Summary of the year 2020 in the Polish RE sector and perspectives for the year 2021

published on 19th February 2021

Review of the year 2020

The renewable energy sector is one of the industries in the Polish economy that avoided the downturn caused by the Covid-19 epidemic last year. Despite the pessimistic mood that prevailed in the economy, the Polish renewable energy market was characterised by dynamic development and growth last year. The most important factor contributing to the good state of the Polish RES sector was the public support auctions for RES installations in 2020. In 2020. the President of the Energy Regulator conducted 8 rounds of RES auctions, 4 of which were positively decided. As in previous years, the renewable energy auctions for plants using wind or solar energy to generate electricity attracted the greatest interest.

In the auction basket for photovoltaic plants and wind turbines up to 1 MW, 590 producers submitted a total of 1618 bids. All bids were submitted for photovoltaic plants. Only 747 bids from 235 producers developing plants with a total capacity of 700 MWp were accepted. The very high competition in the basket under review led to a significant decrease in auction prices compared to previous years. According to the data of the Energy Regulator, the minimum price of successful auction bids in 2020 was PLN 222.87/MWh [approx. 4.9 eurcent/kWh] and the maximum price was PLN 268.88/MWh [5.9 eurcent/kWh]. By comparison, in the previous year, in the same auction basket, the minimum price achieved in the auction was PLN 269.00/MWh [6 eurcent/kWh] and the maximum price was PLN 327.00/MWh [7.2 eurcent/kWh]. The highest bid submitted that would win the 2020 tender round was thus lower than the lowest accepted bid in the 2019 tender round. The downward trend in auction prices achieved had been observed since the first tender in 2016, but such a significant drop in auction prices was very surprising.

Far less surprising were the results of the tenders in the basket for photovoltaic plants and wind plants with more than 1 MW nominal capacity. Ninety-seven generators participated in the auction with a total of 127 bids (64 bids from wind turbines and 63 bids from photovoltaic plants - the highest number ever). The auction sold 42 TWh of electricity worth PLN 9.4 billion. Auction support was granted for 96 bids from 70 generators developing projects with a total capacity of 1.7 GW - 0.9 GW of new wind farms and 0.8 GW of new photovoltaic plants. The minimum price at which energy was sold in this auction basket was PLN 190/MWh, while the maximum price was PLN 249.90/MWh; a year earlier in 2019, the prices were PLN 162.83/MWh and PLN 233.29/MWh, respectively. The prices in the analysed basket have thus increased slightly. This is mainly the result of the shrinking portfolio of wind projects, which placed relatively favourable bids in previous years.

The remaining auctions in 2020 were for plants using agricultural biogas and biomass for energy production. No significant competition was observed. In the auction for existing biogas plants, only 500 GWh of the 2,500 GWh offered were contracted (20.04 percent of the volume). Support was granted to only 5 projects (out of 7 participating). Prices ranged between PLN 628 and 655/MWh. In the auction for new biomass plants, bids covered only 0.32 TWh out of the 11 TWh offered by the state (2.9 percent). Support was granted for 2 projects (out of 3 participating). The prices were 379.95 and 407.76 PLN/MWh.

Prospects for 2021

Poland enters the new year with the intention of further successive development of renewable energy sources. The criterion of 15 percent share of renewable energy sources in the balance of national energy consumption resulting from Directive 2009/28/EC was not reached last year. This requires further action by the state to ensure continued growth in renewable energy capacity.

Tenders 2021

RES auctions will continue to be the main tool for promoting renewable energy generation in Poland in 2021. Approval for their organisation in 2021 has already been given by a decision of the European Commission, and the Ministry of Climate has adopted a regulation setting the auction budgets. For new photovoltaic and wind power plants with a capacity of not more than 1 MW, the purchase of 14 700 000 MWh is planned in the budget of PLN 5 292 000 000, while for photovoltaic and wind power plants with a capacity of more than 1 MW, the purchase of 38 760 000 MWh is planned in the budget of PLN 10 748 400 000. The Ministry of Climate Change estimates that the auctions to be held in 2021 will contribute to the emergence of almost 2 200 MW of new RES plants, including 1 700 MW in solar (1 000 MW in plants with installed capacity not exceeding 1 MW and 700 MW in plants with installed capacity exceeding 1 MW) and 300 MW in wind.

It is worth mentioning that the regulation provides budgets for the first ever auction for hybrid plants. According to the Ministry's assumptions, the hybrid plant should be mandatorily equipped with the energy storage and its utilisation rate of the installed capacity should be at least 60 per cent, i.e. 5256 MWh/MW/year. For the time being, however, these will be relatively small plants due to the upcoming auction. According to the draft, in 2021 hybrid plants with an installed capacity of no more than 1 MW will be able to auction 394 200 MWh of generated energy worth PLN 242 433 000. The maximum amount of energy that can be sold by generators that produced electricity in hybrid plants with an installed capacity of more than 1 MW was set at 1 182 600 MWh and its value at PLN 703 647 000.

For the upcoming auctions, the Ministry has not yet published the regulation setting the reference prices. It is difficult to forecast what the prices will be in the two main tender baskets. It is possible that the trend from 2020 will continue. However, we tend to assume that prices in the tender round for plants up to 1 MWp will no longer go down so steeply. Many investors are already asking themselves whether it is still economically worthwhile to participate in the tender due to the high energy prices on the market.

Favourable amendments to the Renewable Energy Sources Act expected

Still in 2020, the Ministry of Climate Protection has presented a draft amendment to the Renewable Energy Sources Act. It is expected to come into force in 2021. One of the most important changes in the draft is to change the definition of a „small plant” by raising the threshold of total installed capacity from 500 kW to 1 MW or CHP capacity from 900 kW to 3 MW. Under Polish law, small installations are exempt from the obligation to obtain a licence; they are only subject to informal registration in the register of small energy producers. Producers in plants up to 1 MW would thus be exempt from the time-consuming concession procedure before the energy regulator. Companies holding a concession for a certain capacity would automatically be transferred to the register of energy producers in small installations. Other important changes included in the amended law are the extension of the maximum period for purchasing energy under the auction system until 30 June 2045 and the extension of the „net metering” system for small-scale plants.