August 29, 2012

How good is the new Poland law?

In the interview published by, member of the management board at RWE Renewables Robert Macias suggests that a transitional period should be applied for the renewable energy projects which are currently being carried out in Poland. Large part of the projects had been commenced before the enactment of the new regulations on support for renewable energy sources. Many are also not likely to be completed before 1 January 2013, when the amended law on RES will come into force.

The expert holds a negative opinion on the decision to abolish the valorisation of the compensation fee paid by enterprises in exchange for the green certificates. In his opinion, the measure will cause the value of green certificates correlated with inflation. Depending on the increase in inflation, the next 15 years may bring a reduction in the value of green certificates by PLN170-270 MW/h, which will inevitably slow down the development of the renewable energy sector. Due to the high costs of investments, it is likely that many of the projects which are being currently prepared, will be given up due to insufficient support.

The final effect of the new regulations on future development of the sector should nonetheless be considered with reference to all components of the new law. The proposal to introduce different correction rates was assessed as reasonable, given the likelihood that the costs of implementation of particular technologies will be changing in the future. However, the abolition of valorisation of compensation fees and reduction of the period in which renewable power plants would be eligible to benefit from public support may prove too restrictive.

The expert draws attention to the provision included in the amended act, assuming that producers selling green power at prices higher than the guaranteed price, shall lose eligibility to green certificates. The probable effect of this regulation will be that green power producers will find themselves at a disadvantaged position . Moreover, the fact that the guaranteed price shall be not higher than the average price from the preceding year, implies that producers of green energy would be exposed to the risks connected with free market competition, at the same time having no chance to take advantage of its benefits.

Amendment of the disadvantageous provisions would therefore be advisable if Poland recognised the need to support the development of renewable energy. RWE would be in favour of establishing a transitional period for investments to be completed within two years from the enforcement of the new regulations. The currently proposed solution for projects which have been already commenced assumes the maintenance of an unchanged correction rate. This, however, will not prevent the decrease in the value of public aid granted to green energy producers, due to the abolition of valorisation.

The new regulations were also assessed critically by Production and Distribution Manager at Fortum Piotr Gornik who expects that the restrictions in public aid for co-incineration plants will have particularly negative consequences for the plant in Czestochowa. In June, the share of biomass in the fuel incinerated by the power and heat plant reached 35 percent. The enterprise intends to establish still higher targets for the share of biomass in the overall amount of fuel. Since the support for co-incineration plants is expected to be reduced, the plant in Czestochowa may be entirely switched to biomass incineration in order to preserve the higher level of public support. The complete switch to biomass incineration would nonetheless require additional investments. Biomass was also selected as the main source of power for Fortum's new power plant in Zabrze. The final decision about the construction of the plant, which is expected to cost PLN1bn, will be made at the turn of 2012 and 2013. The initial plan assumed that biomass would account for 50 percent of all fuel to be incinerated in Zabrze. The change in the terms of appropriation of public aid may cause Fortum to revise its plan.

Meanwhile, President of the Energy Regulatory Office (URE) Marek Woszczyk argues that the reduction of public aid for co-incineration plants is a reasonable step, which may enable Poland to increase the amount of new power units relying on renewable resources. The proposed regulations are in line with the strategy of URE intended to support small generation units. Thanks to the reduction of aid received by large co-incineration plants, more funds will be made available to local biomass fueled generation units. Although the incineration of biomass in large co-generation units has helped increase the share of renewable energy in the total output of electric power, it is doubtful whether it may be considered helpful from the point of view of environment protection. Mr Woszczyk believes that the main shortcoming of the new regulations is the absence of provisions granting support for the development of energy accumulation technologies, which may be particularly important for producers of solar and wind energy who have to deal with the unpredictability of the output.

The increased support for small solar and wind power generation units will be a major advantage for Easy Solar. According to CEO at Easy Solar Marcin Dolata, the enactment of the new regulations was regarded as one of the main arguments in favour of the company's entry to the Polish market. Currently, it is waiting for permission to connect its display PV systems with the capacity of 0.5 MW to the power network. Apart from planning to sell photovoltaic technologies in Poland, Easy Solar intends to move the manufacturing of solar panels to Poland. The support for solar power generation to be offered on the grounds of the new law is expected to cause a more dynamic development of photovoltaic energy in Poland. The company hopes for an especially quick growth in the number of solar panels installed in private households. Even without the additional encouragement and despite the fairly poor availability of light, Poland has become the fourth leading market in the EU in terms of solar panel sales. The capacity of solar power generators to be installed in Poland in 2013 may reach 500 MW. The current costs of photovoltaic technologies amount to EUR2000-2500 per 1 kW. Taking into account the support to be granted on the grounds of the new law, the costs could pay back in about 6-7 years. The encouragement in the form of state subsidies is necessary in order to encourage investments in photovoltaic technology. It is expected that the prices of panels will be decreasing in the near future and reach EUR1300/ 1kW around 2020. At the same time, their relative profitability will be growing due to the expected increase in the prices of electricity.

The crucial importance of stable and proper legal regulations for the development of investments in the energy sector was emphasized by President of Tauron Polska Energia Dariusz Lubera. His company will be affected not only by the new regulations on renewable energy but also by the other two bills from the energy package, which concern the gas market and the energy sector as such. It is also waiting for the new regulations on energy transmission corridors and transmission line easement. For Dariusz Lubera, of crucial significance will be to formulate precise terms for the appropriation of aid to cogeneration and renewable sources of energy. As he believes, it is also crucial that Poland acknowledges the fact that its energy sector will depend on coal for a considerable period of time in the future and ensures that no new regulations to be enacted in the near future concede to the complete elimination of the resource from the energy sector.

No comments:

Post a Comment