The new Renewable Energy Sources Act in Poland An opportunity or a threat ?

The new Renewable Energy Sources Act in Poland

An opportunity or a threat?

Copenhagen, 19.04.2012

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Polish Wind Energy Association

a non-governmental organisation, acting since 1999having more than 100 member companies

a member of:

European Wind Energy Association,

Global Wind Energy Council.

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1. Wind power development in Poland – plans vs. the reality.

2. Key reservations and conclusions from public consultations of the draft RES Act of 22 December 2011.

3. The industry’s expectations towards the new draft.4. Summary.

Agenda

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Wind installed capacity in the 2010-2020 period in accordance with the National Renewable Energy Action Plan (NREAP)

Source: Ministry of Economy

Small wind installations [MW]Onshore wind [MW]Offshore wind [MW]

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RES-E sector by technology in 2020 in accordance with the NREAP

Source: Ministry of Economy

HydroWind

GeothermalSolid biomass

PVBiogas

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Wind power slowdown – 2011 growth rates lower than before and less than expected

Source: PWEA own study on the basis of ERO data

Installed capacity in particular years, 2003-2011

Year

Growth rate [%]

Installed capacity [MW]

Installed capacity [MW] Growth rate [%]

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Electricity production (MWh) by particular RES technologies, 2005 – 2010

Source: PWEA own study on the basis of ERO data

Biogas

Biomass

Wind

Hydro

Co-firing

2005 2006 2007 2008 2009 2010

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Draft of 22 December 2011

Draft v. 2.0 after public and interdepartmental consultations

Final draft

The draft RES Act

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Modyfikacja systemu bez zachowania przepisów przejściowych

Key reservations of the wind power sector to the draft RES Act of 22 December 2011

No ensured stability of the support scheme

Insufficient support period (15 years) and variability of coefficients during the green certificates acquisition period

Modification of the support scheme without transitory provisions; decreased support levels

No guarantee of purchase of electricity from RES at a predefined price

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• A support scheme without an element guaranteeing the purchase of electricity from RES would not lead to the increase in new capacity in Poland.

• A significant slowdown to wind power development.• Incapacity to achieve the targets laid down in the

NREAP.• No protection for completed investments and

investments in progress – bankruptcy of companies and compensatory claims towards the State Treasury.

• Investors’ abandonment of most projects.

Conclusions from public consultations

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• Non-specification of correction factors precludes the making of investment decisions.

• Specification of correction factors in a Regulation increases investment risk.

• Sudden changes to the support scheme result in lack of investors’ confidence in the state’s legal system, hence in the increase of investment costs.

• Uncertainty as to the level of revenues during validity periods of subsequent factors.

• A risk of collapse of the green certificates system.

Conclusions from public consultations

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Expectations towards the new draft RES Act

Expectations towards the new draft RES Act

• Full implementation of Directive 28.• Implementation of clear and transparent rules

supporting RES development.• Development of new support rules that do not

result in doubt together with the RES sector on the basis of economic analyses and expert knowledge.

• Clear specification of the schedule of works on the draft RES Act together with specification of a transitory period.

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A comparison of both versions of the draft RES Act A comparison of both versions of the draft RES Act

Support schemeversion 1.0 of 22 December 2011• No guarantee of purchase

of electricity from RES at a predefined price.

Support schemeversion 2.0 of the draft Act• Return to the mandatory

purchase of energy from RES by a „designated vendor” concept

• Purchase of energy from RES at the average electricity sales price on the competitve market in year 2011 (annual indexation).

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Factors version 1.0

• A fixed factor, acquisition of green certificates by a RES installation for a period of 15 years.

• Specification of the first correction factors directly in the Act, further in a Regulation.

• Support for RES installations for 15 years, variability of factors during the green certificates acquisition period.

• Specification of correction factors in a Regulation to the Act.

Factors version 2.0


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Transitory provisions version 1.0

• Certificates of origin for RES commissioned before effective date of the Act together with a fixed correction factor of 1 may be received for a period of 15 subsequent years.

• No protection for completed investments and investments in progress.

• The planned modification to the support scheme could be deemed expropriation (the so-called regulatory or indirect expropriation).

Transitory provisions version 2.0


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Substitution fee version 1.0

• Modification of the substitution fee calculation concept

• Substitution fee (base) value: 286.74 PLN/ MWh

• Annual indexation with consumer price index

• The substitution fee calculation algorithm assumes the unit substation fee Ozj= 470 PLN/MWh.

• The value of green certificates constitutes the difference between the proposed unit substitution fee and the average energy price on the competitive market.

Substitution fee version 2.0


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Oversupply of certificatesversion 1.0

Oversupply of certificates version 2.0

• No regulations preventing oversupply of green certificates.

• Implementation of a scheme reducing the risk of oversupply of certificates of origin.

• A subject managing a commodity exchange shall monitor the sale prices of proprietary itnerest stemming from certificates of origin on the exchange.

• Reporting to the Minister for Economy.

• Increased share of electricity in the so-called RES Regulation.


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Grid connection version 1.0

• Priority connection of RES installations to the power grid compared to installations other than renewable energy sources, if:– grid connection is technically

feasible and economically legitimate,

– the applicant accepts connection conditions.

• No regulations ensuring priority in connection of RES installations to the power grid.



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• Lack of regulations ensuring grid connection of RES


• The President of the ERO concludes regulatory agreements with the TSO and DSOs ensuring increase of new connection capacity of renewable energy sources at least to the extent estimated in the National Renewable Energy Action Plan.



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• Ambiguous terms and fully discretional assessment of connection applications.

• Lack of any objective, defined criteria for assessment of connection applications.


• Definition of economic conditions for connection.• The connection conditions shall specify:

– connection schedule,– implementation schedule of

an investment task (RES installation);

– detailed valuation of costs related to the connection divided into actual connection costs and the costs of necessary grid extension or modernisation.



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• The new draft of RES should be published on May 2012. Ministry of Economy expects that new law can be implemented by the end of 2012.

• Department of Renewable Energy at Ministry of Economy has accepted most important remarks submitted by PWEA at the consultation period.

• PWEA has built strong coalition of organisations and created PA and PR campaign to continue its activities to support decision makers to implement good law for renewable energy market development.

SummarySummary

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Thank you for attention!

Arkadiusz SekscinskiPolish Wind Energy Association

www.psew.pl 22

http://www.psew.pl/

Documents

The new Renewable Energy Sources Act in Poland An opportunity or a threat ?