Geothermal energy in Poland and the possibility of its financing from public funds

published on 1st September 2022

The energy crisis as well as the implementation of the climate policy - these are the two factors that cause Poland to be more and more interested in investing in geothermal energy. Until now, geothermal energy has been an example of one of the most rarely used types of renewable energy, despite the potential for the development of such facilities that exists in Poland. Increasingly, however, geothermal energy is attracting the interest of public entities that have recognized the potential of such investments for ensuring Poland's energy security.

Geothermal energy in Poland - the investment environment

Geothermal energy in Poland is currently an example of a fallow investment field, although natural conditions favor the use of this type of energy. The share of geothermal energy in the structure of renewable energy production is 0.3%, the lowest among all carriers of this energy, and it changes little, although geothermal sources are well developed. It is important to note that the requirements resulting from the state plan for the development of renewable energy sources have not been met so far. This plan foresaw that the use of geothermal energy should have reached a capacity of 4814 TJ in 2020. In fact, only 1073 TJ have been achieved. The reason for this huge gap between expected and actual utilization is the still small number of geothermal plants in Poland. So far, only a few such plants with an estimated capacity of about 75 MW could be built. For comparison, the total potential of all geothermal plants for heat generation in Europe is given as 5500 MW. Thus, in the case of Poland, one can speak of an unexploited development potential of this energy sector

Development potential of geothermal energy

Despite the low use of geothermal energy in Poland, the investment prospects in this field seem to be improving. In this context, it is worth recalling the significant expenditures made to identify geothermal sources. Around mid-2020, the State Geological Institute prepared preliminary technical-economic studies for 11 selected localities, which may serve as a basis for future geothermal projects.

Another important element was the "Long-term program of geothermal resources development in Poland" issued by the Ministry of Climate and Environment in May 2022, which presents a roadmap for geothermal energy development until 2040 with a perspective until 2050. The document consists of nine points dealing with the potential of near-surface geothermal energy as well as low-, medium-, and high-temperature geothermal energy, energy storage, minimizing investment risk, and proposed legislative changes. It also addresses funding and task coordination issues.

The cost of implementing the program by 2050 was estimated at over PLN 49 billion. The funds for the subsidy, which will come from the state budget, the National Fund for Environmental Protection and Water Management (Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej), the National Research and Development Center (Narodowy Centrum Badań i Rozwoju), the Bank for Environmental Protection (Bank Ochrony Środowiska), the National Plan for Reconstruction (Krajowy Planu Odbudowy) and other foreign funds are expected to exceed PLN 12 billion. PLN.

"Making thermal springs in Poland accessible".

Currently, in Poland, local authorities and their associations can apply for public financial support for investments in searching for and developing deposits of thermal springs in order to make them accessible for the purpose of using the extracted heat/energy for heating. The program "Making Thermal Springs Accessible in Poland" is managed by the National Fund for Environmental Protection and Water Management ("NFOŚiGW") and has a budget of PLN 480 million.

Selected projects can expect to receive grants covering up to 100% of eligible costs. The program is implemented through a competitive process - applications for grants are accepted from time to time. It is anticipated that contracts with beneficiaries will be signed successively through 2024 and costs will be deemed eligible by the end of 2027. Currently, applications for subsidies are being accepted until September 30, 2022, and the budget of the competition has been set at PLN 250 million (approximately EUR 54.3 million).

The important thing is the following: In order for an investment project to receive a grant, it must include, among other things, a project of geological works aimed at searching for and developing deposits of thermal springs, confirmed by a decision of the relevant voivodeship marshal. In addition, the project must include an analysis of the conditions for exploitation of thermal springs, which contains the necessary elements that will allow the application to be considered. The applicant must also have the right of ownership or usufruct of the property for the entire duration of the undertaking.

The preparation of an application for a grant under the above program is a multi-step process that requires close cooperation of specialists from various fields, such as finance and state aid, geology, construction, and drilling. It is worthwhile to plan ahead for the application to ensure that all strategic documents, at least those from local authorities, take into account the relevant issues related to thermal heat development, and that the application documentation includes all necessary expert opinions and notifications required by public authorities.

"Polish Geothermal Plus"

Independently of the above program, in recent years there has also been the nationwide support program "Polska Geotermia Plus" ("Polish Geothermal Plus") with a total budget of PLN 600 million (over EUR 130.4 million), consisting of equal parts of grants and loans. The target group of this program is entrepreneurs. Although no applications for grants under this program are currently being accepted, it is very likely that this program will be relaunched by the NFOŚiGW. It would open the possibility of co-financing investments from public funds in the following areas:

Construction of new and expansion or modernization of existing thermal power plants/electric power plants/geothermal power plants relying on geothermal sources, or
Modernization or expansion of existing renewable energy sources around thermal power plants/electric power plants/geothermal power plants relying on geothermal sources, or
Execution or reconstruction of geothermal wells.

Optionally, investment projects may involve the following:
Mitigation of consumption of primary raw materials in existing production installations or industrial facilities;
Limitation or prevention of emission of harmful substances into the atmosphere;
Increasing energy efficiency, including technological changes to existing objects, installations and technical equipment;
Construction or reconstruction of units producing thermal energy and/or electricity from renewable energy sources, precipitation heat or heat from cogeneration;
Modernization or reconstruction of thermal energy networks.

So far, the injection of financial resources through subsidy could be up to 40% or 50% of eligible costs and even up to 100% in the form of a loan, while maintaining any additional limits for state aid. Contracts with beneficiaries will be signed by 2023 inclusive, and the eligible costs of an investment may cover a period until the end of 2025.

It is worth following when new applications for state subsidies for geothermal energy in Poland will be accepted. Rödl & Partner informs interested legal entities about the acceptance of new applications in its newsletters. To sign up for it, please visit www.roedl.pl.

Rödl & Partner experts are ready to assist potential investors in geothermal energy in selecting an available assistance program and to support them in preparing application documentation, identifying conditions and opportunities, as well as in legal and tax analyses related to conducting business in the field of geothermal energy in Poland. We would like to encourage persons interested in comprehensive advisory services provided by Rödl & Partner in the implementation of a relevant investment project to contact us by filling in the contact form on the website www.roedl.pl.

Find out which marketing models work in Poland.