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After many months of work on the amendment to the Renewable Energy Act (REA), on 26 March 2018, the draft amendment was finally submitted to the Sejm. On 11 April, the bill was submitted to the Energy and Treasury Commission for first reading. Although there is still a long way to go until the amended law is enacted, and further essential changes to the draft are possible, it is worth taking a closer look at some selected aspects of the bill.
After two auctions for new RE plants were held – the first one in December 2016 and the second one in June 2017 – the incentive system for power plants with a capacity of more than 40 kWp was suspended for several months, and project developers are waiting for new provisions that will be the basis for the organisation of auctions in 2018 and the following years. In the notification procedure – action SA. 43697 (20 15/N) – Polish system promoting the development of RE and reliefs for energy intensive users – Poland has committed towards the European Commission to ensuring full compliance of the provisions of the Renewable Energy Act (REA) dated 20 February 2015 with state aid provisions.
The information that the draft amendment will include a clause expressly stipulating that auctions for power plants with a capacity of more than 1 MW will be organised this year has been long awaited by many enterprises. In contrast, only smaller-scale projects were admitted to the two previous auctions. As for large-scale PV installations and wind farms, the bill provides for a record volume of energy for which contracts will be awarded – 45 000 000 MWh with the total value of PLN 15 750 000 000. If these amounts are maintained it will be by far the largest energy auction in Poland to date and many investors will finally be able to implement their projects.
According to the new provisions, several auction rounds will be organised for individual technologies. This does not mean that a separate auction will be held for every technology. In particular wind energy (onshore) and photovoltaics will continue to compete as has been the case to date. But there will be separate auctions for agricultural biogas. The bill provides for the joint participation of owners of offshore wind turbines as well as of hydro power and geothermal power plants.
Surprising is that auctions in paper form will be possible. By this, the government representatives intend to accelerate auctions in 2018. Although, after the bad start in 2016, the online auction platform proved successful during the June 2017 auction, adjusting the platform to the provisions of the new law – introduction of auction baskets – may be a time-consuming process. For this reason, the bill allows for a sort of safety valve, i.e. the possibility to hold auctions in paper form. This is only an emergency solution, which follows from the fact that the principles for organising auctions in paper form have been incorporated into the final provisions and refer to auctions organised in 2018 only.
One major change, which was added at the last stage of the current legislative process, is the introduction of the obligation to sell energy, subject to the condition that the entire energy generated is fed into the grid and sold at the commodity exchange or in a marketplace organised by the operator of a regulated market in Poland. Energy producers should bear in mind that they should calculate the OPEX costs taking into consideration the costs incurred for the sale of energy at the energy exchange.
The author of the draft also shortened the deadlines for the installation of RE plants and the start of energy sale by introducing a general deadline of 36 months (formerly: 48 months) and the following shorter deadlines:
For all power plants with a capacity of more than 40 kWh the REA introduced the auction system, which is the system recommended by the EU. The amended REA provides for a very important and –from the point of view of power plant owners or developers– very comfortable exception for some technologies, i.e. an incentive in the form of a guaranteed feed-in tariff.
The incentive in the form of a guaranteed tariff will apply to both existing and newly planned RE plants that use one of the following sources for generating energy:
The draft provides for incentives for power plants with a capacity of up to 1 MWp. These power plants will receive a fixed purchase price of 90% of the reference price applicable at the moment when the declaration about joining the incentive system is made or, in the case of power plants that were connected to the grid before July 2016, at the moment when the declaration about transitioning from the system of coloured certificates is made. Similar to the prices achieved in auctions, also the FiTs will be valorised every year.
Very important and positive information for investors is that the author of the draft refrained from extending the applicability of the amendment to entities that won auctions in 2016/2017, as had been stipulated in the previous version of the amendment. According to the provisions, it was possible to apply the previous provisions provided that they were ”more favourable”. But applying such an indistinct term would have posed a risk in terms of the interpretation of the provisions. Currently, based on Article 4 of the amending law, the following distinct principle applies: ”Producers of electricity from renewable energy sources in power plants that won the auctions held before this amendment was enacted are subject to the provisions of the previous version of the amended law.”
Despite repeated official assurances that renewable energy is an important issue in Poland and although the deadline for reaching the climate goal is approaching, investors have yet to wait before the new provisions are enacted and before they know when to actually expect new auction rounds to take place. Until the enactment of the new provisions it will not be sure, either, on which conditions the auctions will be held.
Piotr Mrowiec, LL.M.
Associate Partner
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