Development of renewable energies in Poland – Overview of 2017 and prospects for 2018

In a nutshell:

2017 has been marked by further uncertainty on the RE market. Early 2017 saw a huge fuss caused by a problem-fraught first auction round that took place in late December 2016. At the end of September 2017, a controversial amendment to the Polish

RE Law was enacted, which will lead to a further deterioration of the financial situation of many RE plant operators. Moreover,

at the end of September, two auction rounds already announced for October 2018 were cancelled at short notice. At the same

time, however, the market is by no means at a standstill and numerous projects are being developed. In this article, we summarise the most important events in the energy industry in 2017 and venture an outlook for 2018.

Auctions in 2017

When the Energy Ministry announced the first auction round for the supply of electricity from RES in Poland, it justified the small energy volumes available for purchase at that time by stating that the first auction round was a trial auction only and that auctions for all technology baskets with a much larger volume would take place in 2017. The plans providing for large auctions in 2017 were implemented to a modest extent only. It is true that auctions were organised and contracts were awarded to 352 projects for plants of up to 1 MW (mostly PV installations) at the end of June 2017. But no more auction rounds will be organised in 2017.

Two further auction rounds had been scheduled for the beginning of October – one for biomass und hydro power plants with a capacity of over 1 MW and one for small and large agricultural biogas plants. Both were unexpectedly cancelled. The total value of the aid to be awarded to the winners of the cancelled auction should have reached PLN 23 billion within 15 years. The government even annulled the regulations already in force. This abnormal fact results from the lack of communication between the government and the Polish Energy Regulatory Authority during negotiations with Brussels. The auctions were launched when the notification procedure with the European Commission was not yet finished. The plans of URE [the Polish Energy Regulatory Authority] to announce 8 further auctions in this year were put on ice.

Additional obstacles for the operators of the existing energy plants

Existing plants are not to be envied – many of them have lost profitability due to extremely low prices for green certificates. The deterioration in prices is significant and is posing a threat to the existence of RE plants. From the peak value of over PLN 300 per MWh some years ago, the price for certificates dropped to the historic low of PLN 22 per MWh at the end of June. During the next months the price picked up a bit – the value of green certificates rose by nearly 160% (up to PLN 58) – only to drop again later. And for most of the wind farms to remain profitable, the price of green certificates must be at least PLN 100-150.

A knockout for RE plant operators could be the recently enacted

amendment of the RE Law which links the amount of the substitution

fee – payable by energy suppliers if they cannot prove [the purchase of] a certain share of green Renewable Energy Certificates – to the price for Renewable Energy Certificates. The substitution fee is PLN 300.03 per MWh and the inevitable outcome is that utilities supplying electricity to end consumers purchase green certificates at the energy exchange where they are much cheaper. After the amendment, the substitution fee will exceed last year’s market price for Renewable Energy Certificates only by 25%. Thus, the substitution fee will drop from to PLN 300 to PLN 92. Starting from January 2018, the price could be PLN

40 only. As a result, the price for certificates at the exchange will not recover anymore, which will permanently disrupt the financial

situation of the operators of the existing plants. What is more, 70% of the wind farms posted losses amounting to about PLN 3 billion already in 2016, when the prices for Renewable Energy Certificates were higher.

A small consolation is that the recently adopted regulation of the Energy Minister obliges energy suppliers to purchase 17.5% of green certificates next year instead of this year’s 15.4% (or to pay a substitution fee).

Prospects for 2018

Poland is still far behind the EU‘s 2020 climate goal. If Poland misses the climate goal, it will have to pay penalties or import green energy from other countries by way of so-called statistic transfers. Both options would be expensive. Therefore, it can be expected that in 2018 the government will finally organize auctions of much larger volumes than it has done so far. This at least would be a rational decision.