Bukowsko plant, both using Repower turbines and due online in the first part of this year (table). Another particularly active player is Polish Eurowind. The firm's Michal Jankowski reports a project pipeline of 815 MW, with several to go online in 2010 and 2011.

Other well known names in the wind power sector building projects in Poland are Iberdrola Renewables, E.ON's renewables division and Danish company Dong Energy. All say they will be bringing projects on line this year. None are bigger than 50 MW.

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