Certificate market in Poland ready to roll -- Traders begin registration

While trading of renewable energy certificates in Poland officially began at the start of October, the certificates register in which all transactions must be noted is first opening at the Polish energy exchange on November 2. And trading will not seriously get going until all trading participants, potentially more than 1000 companies, have registered and the total number of renewable energy certificates to be issued for 2005 is revealed by energy regulator URE.

Under an amendment to the country's power law in April, all power companies selling or trading electricity must obtain certificates of origin to confirm they have bought the legally required amount of energy from renewable sources. For 2005, this is set at 3.1% of electricity sales, rising to 3.6% in 2006, 4.3% in 2007, 5.4% in 2008 and 7% in 2009. A further target of 9% is set for the 2012 to 2014 period.

The certificates, each representing the equivalent of 1 MWh of electricity generation, must be submitted to the Power Sector Regulatory Office by a specific date each year. For 2005, the deadline is March 31, 2006. Companies face a penalty of PLN 240 (EUR 60) for each megawatt hour for which certificates are not presented in 2005, with the penalty rising each year as calculated under a set formula outlined under the law.

Sales price

The certificates could have a value this year of about PLN 200/MWh (EUR 50/MWh). Certificate revenues will be added to income from green power sales at the legally set price of PLN 120/MWh (EUR 30/ MWh ) for 2005, giving renewable generators a total income of around EUR 80/MWh this year. The power purchase price is fixed at the average sales price for electricity from coal from the previous calendar year as notified by URE. Assuming a certificate price of EUR 50/MWh, 3.1% of Poland's 120 TWh of consumption adds up to a certificate market worth around EUR 186 million in 2005.

The wind industry is concerned that the relatively low penalty compared with the expected certificate price will provide little incentive for utilities to buy green power. German wind consultant Övermöhle Consult and Marketing estimates the share of renewables in Poland's total electricity sales this year will fall short of the 3.1% target at just 2.4-2.5%. The firm says it is not aware of any new wind projects coming on line this year. About 60 MW of wind capacity is currently operating in Poland.

Övermöhle does expect the market to pick up next year, however, and forecasts a favourable outlook for wind developers. The overall price paid for electricity from wind power could reach nearly PLN 360/MWh (EUR 90/MWh) in the coming year, Övermöhle says. Renewable generators are likely to sign fixed price, bi-lateral contracts for green certificate delivery for ten years or more, while the legally set remuneration is likely to rise annually in line with increasing conventional power prices.

Potential traders

According to the energy exchange, Towarowa Gielda Energii, there are around 1000 Polish energy companies, many of them very small, that will need to meet the certificates requirement and are therefore potential traders, either bilaterally with other energy companies or by buying and selling on the energy exchange. Foreign companies, banks and other financial institutions may later become involved in trading.

Övermöhle says interest in the Polish market is intense among wind developers, with about 11 companies from Germany active in Poland along with competitors from the Netherlands, Spain and Denmark. Well over one thousand megawatts of development is already in the works, says Övermöhle, with 790 MW of that proposed by German players.

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