Biogas and biomethane in Poland – state aid and investment prospects

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​​​​​​​​​​​​​​​​​​​published 30 April 2024

The regulatory environment in Poland increasingly favours the expansion of biogas and biomethane production. This is evidenced by the simplification of administrative procedures and the support mechanisms provided by the government. Read the following article to find out whether they can actually increase the attractiveness of investing in such plants in Poland.


Current situation and development prospects for biogas and biomethane plants in Poland

The production potential of the Polish agricultural sector is one of the largest in Europe. However, this does not translate into the development of biogas plants. At the end of 2023, there were 218 agricultural biogas plants and only 148 municipal biogas plants in Poland, with small plants with a capacity of up to 1 MW predominating. This result falls well short of the potential.  What must be even more astonishing from a foreign investor's perspective is the fact that not a single commercial biomethane plant has been built in Poland to date. The first investment of this kind will start operating in the second half of 2024.​

Biomethan und Biogaserzeugung im Verhältnis zu, Verbrauch
Figure: Biomethane and biogas production relative to total gas consumption in 2021, top 16 countries

One response to the problem outlined above is the recent changes to legislation. Of particular note is the amendment to the Energy Act in the autumn, which finally created the legal framework for connecting biomethane plants to the gas grid. Measures to promote the connection of biomethane plants were also taken by the two largest state-owned companies responsible for gas infrastructure in Poland - Gaz System and Polska Spółka Gazownictwa. In addition, the regulations defining „biomethane” and the regulatory requirements for its producers have been adapted. The regulatory environment for such plants has thus been created, which is of key importance for the legal stability of investment realisation.

In addition to regulating the issue of biomethane production, the government has taken measures to speed up the process of investing in agricultural biogas plants. New regulations are intended to enable the faster construction of plants and facilitate grid connection. Significant planning changes have been made and waste legislation for processing selected types of biomass has been relaxed. Importantly, the aforementioned changes for agricultural biogas plants mainly apply to agricultural companies. In the case of trading companies, the utilisation of these amendments will only be possible if an agricultural enterprise is its shareholder.


Operational promotion of biogas and biomethane plants

Biogas and biomethane plants operating in Poland can utilise subsidy systems. In the case of biogas plants, support is linked to the sale of electricity and is based on the system of guaranteed feed-in tariffs (FIT) and the system of feed-in premium (FIP).

The FIT system is intended for the smallest systems with an installed capacity of up to 500 kW. It is based on a fifteen-year guarantee of the purchase of electricity by an obligated company at a price set in advance in a decree of the Minister.

The FIP system, in turn, is intended for the largest biogas plants with an installed capacity of at least 500 kW and no more than 1 MW. It also includes biomethane plants with an installed electrical capacity of no more than 1 MW. In contrast to the FIT system, the legal institution of the obligated buyer was not taken into account in the FIP system. This means that the producer must sell the electricity it does not consume at market conditions. At the same time, the legislator has provided a kind of safety buffer for producers operating under the FIP system. They are guaranteed a right to cover the so-called negative balance, regardless of the price they realise when selling the electricity at market conditions. This right enables the producer to receive additional payments in the amount of the difference between the market price of the electricity at which it is sold by the producer and the equivalent of 90 per cent of the reference price set by the Minister of Climate. The additional payments are made by a state-owned company, Zarządca Rozliczeń S.A. The FIP system therefore enables the producer to gradually become independent. On the one hand, it is secured with the right to cover the negative balance, on the other hand, it operates under market conditions and the law does not limit the price at which it sells electricity to its business partners.
 
In the case of biogas plants with a capacity of more than 1 MW, it is worth noting the possibility of receiving support through auctions for renewable energy organised by the President of the Energy Regulatory Office. To qualify for the subsidy, producers submit bids in an auction and declare a specific amount of electricity that they undertake to sell within 15 years of operation under the subsidy system. The price criterion is the main criterion for winning an auction. It should be noted that the value of the electricity offered is regulated by so-called reference prices, which are maximum prices for the electricity offered in the RE auctions. The reference prices are published in the Regulation of the Minister for Climate. Similar to the FIP system, the winner of a RE auction receives the right to cover the so-called negative balance. The fundamental difference, however, is that the right relates to covering the negative balance from the difference between the average electricity price recorded on the competitive market and the price declared by the producer in the auction offer. It should be noted that, in contrast to the FIT and FIP systems, a producer using the auction system enters into an obligation to sell a certain volume of electricity; failure to fulfil this obligation is subject to penalties.


Investment aid - available funding programmes for financing plant construction - EU and national funding programmes

European Fund for Infrastructure, Climate and the Environment 2021-2027 („FENIKS”)

Thanks to the soon to be launched allocation of funds from the new European Fund for Infrastructure, Climate and Environment 2021-2027, investors planning to invest in biogas and biomethane plants will have a potentially very attractive tool for financial support of their projects in Poland with the part related to the development of RES.

According to the timetable, the competition, under which companies registered in Poland can submit applications for subsidies for the construction or conversion of a plant, is to begin on 29 March 2024 and last until 29 May 2024 (this date may be slightly delayed). As of today, it is not known whether the application acceptance process will be opened again, and if so, when. It is therefore advisable to submit the project documentation within the current deadline.

The subject of the competition is investments in the construction, conversion, modernisation and expansion of renewable energy plants for the production of:
  1. ​Biomethane with connection to the gas grid;
  2. electricity and/or thermal energy from biogas, including energy storage for the plant in question and connection to the grid, including infrastructure that enables the utilisation of heat from CHP plants.
The programme supports larger plants, i.e. plants with a capacity (total for all plants that are part of a project)
  • of over 0.5 MWe - for electricity generation from biogas;
  • over 0.5 MWth - for heat generation from biogas.
The budget of the competition amounts to PLN 300 million (approx. EUR 69 million).

Funding in the form of a combination of loans and grants in the following proportions:
  1. ​Loan - at least 51 per cent of the value of the funding;
  2. Grant - maximum 49 per cent of the value of the funding.
 
With regard to additional restrictions under State aid rules, in particular Article 41 of Commission Regulation (EU) No 651/2014, the total effective ceiling of horizontal aid for a large company may be up to 45 per cent of the eligible investment costs for renewable energy production. According to Article 4 of the same Regulation, the ceiling for State aid (granted without an EC notification procedure) can be EUR 30 million per investment project for a single company.

As regards the system for evaluating applications for support, it will consist of checking whether the project fulfils all the mandatory criteria and has received evaluation points in the ranking criteria. Part of these are the horizontal criteria listed below, the other part are the competition-specific criteria, which are not yet known and will be announced before the start of the submission of applications. A ranking list of projects will be published based on all evaluated applications - those with the highest score will receive funding within the planned budget.
 

Programme „Development of combined heat and power generation based on municipal biogas”

Companies can apply for funding for the construction of new, expansion or modernisation of existing plants for the fermentation of selectively collected municipal biowaste and the use of the biogas obtained to generate energy under conditions of highly efficient cogeneration.

Applications can be submitted from 13 February 2023 to 30 June 2024.

The programme has a budget of PLN 1.5 billion (approx. EUR 341 million)
The funding is granted in the form of a loan and a grant, whereby a grant may amount to a maximum of 50 per cent of the eligible costs and a loan up to 100 per cent of the eligible costs. The funding intensity percentage is based on the regulations on state aid and amounts to a maximum of 45 per cent of the eligible costs for a large company.


Energia Plus programme

This national programme is intended to support the potentially largest group of different investments, as it finances all projects that contribute to reducing the negative impact on the environment, including the production of electricity from renewable energy sources, i.e. biogas and biomethane plants, including their connection to the distribution network.

Applications for investment support may be submitted until 13 December 2024 or the earlier date of exhaustion of the funds provided; the budget amounts to PLN 566 million (approx. EUR 131.6 million).

The support consists in the granting of loans on preferential terms and, after meeting the environmental criteria, up to 10 per cent of the disbursed capital can be waived, up to a maximum of PLN 1 million (approx. EUR 232.5 thousand). The loan can be granted for a period of up to15 years and amount to between PLN 0.5 million and PLN 500 million (approx. EUR 116 thousand - EUR 116 million).

EUR 116 million). It can cover up to 85 % of the eligible costs of the investment, subject to the ceilings for state aid for companies and the available programme budget.


Development potential for new investors in the biogas and biomethane production market

The above-mentioned support programs, the announced possible additional funds for farmers and the planned changes in legislation may constitute a significant impetus for investments in biogas and biomethane plants in Poland.

The competitions in which the projects are assessed may require various documentation to be submitted when applying for funding for the investment. In order to prove their willingness to implement the project, applicants may be required to submit simplified technological schemes, necessary environmental permits or feasibility studies for their projects. It should also be noted that an investment can only be started after the application for state aid has been submitted, so all measures necessary for success should be taken with the appropriate lead time.

As the number of biogas plants in Poland is much lower than in other EU​ countries - just under
0.4 thousand plants compared to around 20 thousand in the EU as a whole - and there are no biomethane plants (in the EU there are over a thousand plants), as well as taking into account the agricultural resources in this country, the potential for development seems enormous and development itself seems inevitable in the longer term. Considering the current situation on the electricity and gas market and the commitment to the energy transition resulting from the Green Deal, the emergence of biogas and biomethane plants should contribute to Poland's significant energy promotion, which has been noted by law-making institutions and institutions implementing financial support schemes.



Find out which marketing models work in Poland​! 


Vermarktungsmodelle Erneuerbare Energien weltweit

 

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