The Renewable Energy Sources (RES) Act came into force on May 4 2015 (for further details please see "New renewables legislation"). Chapter 4 of the act, which fundamentally changes the support system for generators of electricity from renewable sources, was scheduled to come into effect on January 1 2016 (the regulation introduces the so-called 'auction mechanism'). However, under the Act of December 29 2015, which amended the RES Act and the Energy Law, Chapter 4's entry into force has been delayed until July 1 2016.
Existing support system
Investors were particularly interested in the provisions specifying which RES projects would be eligible for the existing support system in the form of certificates of origin. Article 44(1) of the RES Act states that certificates of origin confirming that electricity is generated from renewable sources (ie, green certificates) are awarded to generators with micro installations or RES installations – other than micro installations in which electricity is generated for the first time before Chapter 4 comes into force and installations which undergo modernisation after it comes into force. Under Article 44(5) of the RES Act, a certificate of origin lasts 15 years (until December 31 2035 at the latest) from the day on which electricity is generated for the first time. Significantly, under Article 44(6) of the act, a green certificate for electricity generated in a micro installation or a RES installation – other than a micro installation that undergoes modernisation after Chapter 4 comes into force – may be awarded for only six months from the date of Chapter 4's entry into force. In other words, any modernisation of a RES installation after Chapter 4 comes into force restricts the support period for the installation as a whole (irrespective of when electricity is first generated).
Phased RES projects
Whether the existing support system will be available is particularly significant for phased RES projects, which in practice means the development of wind farms. The wording of the RES Act allows for different interpretations of the degree to which a RES project should be completed before Chapter 4 comes into force for a given generation unit to be included in the green certificate support system. In this context, it is worth considering the Information of the President of the Energy Regulatory Office of December 21 2015, which clarifies selected provisions of the Energy Regulatory Office Act. As regards project phasing, the president of the Energy Regulatory Office determined that:
"The fact that the first kilowatt hour is generated before Chapter 4 of the RES Act comes into force by a RES installation in the commissioning period should be treated as determining the entitlement specified in Article 44, Section 1 of the RES Act in relation to an installation whose installed capacity during the commissioning period is as at the day preceding the entry into force of Chapter 4 of the RES Act. The construction of other generation units – connected at the same connection point – after that time seems to be a modernisation of the installation with all consequences resulting from the RES Act."
Any further expansion of a wind farm (eg, the development of the next phase of a project) and the commissioning of new units after July 1 2016 should be treated as modernisation of a RES installation. Consequently, any extension of a RES installation after July 1 2016 excludes the possibility of obtaining certificates after December 31 2016. As a result, modernised RES installations cannot obtain certificates of origin for the full 15-year period from when electricity is first generated.
This poses a great risk to phased RES projects that are not completed by June 30 2016. One possible way to avoid the risk of losing support through the green certificate system for the section of a project that is already in operation would be to separate completed and planned phases. This separation should lead to the conclusion that a generator operates two separate RES installations. This solution is possible if the wind farm development is phased to enable a separation of the wind farm's individual sections, specifically to ensure separate connection points to the power grid. Under Article 2(13) of the RES Act, a RES installation is a separate set of equipment used to generate and output power and that has a single grid connection point. In this context, the Information of the President of the Energy Regulatory Office states that:
"an incoming feeder to transformer stations (the station's incoming panel) may operate as an individual point/place at which a RES installation is connected to the power grid as long as it is possible to determine – for the purposes of the auction mechanism – the volume of electricity generated and supplied to the grid by the individual (separated) RES installation."
This means that – technical conditions permitting – there is no reason why a transformer station should not contain several outgoing feeders and thus house several grid connection points for separate generation units.
Therefore, phases of a RES project may be effectively separated if they each have a separate connection point. Consequently, at the operational stage, the generator should have an electricity generation licence that formally specifies separate generation installations. However, in this scenario the existing support mechanism for the full 15-year period would cover only the phase of the project commissioned before June 30 2016. At the same time, under the wording of the RES Act, RES installations commissioned after Chapter 4 comes into force – but before an auction is closed – cannot participate in the new auction mechanism. As a result, such units are excluded from the RES support system.
Under the wording of the RES Act, investors whose RES projects are phased – and where any phase is to be completed after Chapter 4 of the RES Act comes into force – will be forced to assess their projects and implement one of the following:
- The investor can separate project phases into individual installations so that phases commissioned before Chapter 4 comes into force benefit fully from the existing support system. Regarding phases completed later, the investor can:
- participate in auctions – which means that the installation cannot be commissioned before the auction is closed (a condition for participating in an auction); or
- give up the support through the auction mechanism and commission the next phase of the project before the auction is closed; or
- The investor can continue development of a RES project as a single RES installation, in which scenario any generation unit partially commissioned before Chapter 4 comes into force would be treated as having been modernised and would lose support through the existing system of certificates of origin, while the owner of that installation could apply for support offered by the new mechanism and participate in auctions.
For further information on this topic please contact Grzegorz Filipowicz at Norton Rose Piotr Strawa and Partners LLP by telephone (+48 22 581 4900) or email (firstname.lastname@example.org). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.
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