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CHANGES IN THE POLISH SUPPORT SYSTEM FOR RENEWABLE ENERGY SOURCES

2016-10-26

In connection with changes being introduced to the support system for electricity production using renewable energy sources, we list some of the most important facts concerning the new green energy support system.

With the passing of the Act on Renewable Energy Sources dated 20 February 2015 (hereinafter: the “RES Act”), an auction system was introduced, which, along with the green certificates system that has been in force for many years, should promote the production of green energy. The most recent amendment to the RES Act (amendment dated 22 June 2016) provides for rules governing the support system for the production of this type of energy.

The support system for the production of renewable energy provides for two mechanisms of promoting energy: newly delivered or modernised systems will use the auction system, while systems that have been receiving support in the form of green certificates will be able to continue using this form of support.

Auction system

The auction system consists of selecting and providing support for the development of renewable energy source systems that offer the lowest prices. As part of the project, the manufacturer is obliged to produce a specific amount of energy in exchange for ensuring its purchase at a fixed price.

The auctions will be held by the President of the Energy Regulatory Office at least once a year. In the regulation, the government will specify the maximum amount of energy that may be sold in a subsequent calendar year (as of this date no such regulation has been issued for 2017). The support period for a given amount of energy offered as a part of a specific auction as well as the reference price, i.e. the highest acceptable price which is specified beforehand, will at any given time be determined by way of an executive order of the Minister of Energy.

Auctions are conducted separately for different groups of generating units, with additional division into units whose capacity does not exceed 1 MW and those whose capacity is higher than 1 MW (e.g. for units with an installed electrical capacity utilisation factor, in total and irrespective of its source, higher than 3,504 MWh/MW/year, for energy cluster members, or for units using only agricultural biogas). Appropriately determining the amount of energy offered to each group (so-called auction baskets) will allow the state to promote one technology (e.g. photovoltaics) while limiting the development of another (e.g. wind power plants).

According to the Act, the production of electricity should commence no later than 48 months following the closing of the auction (72 months for offshore wind energy and 24 months for photovoltaics). 

Systems authorised to participate in the auction system

Only systems opened after 1 July 2016, modernised after 1 July 2016, or with respect to which the operator decided that they wish to participate in the new system and cease to receive green certificates (in which case only winning an auction will result in the expiry of the right to receive green certificates) will be able to participate in the auctions. In case of the aforementioned new and modernised systems, there is an additional condition of using, for the construction or modernisation of the system, equipment that was manufactured no later than 48 months prior to the commencement of energy production using the system in question (with the exception of offshore wind energy, the time limit for which is 72 months).

The system also excludes multi-fuel combustion systems (with the exception of systems where biomass, bio-liquids, biogas, or agricultural biogas make up at least 15% of the total energy value of the combusted fuel, and the system uses a separate processing line to deliver biomass, bio-liquids, biogas, or agricultural biogas to the combustion chamber or uses fluidised bed technology designed so as to allow for industrial waste to be combusted together with fossil fuel or fuel created by way of its processing and with biomass, bio-liquids, biogas, or agricultural biogas), hydroelectric power stations with capacity exceeding 20 MW as well as systems of total capacity exceeding 50 MWe using biomass, bio-liquids, biogas, or agricultural biogas for energy production, combusted using high-efficiency cogeneration with thermal power capacity in combination not exceeding 150 MWt, or a dedicated multi-fuel combustion system).

The RES Act also imposes limitations on support for biomass combustion due to the fuel input used. The system excludes, among others, specific systems using high-quality wood and grains.

Systems for determining price 

It is important to note that the described auction system provides for two ways of determining the amount of support. The first provides for a fixed price per energy unit (e.g. PLN 420/MWh), which is to be paid by the purchaser irrespective of the market price of energy (the so-called feed-in tariff system). In the second system for calculating the support (the so-called feed-in premium system), the final price per each energy unit paid to the manufacturer will consist of two elements: the market price in a given period (e.g. PLN 190/MWh) and the amount of support constituting a difference between the price determined as a result of the conducted auction (e.g. PLN 430/MWh) and the market price of the energy sold (in this case, the support per 1 MWh [PLN/MWh] will be PLN 240/MWh; PLN 430 – PLN 190 = PLN 240/MWh).

The former algorithm (feed-in tariff) will apply to units whose capacity is lower than 500 kW. Systems with capacity equal to 500 kW or higher will fall within the remit of the latter system for determining the amount of support (feed-in premium).

Length of support period

What is equally important is the fact that the RES Act stipulates that support under the auction system will be made available only to systems that participated in auctions concluded by 30 June 2021. Furthermore, support will be granted for a period no longer than 15 years and no later than until the end of 2035.

Subject of auction and auction baskets

The subject of the auction will be determined annually in form of Council of Ministers regulation amount of electricity generated by a period not exceeding 15 years from the date of generation of energy for the first time by the RES installation (see point 3.3 above).

The Council of Ministers will set annually (until 31 October) the maximum volume and value of electricity which can be auctioned in the next calendar year, including the maximum volume of energy to be generated separately for:
a) (i) existing projects which declared intention to participate in auctions and (ii) the new projects;
b) installations with (i) capacity exceeding 1 MW and (ii) capacity not higher than 1 MW.

In addition to the groups of baskets indicated above in June 2016 technological baskets were introduced to RES Act, for which will be conducted separate auctions within each group of baskets:
a) installations where the total installed capacity level, regardless of the source of origin, exceeds 3,504 MWh/MW per year;
b) installations using biodegradable waste to generate electricity;
c) installations emitting not more than 100kg/MWh of CO2, with a total installed capacity level exceeding 3,504 MWh/MW per year;
d) auctions for members of an energy cluster;
e) auctions for members of an energy cooperative;
f) installations using exclusively agricultural biogas for electricity generation;
g) other installations.

The rules and value of support in 2016 year and 2017 year auctions

According to the draft of 8 July 2016 of regulation on the maximum quantity and value of electricity from renewable energy sources, which can be sold in an auction in 2016, support in the auction shall receive almost exclusively existing installations using agricultural biogas to generate electricity, that decide to access the auction support system from the existing support system in the form of green certificates.

The budget for biogas plants with a capacity of not more than 1 MW amounts to PLN 2,092,747,932, and the for installations of more than 1 MW - PLN 2,286,287,784.

There would also be a relatively small budget for new RES installations (which will start generating electricity after winning the auction) with a degree of use of installed capacity below 3504 MWh / MW / year, and capacity less than 1 MW in the amount of PLN 659,137,500. Given these indicators support would concern mostly photovoltaic sources.

According to the Ministry of Energy the regulation shall came into force untill the end of October 2016, however it shall not differ from the abovementioned draft.

At the same time we point out that in October 2016 the Ministry of Energy should issue a draft regulation on the maximum quantity and value of electricity from renewable energy sources, which can be sold in an auction in 2017. Given the small scale of this year's auction, the above regulation for 2017 should identify the real intentions of the authorities on the extent of support for renewable energy sources, including biomass.

The reference prices in 2016 (installations with capacity exceeding 1 MW)

  • RES installations with electrical capacity not higher than 50 MW, using biomass co-fired in dedicated biomass combustion plants or in hybrid installations – PLN 415/MWh;
  • RES installations using biomass, bio liquids, biogas co-fired in dedicated multi-fuel installations PLN 435/MWh;
  • RES installations with electrical capacity not higher than 50 MW using biomass in dedicated biomass combustion plants or in hybrid installations in high-efficiency cogeneration – PLN 420/MWh;
  • Waste to energy installations – PLN 385/MWh;
  • Onshore wind farms – PLN  385/MWh;
  • Offshore wind farms – PLN  470/MWh;
  • Photovoltaics – PLN 445/MWh (installations with capacity lower than 1 MW –  PLN 465 MWh).

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Related Countries: Poland
Related People: Magdalena Mitas
Related Service Areas: Energy and Infrastructure

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