#10 Renewable Energy Wrap-Up - Poland

With our Corporate Energy @TW series, we aim to highlight current developments and issues in the renewable energy sector across different jurisdictions. Taylor Wessing’s international Energy & Infrastructure industry group has more than 50 experts across 16 offices. We have been active in corporate/M&A and financing in relation to renewable energy for more than 15 years and have extensive legal and commercial expertise and market knowledge. We are currently ranked fourth globally according to the number of renewable energy M&A deals in the Clean Energy League Tables 2021.

Question: What are the most important current developments in the field of renewable energy transactions and financing? Answer: We observe increasing interests by investors and developers in onshore wind and solar projects in Poland not least due to the comparably larger number of investment opportunities, compared to other countries. During latest auctions for onshore wind and solar, we observed that onshore wind becomes relatively less attractive compared to solar PV – likely due to prohibitive distance rules established in 2016. In addition, rising wholesale electricity prices might cause auctions to become less interesting for investors compared to attempting to secure higher returns through corporate power purchase agreements (PPAs) especially for large-scale solar PV. Although the legal framework for corporate PPAs for large-scale solar PV still requires some changes, PPAs are already concluded in practice. As an example, the local subsidiary of German HeidelbergCement can be named, which will take solar electricity from the 65 MW Witnica solar PV plant for ten years under a PPA. Witnica solar PV plant is located near the German border and operated by Baywa. Overall, 2020 so far was the most successful year for solar PV in Poland. We expect this development to continue. In addition, the introduction of the Polish Offshore Wind Act can be considered as ground-breaking for the renewables industry (see question three).

Question: What market developments can be expected towards the end of the year and beyond? Answer: We expect a significant increase in transaction activity for Poland in the short and medium term. The importance of PPAs will grow, as wholesale market prices are likely increasing further.

The results of the renewable energy auction from 2018-2021 show that there is no competition in Poland in terms of the costs of generating energy onshore wind. In 2018-2020, wind investors contracted 161.8 TWh of electricity for the amount of PLN 33.9 billion. Therefore, over the 15-year support period, the average price for 1 MW is PLN 209, and wind electricity costs the taxpayer 24% less than it was necessary to pay for electricity on the Polish Commodities Exchange (TGE). Unblocking the construction of onshore wind is just a question of time (see question three).

Question: What has been your personal “game changer” or “highlight” in the field of renewable energies since the beginning of 2021? Answer: The unanimous adoption of Poland’s first Offshore Wind Act in January 2021 certainly is a “game changer” and paves the way for the country to develop electricity generation from offshore wind in the Baltic Sea. The Polish Offshore Wind Act entered into force in February 2021. Besides the rules and regulations that shall apply to the development of offshore wind in Poland, the Act sets out the volumes Poland intends to develop. In a first step, 5.9 GW of capacity were financially supported by the Polish Energy Regulatory Office (ERO). Now, Contracts for Difference (CfD) are awarded in competitive auction processes.

Poland’s targets when it comes to offshore wind are ambitious. In the absence of agreed targets before January 2021, the country aims to install 3.8 GW by 2030, 10 GW by 2040 and 28 GW by 2050. Hitting the target would make them the leading player for offshore wind in the Baltic Region. Already in 2019, Poland submitted its 2030 National Energy and Climate Plan (NECP), as required under the European Commission’s Governance Regulation adopted in 2018. Poland’s NECP singled out offshore wind as the main driver for the transition of the country's energy mix from an energy supply still largely based on fossil fuels to a more environmentally friendly energy supply.

We expect the Act will indeed boost development in offshore wind electricity generation and we see interest from developers and investors rising significantly in the short-term already. We expect however, that the Act and the effort to realize its ambitious targets will boost the entire wind supply chain in Polish coastal regions.

Onshore wind and solar are also increasingly on the agenda in Poland and we see an evolving interest in projects by investors and developers here as well. In the first of two auctions held by ERO in the beginning of June 2021, solar accounted for around 1.2 GW of the assigned capacity. Around 24.7 TWh of power were contracted in total, 68% of the 38.7 TWh that ERO had expected to assign. Around 300 MW of capacity were set aside for wind power projects. In the second procurement round, all of the contracted capacity – around 1 GW – went to PV projects. Results likely illustrate barriers to further develop onshore wind in the country. Especially legal provisions requiring onshore wind turbines to be located at distances from communities equal to at least ten times their heights cause solar PV to become relatively more attractive.

The hope for unblocking the construction of onshore wind is provided by the officially announced amendment to the Act of 20 May 2016 on investments in wind farms, which almost five years ago completely inhibited the development of new wind projects, but often also the possibility of building houses. Liberalization of the distance act, giving local authorities the right to decide on the location of new wind farms on land and distances, however not less than 500m, shall enable further development of onshore wind.

Do you have any questions or are you interested in a discussion with our Corporate Energy & Infrastructure team? We look forward to talking to you!