Introduction

On February 20 2015 the Sejm (the lower chamber of Parliament) reviewed the amendments made by the Senate to the proposed new Renewable Energy Sources Act and passed the final version. On April 2 2015 the act was published in the official journal (Journal of Law 2015, 478). It will enter into force 30 days after its official publication, except for Chapter 4 – the key part of the act that establishes a new landscape for the development of renewable energy sources in Poland – which will come into force on January 1 2016.

In general, projects which start generating electricity before Chapter 4 comes into force will be eligible for green certificates. This means that the existing funding system will be maintained for these projects, but the period of funding for the existing projects will be restricted to 15 years from the date they feed electricity to the grid for the first time. During the final stages of the legislative process, a new mechanism aimed at verifying the incentive effect was introduced into the act. The mechanism stems from the new guidelines on state aid for environmental protection and energy 2014-2020 issued by the European Commission, which came into force on July 1 2014.

Incentive effect under EU guidelines

These guidelines lay down general rules to be implemented by member states to determine whether the state aid mechanisms are compatible with the internal market and can therefore be applied to certain entities. In line with these guidelines regarding the environmental and energy sector (points 49-52), aid can only be found compatible with the internal market if it has an incentive effect. An incentive effect occurs when the aid induces the beneficiary to change its behaviour to increase the level of environmental protection or to improve the functioning of a secure, affordable and sustainable energy market, a change in behaviour which it would not have undertaken without the aid.

The European Commission considers that aid does not create an incentive for the beneficiary where work on the project started before the application for aid to the national authorities. In such cases where the beneficiary starts implementing a project before applying for aid, any aid granted in respect of that project will not be considered compatible with the internal market. In other words, an incentive effect does not occur for the beneficiary if state aid is not indispensable for the implementation of the given project. Under the guidelines, 'start of work' means the start of construction work on the investment or the first firm commitment to order equipment or another commitment that makes the investment irreversible, whichever occurs first. In accordance with the guidelines, buying land and preparatory work such as obtaining permits and conducting preliminary feasibility studies are not considered the start of work.

In line with the guidelines, member states must introduce and use an application form for aid. In the application form, beneficiaries must describe the situation that would exist without the aid, a situation that is referred to as the 'counterfactual scenario' or the 'alternative scenario' or project. When receiving an application form, the granting authority must carry out a credibility check of the counterfactual scenario and confirm that the aid has had the required incentive effect.

Examination of incentive effect

The Energy Regulatory Office (URE) acts as the public authority with the power to determine whether an incentive effect occurs in relation to planned cogeneration projects and renewable energy sources to be implemented in Poland. The guidelines entered into force on July 1 2014. On September 23 2014 the URE announced that it had started examining the incentive effect in relation to applications for a licence promise (a type of preliminary licence) covering cogeneration projects and renewable energy projects submitted after July 1 2014.

Incentive effect under Renewable Energy Sources Act

The regulations in force do not contain any provision under which the occurrence of an incentive effect in relation to renewable energy sources is a condition for the issuance of certificates of origin to an entity operating a renewable energy source. The act provides the following mechanisms to determine the incentive effect:

  • When applying for a licence promise to carry out the business of generating electricity from renewable sources (or generating combined heat and power) or a promise to change a licence that has already been obtained, the applicant is required to enclose a technical and financial description of the project planned, work on which will start after the act comes into force.
  • The URE will prepare and post on the URE website description forms for renewable energy generation projects and cogeneration projects, work on which will start after the act comes into force.
  • Based on the technical and financial description of the project, the URE will determine in a decision regarding the licence promise, whether the project would be completed if the electricity generated by that project was not eligible for a certificate of origin (or a cogeneration certificate of origin). This means that when reviewing the licence promise application, the URE should analyse whether an incentive effect occurs.
  • An electricity producer that does not obtain confirmation in relation to a project, work on which will start after the act comes into force, cannot apply to the URE for a certificate of origin or a cogeneration certificate of origin.

If an incentive effect is not confirmed by the URE in relation to a new renewable energy sources project or a cogeneration project (work on which will start after the act comes into force) that project will not be eligible for certificates of origin or cogeneration certificates of origin.

In consequence, the incentive effect review mechanism should be seen as an additional condition for the issuance of certificates of origin for an entity operating a renewable energy source, the construction of which commenced after the act entered into force – in addition to the general rule that the certificate of origin will be available only for those projects which start generating electricity before Chapter 4 of the act comes into force.

Grzegorz Filipowicz

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