Poland’s renewable energy industry is closely watching the Polish government’s work on an amended draft of the act on renewable energy sources (the "Bill"). The Bill is part of a package of new energy legislation (the "Energy Package") comprising a new gas law, a new energy law and the act containing implementing provisions regarding all those energy acts (the "Implementing Act").
On 16 October 2012, the most recent (fourth) version of the Bill was published by the Ministry of Economy. After the final versions of all acts from the Energy Package are prepared and approved by the Polish government, the Energy Package shall be forwarded to the Polish parliament, where it will be a subject of legislative works. In addition, the Bill shall be reviewed by the European Commission in the context of state aid to private entities. As a result of these two processes, we expect that the current version of the Bill will be further revisited and amended.
It is currently anticipated that the Bill will come into force in the 2nd or 3rd quarter of 2013.
The Bill is meant to transpose into the Polish legislation the provisions of the Directive 2009/28/EC on renewable energy. This legal insight looks at the key proposed amendments with a focus on the support schemes.
Changes to the support scheme
The support scheme for renewable energy sources ("RES"), provided by the Bill shall be based on two pillars: the compulsory purchase of energy by so-called "obliged suppliers" and a mechanism of certificates of origin indexed by a coefficient.
Under the Bill, energy generated from renewable sources ("RES-E") shall have its market secured irrespective of the size of a given installation. The Bill introduces the concept of "obliged supplier", which generally is an entity nominated by the President of Energy Regulatory Office ("PERO") and sells electricity, heating or biogas fuel to end customers in a given area. The obliged supplier shall purchase RES-E for a fixed price, which pursuant to the Bill is initially set at PLN 198.90 (ca. EUR 50) per 1 MWh. This price shall be annually indexed to the Poland’s national inflation rate and published by PERO. In addition, this fixed price after indexation cannot exceed the average price for electricity on the competitive market, which is to be published by PERO based on the provisions of new energy act. Critics of the Bill claim that such an indexation mechanism in practical terms "freezes" the fixed price and thus disturbs competition.
The Bill continues to use the mechanism of green certificates, which certify that the electricity was generated by RES and which are issued by PERO to a RES-E generator. Green certificates are transferable and are tradable on the commodity exchange market.
Certain entities (among them energy enterprises performing business activities in the field of generation or trading and selling electricity to final receivers) shall be obliged to acquire green certificates and submit them to PERO for remission or, alternatively, to pay the substitution fee. Although this obligation is not a novelty, the Bill introduces technology and installed power banding. Currently, under the existing Polish energy law, all RES technologies and installations enjoy uniform support. Pursuant to the Bill, the Ministry of Economy shall set the number of green certificates to be purchased by the obliged suppliers.
The number of green certificates to be issued to generators will be indexed by a coefficient calculated based on the following main criteria: technology, installed capacity and commissioning date / revamping date. The indexation shall be performed every 3 years by the Ministry of Economy for the next 5 years. However, a given coefficient shall be fixed (its value shall depend on the year of the commencement of operations) for a given RES installation throughout the entire time such installation takes advantage of a newly designed support scheme. The indexation coefficient for the first 5 years of the new support scheme shall be set in the Implementing Act. Based on this coefficient, it seems that hydro and solar are the preferred technologies. Biogas could become more attractive to investors as the coefficient set for this technology will be as a general rule higher than it currently is.
As a general rule, the support scheme in the form of green certificates introduced by the Bill shall be in force until 31 December 2035. However, each RES installation will be eligible to take advantage of this support scheme throughout 15 years following commencement of its operations. The new support scheme’s long period of functioning guarantees a certainty of income from the green certificates.
Under certain conditions, green certificates shall be issued for revamped RES installations, as well as for installations which were revamped from non-RES installations into RES installations but only proportionately with the increase of installed capacity. Therefore, it may be said that support scheme promoted under the new Bill could provide incentives for the deployment of new RES technologies.
One of the most controversial provisions of the Bill provides that should the RES-E be sold for a price higher than 105% of a fixed price calculated based on the provisions of the Bill, no green certificates shall be issued for RES-E sold at such higher price. In addition, green certificates will not be issued if a full value wood or full value grain was used to generate electricity. We can anticipate that industry will look at this provision as a barrier to creating an effective competitive environment for the RES-E generators on the Polish market. On the other hand, we expect that the Ministry of Economy and the Polish regulator will argue that this measure is needed to avoid overcompensation, especially since there are already a number of precedents for overcompensating support schemes in Europe (eg: Spain and Germany).
Support for small scale generation capacities
Feed-in tariffs are available for micro power generators with an installed electric capacity of up to 40 kW or for heating and cooling installations with an installed capacity of up to 70 kW, and for small generators with total installed electric capacity between 40 kW up to 200 kW or total installed heating or cooling capacity between over 70kW up to 300 kW. In practical terms, such installations will be usually installed and operating in private households. Moreover, there are no licensing / concession requirements for micro and small generators.
The support scheme for such generators is available for 15 years as of their commissioning date, but not longer than until 31 December 2027. The obliged suppliers will act as purchasers. There will be no charge for the connection to the grid for micro generators.
The Energy Package will guarantee that those capacities commissioned before the Bill is passed into law will be eligible to receive green certificates for the next 15 years following the commissioning date. Moreover, the indexation coefficient will remain unchanged, i.e. 1 over the entire duration of the support scheme.
Limitation of the support schemes for multi-fuel installations
The Bill envisages a limited support regime for multi-fuel installations (defined as RES installations in which biomass or biogas are used together with fossil fuels). Under the Bill, support to those installations through green certificates is limited to 5 years following first generation of electricity for which green certificates were issued.