Poland finally moves on green energy bill

By bne IntelliNews April 9, 2014

Tim Gosling in Prague -

The Polish government on April 8 finally approved a long-awaited draft bill on state support for renewable energy producers. Warsaw says the legislation offers investors greater security, but the devil is likely to be in the details.

Poland has been struggling to put together a new system of support for renewables since 2011. While the heavily coal-dependent country argues with the EU over climate targets, it has also bickered with investors, who have objected to several drafts over the years. In line with the trend across Europe, Warsaw says it has to rebalance support in order to reduce the bill for consumers and avoid speculative development in certain segments.

Under the draft law, which requires final approval by parliament and the president, developers and owners of new renewable installations can sell their energy at auctions for a fixed price that would be guaranteed for 15 years regardless of market prices, reports Reuters. The proposal would also set a ceiling on the subsidy. The previous subsidy system was criticised for not providing enough long-term guarantees.

“Auctions are a more efficient system that allows us to choose the projects with lowest production prices from competing ones,” Deputy Economy Minister Jerzy Pietrewicz said in November, according to Bloomberg. “Additionally, investors will get predictability for their projects for a long period as they will be settling a price level they offer.” 

Upset giants

Crucially, the bill will allow projects already in operation to keep current subsidies or choose to join the auctions. Several major producers - such as French giant GDF - threatened legal action against Poland over the course of the last three years over earlier proposals to cut support levels to existing investments.

However, the approved bill could yet upset the larger investors in the sector. According to reports in November, the latest draft included plans to exclude hydroelectric power plants exceeding 1 megawatt of capacity from the new system. The rules would also cut subsidies for biomass co-firing, the country's major source of renewable energy currently, by up to 50%.

That has long appeared the more likely reason that the issue has hit the headlines so frequently. The government has throughout the last three years been seeking to cut support for the largest and most populated segments - co-firing and onshore wind - suggesting micro-generation, solar power and offshore wind would see more encouragement.

EU requirements call for Poland to expand its level of green energy production to 15% by 2020. The country currently produces nearly 90% of power from coal, and the government has recently been pushing its state-owned utilities to rapidly build new coal-fired power plants - as well as the country's first nuclear facility - in order to curb a threat of insufficient capacity.

The current renewables tariffs cost consumers about PLN4bn (€960m) annually, according to 2013 estimates from the economy ministry. The government has warned that without revision, the cost of the system would rise to PLN7.5 - 11.5bn by 2020.

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