Polish wind energy industry is trembling with fear

In a nutshell:

Despite a record-breaking growth in 2015 when 1286 MW of new capacities were connected to the grid, it seems that 2016 will be a hard year for the wind power industry. Just before the end of 2015, the government postponed the enactment of the provisions regulating the auction system for another six months. According to a statement by the Ministry of Energy, this is not just a technical move but a first step towards a complete overhaul of the incentive system in Poland before the auction system is introduced. Really bad news, however, was the announcement that a bill is being prepared in a bid to impose wind farm site restrictions.

​Adjustment of the incentive system for renewable energy

On 22 December 2015, the Polish Sejm amended the Renewable Energy Sources Act (the “RES Act”) so that the effective date of Section IV of the RES Act was postponed for six months. The President signed the amendment into law on 30 December 2015, i.e. two days before the regulations introducing the incentive mechanism for renewables in form of the so-called “auction system” were supposed to come into force. Given the current legislation and the amended RES Act, the first green energy auctions will be thus held with a six-month delay.

Before the auction system is introduced, it will undergo a massive overhaul, which, as announced by the Ministry of Energy, may affect variable energy sources, i.e. photovoltaics and wind power. The present government wants to focus on generating energy from controllable renewable energy sources, i.e. primarily co-firing technology and biogas plants. In the opinion of the Ministry of Energy, wind power, which is a non-controllable natural source of energy, has played too dominant a role and cannot ensure continuity of the power supply and requires using conventional sources as the operating reserve.

The current renewables bill introduces a rule where as much as 25% of electrical power purchased at auctions must be derived from variable renewable energy sources. This would increase chances of success for the wind power technology in the competition with the incredibly cheap co-firing technology and create growth opportunities for photovoltaics in the area of installations of up to 1 MW. Unfortunately, it remains to be seen whether this  rule will be upheld in the bill. In addition, the Ministry is able to very easily increase or reduce the attractiveness of the auction system to individual technologies, i.e. by modifying reference prices binding on such technologies. The Ministry will surely elect to increase the reference prices for co-firing, which is a fairly controllable technology and would be promoted in Poland instead of the non-controllable photovoltaics.

Planned enactment of the “Anti-Wind Farm Law”

Investors have already got used to the fact that there are always some problems with the Polish legislation regulating the mechanisms and rates of incentives for renewable energies. But as these problems have not been as big as the problems in many other European countries, they did not very severely impact on investor decisions about whether to invest in Poland's wind power. The perception of Poland as a country offering attractive conditions for wind power projects could be dramatically affected by the enactment of the Wind Turbine Investment Law, which is generally and without exaggeration called “Anti-Wind Farm Law”.

The bill was brought before the Sejm on 19 February 2016 and was then passed to the Committee for Infrastructure for first reading. The bill has been prepared and proposed by the Members of Parliament that represent the governing majority in Parliament. Since it would be introduced under the so-called “MPs' bill procedure”, this controversial bill could be adopted as fast as possible without registering it by the government, consulting the public or evaluating the implications of such regulation. The constant application of this procedure has been criticised by non-governmental organisations such as Fundacja Batorego (Batory foundation) and Watchdog Polska.

Figure 1: Installed capacity (MW) between 2005 and 2015

(Click to enlarge)

If the bill was enacted in the version presented before the Sejm for first reading this would virtually wreck havoc on new projects in Poland. Many projects in the planning phase or already afoot could not be implemented.

The bill introduces a rigorous principle according to which a wind turbine (which is quite precisely defined in the bill) must be installed at a distance of at least ten times its height from the nearest residential or mixed-use building (with one of the functions of such mixed-use building including residential use); the distance is measured from ground to the top including the technical components such as the rotor and rotor blades (the entire height of the wind turbine). Since the towers of wind turbines are increasing in height, this principle virtually implies a ban on the installation of wind turbines within a 1.5 to 2.2 km distance from the nearest residential building – except for small and less effective wind turbines.

Moreover, the bill imposes the obligation to install wind turbines in accordance with land use plans adopted by municipalities. Admittedly, this obligation also indirectly arises from the current legislation. Since the drawing up of a land use plan is a time-consuming process, investors often built wind farms on the basis of a 'land development conditions' decision, which significantly shortened the investment and construction process. After the enactment of the new provisions, this “quick investment option” will not be available anymore.

A very problematic provision is the obligation to obtain decisions approving the operation of wind turbines. These decisions will be valid for a period of two years and will have to be renewed during the entire operating life of a wind turbine. What is more: The requirement to obtain these fixed-term “legalising” decisions will also apply to wind turbines already in operation. The idea to establish a kind of TÜV for wind farms is not bad in itself. Problematic, however, are the costs charged for the issuance of a decision; these were determined at “a value not exceeding 1 percent of the value of a wind turbine installation investment”. In Poland, fees are usually charged at the maximum rates if such have been established by law. Assuming that capital expenditures (depending on the technology applied or the selected location of a wind farm) may be between PLN 4.4 million and PLN 8 million per 1 MW, investors would have to spend PLN 44.000 up to PLN 80.000 per 1 MW of the capacity of a wind farm every two years. With larger-scale wind farms this quickly leads to many millions in additional spending over the budget.

What is more: The bill reads that anyone who operates a wind turbine without the required decision will face 2 years' imprisonment. The Members of Parliament decided also to maintain the provision on imprisonment, which is an absolute exception in terms of the dimension of penalties for violating technical supervisory provisions.

The bill provides for short vacatio legis of 14 days and – after enactment – automatic cessation of all proceedings involving the issuance of “land development conditions” decisions. Moreover, all issued “land development conditions” decisions for wind farms will cease to be valid – unless the installation of a wind farm has been already completed or proceedings on the issuance of a building permit for such wind farm are pending (whereas, in such a case, investors are given a time limit of one year within which such proceedings must be completed). Once the law is enacted, the existing operators of wind farms will be given a time limit of one year to obtain the permit for the use of the wind turbine.

Both in terms of the planned adjustment of the incentive system and in terms of the enactment of the “Anti-Wind Farm Law”, Poland’s commitment to meeting the climate policy objective, where at least 15% of gross inland energy consumption should be covered by renewable energy sources, could lead to the abandonment of the changes to the incentive policy and easing of the provisions of the “Anti-Wind Farm Law”. If Poland fails to achieve the EU’s 2020 renewable energy production target, the country will have to cover the deficit under the EU statistical transfer cooperation mechanism and buy green energy from countries which generate surplus, e.g. from Germany, which would cost Poland billions of Polish zlotys – a cost the government will surely want to avoid. Thus, it is likely that the adjustment of the energy policy will not be as strong as one might expect and somewhat relaxed given the pressure of criticism of the Anti-Wind Farm Bill.