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As early as February, the Polish Ministry of Energy published the draft amendment to the Polish Renewable Energy Sources (RES) Act and submitted it for public consultation. By the time of writing this article, the legislative work did not move forward, although the amendment is necessary to be able to organise the energy auctions this year.
The government is planning to introduce a significant change to the mechanism of determining the rate of the substitution fee. According to the current wording of the Act, the rate of the substitution fee is 125% of the average price of green certificates quoted on the energy exchange in the previous year (in 2018, the value was PLN 103.82). Thus, the 2019 substitution fee amounts to PLN 129.775.
The Act also provides for the maximum rate of the substitution fee and this upper limit is PLN 300.03. According to the draft amendment, the formula for determining the rate of the substitution fee will change. The rate of the substitution fee will no longer be linked to the average market price of the traded green certificates of origin, but to the amount of the reference prices (permitted maximum auction prices) and the previous year’s average price of electricity. According to the proposed amendment, the maximum amount of the substitution fee should be equal to the difference between the average reference price for all technologies in 2018 (weighted according to the installed nominal capacity as of 30 June 2016) and the previous year‘s average electricity purchase price.
The proposal of the Ministry has been strongly criticised by the renewable energy industry. It is probable that the Ministry will depart from this idea and will continue to apply the old formula.
According to the current wording of Article 192 of the Polish RES Act, the contractual deadline for the first supply of electricity generated in (on-shore) wind turbines or PV power plants cannot be longer than 48 months. This deadline has been running since the effective date of the Polish RES Act. The Act came into force 30 days after its promulgation on 3 April 2015. Grid connection agreements should thus expire by 4 May 2019 at the latest. The planned amendment recasts this provision and provides for a “1-month window for connection” for renewable energy projects. The final deadline for the supply of energy cannot be earlier than 1 January 2020 but also not later than 31 January 2020.
It should be noted that irrespective of the above-mentioned prolongation, the validity of grid connection agreements for auction winning projects will be extended for the period which the winner of the auction will be granted to complete a power plant.
The amendment is also necessary not only because of the acute problem of grid connection. Due to the lack of implementing provisions, no new auction can be organised in 2019 under the current legislation. The amendment to the RES Act aims to make the conduct of auctions possible this year. The Ministry has recently published information about the volumes of energy to be auctioned in the auction rounds planned for 2019.
For the wind industry, relevant is the volume of energy offered for purchase from new power plants with a capacity of 1 MW and more – the value here is 91,470,000 MWh (technology basket: wind and solar). Assuming that the power plants participating in the auction will have a capacity of 10 MW and each power plant will produce about 450,000 MWh of electricity in a period of 15 years (30,000 MWh per year), it can be stated that the auction round is designed for a good 200 wind power projects. The Ministry has also published information about volumes of energy to be auctioned in the auction round for power plants of up to 1 MWp, for which PV power plants are a perfect fit. Accordingly, 11,445,000 MWh of energy is to be purchased from smaller wind power or PV power plants.
Piotr Mrowiec, LL.M.
Associate Partner
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