Poland – Towards a mature REs Market

published on 17th November 2021

The two greatest threats to the Polish energy market: rapidly rising prices and the spectre of a generation gap, are driving the authorities to take an increasing interest in renewable energy sources. The most noticeable changes this year were a major amendment to the Energy Law and the Renewable Energy Sources Act. Also worth mentioning are the first decisions granting public support for offshore wind farms and the announced loosening of restrictive rules related to onshore wind farms.

Energy law changes – milestone in the energy market development

In July, most of the provisions introduced by the amendment to the Energy Law came into force. The most important changes introduced by the amendment include the establishment of a central energy market information system, the introduction of regulations on energy storage, and favorable changes in constructing of direct lines.

The central energy market information system will collect and process information necessary for the execution of energy market processes, including the process of switching electricity suppliers, as well as settlements for the supply and sale of electricity. The system’s key tasks are to ensure an effective and secure exchange of information on the electricity market, enabling market participants to fulfill their statutory rights and obligations; to standardize and streamline market processes and information flow among market participants; to provide end users with free access to their own energy market information (including metering data); to improve competition on the electricity market; and to provide free access to selected statistical data resulting from energy market processes, as well as to data enabling market participants to offer new products and services. Regulations that digitalize the Polish energy sector will change both the way the sector operates and the level of activity of its individual participants. Consumers, who will be able to both produce, consume and store energy, are expected to play an increasingly important role.

The new regulations introduce and unify the definition of an energy storage facility appearing in various acts, define the rules of connecting the storage facility to the grid and introduce beneficial solutions regarding the energy storage settlement. The amendment introduces the obligation to obtain a license for storage facilities with a capacity exceeding 10 MW. Storage facilities with a capacity between 50 kW and 10 MW will only require an entry in the relevant register. Settlement of energy storage will be made in accordance with the so-called balance rule. This means that grid fees will be charged only for the difference between energy consumed and injected into the grid. In this way, double charging of transmission fees – for energy taken from the grid to the storage facility and returned from the storage facility to the grid – will be eliminated.

It should be emphasized that the discussed amendment also includes favourable changes for admissibility of direct lines, i.e. sections of a „private” network connecting RES installations with end consumers. Before implementation of changes, construction of such lines has been blocked by the necessity of obtaining the consent of the President of the Energy Regulatory Office (subject to many strict requirements). Currently, the requirement to obtain such consent will not apply to situations where a direct line will connect production and consumption facilities belonging to one entity. This change will facilitate investments in renewable energy sources by, for example, large manufacturing facilities seeking to diversify their energy supply. The creation of a direct line will limit the imposition of distribution fees on electricity, which currently constitute about 1/3 of the energy price on the bill.

The act on RES amended -further public support expected

At the end of October the second most important legal change concerning the Polish „green energy” market entered into force. It refers to the amendment to the Act on Renewable Energy Sources, which facilitates business activity in this field and extends public support for RES in Poland.

The amendment provides for limiting licensing obligations for entrepreneurs operating by small RES installations. It is to raise the threshold of the total installed power from 0.5 MW to 1 MW or co-generated heat power from 0.9 MW to 3 MW. For these installations, the license obligation will be replaced by entry in the register of small installations. This is a much simpler and less formalized way of registration. In this case the Energy Regulatory Office does not examine the documentation of the company or the installation, but relies on the statements of the producer. In contrast to the lengthy license procedure, an entry in the register of small installations should take place within 7 days.

It should also be noted that the amendment has extended until December 31, 2027 the existing auction support system for renewable energy producers. The amount and value of electricity from renewable energy sources that can be auctioned between 2022 and 2027 will be determined by regulation and cannot be reduced. This change is to create a predictable framework for the development of the RES sector and provide a stable investment perspective.

If reference is made to auction support, the following should be highlighted. The President of the Energy Regulatory Office will hold another auction session later this year. The first two auctions dedicated to hybrid RES installations will be held on 2 and 3 December 2021.The next auctions will involve onshore wind and photovoltaic installations. On 7 December 2021 an auction will be held for small plants with capacity equal to or lower than 1 MW, and on 9 December – for large plants with capacity over 1 MW. The final, fifth auction to be held on 10 December 2021 will be dedicated to, among others, hydro and geothermal sources.

Concluding the changes to the auction system, it is worth mentioning that the period within the producer will be obliged to calculate and potentially return the so-called positive balance, i.e. the surplus between the average exchange price of electricity and the price resulting from the producer's offer in the auction of renewable energy sources, has been reduced from 15 to 3 years. The positive balance will be returned to the renewable energy settlement operator's account within 6 months from the end of each three-year period in which the one appears. It should be added that during the entire duration of each three-year period the value of the positive balance will be set off against the value of any negative balance (occurring when the auction price is higher than the average exchange price of electricity).

Robust support for offshore wind farms

The Energy Regulatory Office has reviewed all applications for public support for offshore wind farms under the Phase 1. In total, the Office examined nine applications submitted and issued seven decisions on granting the right to cover the negative balance of electricity in offshore wind farms.

In the Phase 1 of the system, support is granted by way of an administrative decision issued by the President of URE for individual producers and may cover offshore wind farms with a total installed capacity of up to 5.9 GW. These are the most advanced projects in terms of implementation, which will generate their first power before 2030. The second phase, on the other hand, will see at least two competitive auctions (in 2025 and 2027) for a total capacity of 5 GW.

Electricity producers in offshore wind farms, which are admitted to the support system, obtain the right to cover the negative balance. In practice it means covering the difference between the market price of energy and the price specified in the administrative decision (Phase I) or in the auction offer (Phase II). The amount of granted support will be determined as a product of the planned installed capacity of the offshore wind farm and 100 000 hours. Such a solution allows for an optimal distribution of the support over time, when it will be granted, i.e. for a maximum of 25 years.

Development of offshore wind energy is one of the pillars of the program for increasing the share of renewable energy in the Polish energy mix. It is estimated that the support system will allow the construction of offshore wind farms with a capacity of up to 11 GW by 2040, which will account for nearly 20 percent of electricity generated in Poland.

Better times for onshore windfarms?

In the passing year, a draft amending the so-called Distance Law of 2016 was published. The Distance Law blocked the possibility of onshore wind farms, due to the location restriction (limit to the distance of 10 times the height of the windmill from the nearest residential buildings). The presented draft act liberalizes this rule.
The Ministry proposes that the statutory distance rule be made more flexible and that individual communes be given more authority to determine the location of wind turbines as part of the planning procedure for the adoption or amendment of a local spatial development plan developed for a wind turbine.

In local plans, municipalities will be able to specify a different distance between a wind turbine and a residential building - taking into account the absolute minimum distance of 500 m. The basis for determining the required minimum distance from residential buildings shall be the results of an environmental impact assessment. The possibility for municipalities to make the minimum distance more flexible will also be connected to additional rights to consult residents of municipalities during public discussions. For this purpose, an obligation to organize additional public discussions with the participation of interested residents is to be introduced.

The draft act is currently at the opinion stage.