Act on Investments in Wind Power Plants
Two acts introducing significant amendments to the renewable energy support scheme and establishing major limitations on the location of wind farms were recently passed by Parliament and signed by the president:
- the Act Amending the Renewable Energy Sources (RES) Act (925/2016) – the Amendment Act for short – entered into force on July 1 2016 apart from certain provisions which will come into force at a later date; and
- the Act on Investments in Wind Power Plants (961/2016) entered into force on July 16 2016.
The Amendment Act introduces a number of significant changes to the RES Act , including Chapter 4, which sets out new rules for subsidy mechanisms. In general, the final stage of the legislative process did not result in major changes to the draft Amendment Act.
New definition of 'RES installation'
Previously under the RES Act, a 'RES installation' was defined as a separate set of equipment used for the generation and output of power from one type of RES connected at a single connection point (implying that this refers to a single power grid connection point). However, the Amendment Act removes from the definition the criteria of:
- a single connection point; and
- a single type of RES.
As a result, from July 1 2016 a single RES may consist of several types of technologies for generating electricity from renewable energy. Further, several RES installations may use the same grid connection point but conversely, a group of RES connected to the grid at several points may also be deemed a single RES installation; in other words, a single connection point is no longer a defining feature of a single RES installation.
Reduced support for existing RES greater than 0.5 megawatts
Before the Amendment Act, existing RES installations (in principle installations which start generating electricity before July 1 2016) were meant to remain eligible for green certificates and also benefit from the obligation imposed on local suppliers of electricity to purchase power from such installations at the price defined in the RES Act (ie, the average wholesale market price from the previous calendar quarter, as calculated and published by the president of the Energy Regulatory Office).
Under the Amendment Act, as of January 1 2018 the electricity purchase obligation will be limited to electricity generated in RES installations with a total installed capacity of less than 500 kilowatts (kW). This means that existing RES installations with a total installed capacity of 500 kW or more will be forced to sell electricity on the market only and will no longer be entitled to demand that obliged suppliers purchase their electricity. On the other hand, larger existing RES installations remain eligible for green certificates for the entire 15-year support period.
Increased support for existing dedicated biomass co-firing installations
Under the RES Act, the level of support for the co-firing of biomass was reduced – the co-firing of biomass was meant to receive half a green certificate per megawatt hour (MWh) of electricity produced – except for 'dedicated biomass co-firing installations' (ie, biomass co-firing installations that meet the criteria defined in the RES Act and for which a relevant power generation licence was issued before June 30 2014).
The Amendment Act broadens the definition of a 'dedicated biomass co-firing installation'; in particular, it removes the requirement that installations must hold a relevant licence issued before June 30 2014:
"a multi-fuel fired installation, in which the share of electricity or heat produced from biomass, bioliquids, biogas or agricultural biogas is higher than 15% (the initial draft Amendment Act required a level of 20%) of the total amount of electricity or heat produced at such an installation in a given settlement period, provided that:
(a) the installation is equipped with separate process lines for transporting biomass, biofuel, biogas or agricultural biogas to the combustion chamber, or
(b) the installation uses fluidized bed combustion technology designed to incinerate industrial waste together with fossil fuels or fuel arising from their processing and biomass, bioliquids, biogas from agricultural biogas."
Further, as regards units firing or co-firing biomass, the Amendment Act introduces a requirement of a minimum share of local biomass in the total weight of biomass used in the combustion process; the exact amount will be determined in the relevant secondary legislation. 'Local biomass' is defined as biomass that originates from:
- energy crops;
- waste or residues from agricultural production or industry; or
Local biomass must be obtained from a producer located within a 300-kilometre radius from the given RES installation. The detailed rules for documenting the origin of biomass and the permissible distance to generation units will be set out by the Ministry of Agriculture in secondary legislation.
Energy clusters and energy cooperatives
The Amendment Act introduces two new terms:
- an energy cluster; and
- an energy cooperative.
An 'energy cluster' is defined as a civil law agreement between natural persons, corporate bodies, research-and-development units or self-government units regarding the generation, balance of demand for, distribution and trading in energy from RES or other energy sources in an electricity distribution system and one powiat (a mid-level self-government unit in Poland) or five municipalities.
An 'energy cooperative' is defined as a cooperative (according to the Cooperative Law Act) which produces:
- electricity from RES installations with a total installed capacity not larger than 10 MW;
- biogas RES installations with annual efficiency not higher than 40 million cubic metres; or
- heat in RES installations with a total installed capacity not higher than 30 MW thermal and secures:
- balanced power demand;
- distribution and trading in electricity; and
- biogas and heat for the cooperative and its members in urban-rural municipalities.
New structure of auction categories
Under the previous version of the RES Act, auctions were to be conducted separately for existing and new projects. In both cases, there were separate auctions for installations with a capacity of up to 1 MW and over 1 MW. However, no separate technology categories were established. The Amendment Act introduces the following additional separate categories:
- RES installations with a capacity utilisation rate of more than 3,504 MWh/MW per year;
- RES installations which use the biodegradable portions of industrial and municipal waste to generate electricity, including water treatment waste and sewage treatment waste, in particular the use of sewage sludge in a waste incineration plant;
- RES installations which emit no more than 100 kilograms of carbon dioxide per MWh and have a capacity utilisation rate of greater than 3,504 MWh/MW per year;
- members of energy clusters (this category will come into force as of July 1 2017);
- members of energy cooperatives (this category will come into force as of July 1 2017);
- RES installations using agricultural biogas only; and
- RES installations other than those listed above.
In each of these categories there will be separate auctions for installations:
- operating before July 1 2016;
- operating as of July 1 2016 or later; and
- with an installed capacity of up to 1 MW and over 1 MW.
By the end of October each year the Council of Ministers will set the maximum volume and value of electricity that can be purchased in each auction. At the request of the minister of energy, the Council of Ministers will set the order of the auctions. This suggests that the auctions will not need to be conducted at the one time.
Under the Amendment Act, RES installations located outside Poland are allowed to participate in auctions provided that a relevant international agreement between Poland and the country where the installation is located has been executed; the agreement must guarantee reciprocity in benefiting from the support systems and ensure the physical transfer of electricity to the Polish transmission system. The maximum volume of electricity produced in such installations that may be sold in a given year cannot exceed 5% of the energy sold jointly as part of the auction in the preceding year.
The date of the first auction will be announced by the president of the Energy Regulatory Office by the end of 2016. By August 31 2016 the Council of Ministers should have set the maximum volume and value of electricity which can be purchased in the 2016 auctions.
The Amendment Act specifically provides that the reference prices (ie, the maximum prices that projects can bid in auctions) concerning auctions held in 2016 will be set by the minister of energy and announced by August 31 2016.
Guaranteed support period in auction system
Under the previous RES Act, the duration of support through a feed-in-tariff or contract-for-difference awarded in an auction was fixed at 15 years. Under the Amendment Act, the duration of support will be set by the minister of energy in secondary legislation taking into account:
- the national energy policy;
- the percentage of energy and fuels generated by RES installations in overall energy consumption; and
- the security of the power system.
The support period cannot exceed 15 years. Until the relevant regulation is published, the support period will be 15 years. The annual modification of support periods will apply only to those units that win auctions in the given year; this means that any subsequent change of the support period should not apply to RES installations that have already won auctions.
RES installations commissioned after June 30 2016 but before auction process
Under the previous version of the RES Act, RES installations commissioned after Chapter 4 came into force on July 1 2016 – but before an auction has been closed – were to be excluded from the new auction mechanism. The Amendment Act states that the operator of a RES installation commissioned after Chapter 4 came into force are allowed to sell electricity until December 31 2016 and participate in an auction on the following conditions:
- The RES operator sells all electricity produced by the RES installation on the commodity exchange; and
- Fourteen days before the commencement of generating electricity the operator submits a written statement to the energy regulator that the electricity produced in the relevant RES installation will be fed into the grid and sold on a commodity exchange.
If such a RES installation wins an auction, the support period will start on the day following the announcement of the auction result.
Support for hydropower installations
Under the previous RES Act, existing hydropower installations with a total installed capacity of over 5 MW were not eligible to take part in auctions. However, the Amendment Act states that hydropower installations with a total installed capacity of over 20 MW are excluded from the auction system. On the other hand, the Amendment Act introduces no changes to the eligibility criteria applicable to the existing support system (ie, only existing hydropower projects with a capacity of up to 5 MW are eligible for green certificates and the electricity purchase obligation).
Act on Investments in Wind Power Plants
The aim of the Act on Investments in Wind Power Plants is to establish new rules for locating and constructing wind farms, but it appears that it could significantly limit the development of wind farm projects in Poland.
Minimum distance from residential buildings and protected environmental areas
The Act on Investments in Wind Power Plants established that the minimum distance between a wind turbine and a residential building or protected environmental areas cannot be less than 10 times the total height of the wind turbine, including the rotor blade.
In general, existing wind power plants will not be required to comply with the minimum distance requirement. However, an existing turbine which does not comply with the requirement may undergo repair or maintenance work only; it will not be allowed to expand its overall size or impact the environment.
The minimum distance requirement binds local authorities when they:
- set a local zoning plan;
- prepare a local zoning study;
- issue a zoning decision; or
- issue a construction permit.
Definition of a 'wind power plant'
The Act on Investments in Wind Power Plants defines a 'wind power plant' as a structure according to the construction law that consists of at least foundations, a tower and technical elements, including:
- a rotor with blades;
- a powertrain;
- a power generator;
- control systems; and
- a gondola along with an attachment and rotation system.
The act may have significant implications for the calculation of property tax payable on the real property where a wind turbine is located. Before the Amendment Act, only the value of the foundations and the tower were part of the taxable base. As a result of the Amendment Act, local authorities may consider that the value of an entire wind power plant – including the most costly technical elements – should be part of the taxable base. Under Article 17 of the act, until December 31 2016, the real estate tax for wind power plants will be calculated and collected according to the provisions applicable before the act entered into force.
New operation permit dropped
The initial draft Act on Investments in Wind Power Plants proposed a new operation permit issued by Urząd Dozoru Techniczneg, the technical supervision authority. This new permit was going to be required in addition to a permit for use obtained from the construction authorities at the end of construction. However, during the legislative process this idea was dropped. There will now be no requirement to obtain such a permit or pay the associated fees.
Local zoning regulations
Under the Act on Investments in Wind Power Plants, the location of wind turbines will now be decided based exclusively on local zoning plans. The option to determine real property development conditions in zoning decisions will no longer be available. If local zoning plans allow the construction of wind power plants they are required to specify the maximum height permitted.
Construction permits issued before the act came into effect on July 16 2016 will remain valid as long as the wind power plant is constructed and obtains a permit for use no later than three years from the effective date; in that case the minimum distance requirement will not apply.
Administrative proceedings concerning the issuance of a building permit before the act entered into force may be continued on the basis of previously binding regulations (ie, the authorities do not need to observe the minimum distance requirement).
Pending administrative proceedings concerning zoning decisions for wind turbines commenced before the act entered into force should be discontinued.
Zoning decisions regarding wind turbines should expire on the day that the act comes into force, unless an administrative proceeding for the issuance of a building permit concerning the project covered by the zoning decision was initiated before the act entered into force.
For further information on this topic please contact Grzegorz Filipowicz at Norton Rose Fulbright Piotr Strawa and Partners, LP by telephone (+48 22 581 4900) or email ([email protected]). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.