At the crossroads, all signs point to Polish wind growth

At the crossroads of the old green certificates system and the new auction system, Poland has been doing a great job expanding its wind portfolio.

In 2015, it was the second-largest wind installer in the EU, adding almost 1.3GW, a runner-up to Germany.

Having added more megawatts than France and the UK last year, the Polish onshore wind sector can now be considered a leading industry. With 5.1GW of onshore wind, Poland holds seventh place among EU countries.

Last year’s rapid growth was caused mainly by the Renewable Energy Sources (RES) Act, which mandated a switch from green certificates to auctions. That triggered a “now or never” rush to complete pending projects by the end of 2015, to qualify for the 15-year support in the form of green certificates, without the need to participate in auctions.

However, at the very end of December, the parliament made a surprise decision to prolong the old system. The auction system, which had been due to start on 1 January 2016, has been postponed to 1 July, bringing much relief to some developers that had planned to finish construction in 2015 but had failed to make it on time.

The Ministry of Energy is now working on another amendment to the act, aimed at closing gaps in the auction scheme and fine-tuning the support regime for prosumers. Overall, the changes are not expected to be revolutionary.

Another reason for postponement of the new system was that the government, elected in October, plans to introduce regulations restricting the siting of wind farms near housing areas, which may take the form of a minimum distance rule. The idea has been heavily criticised by the industry, particularly because the current regulations, based on noise limits, are generally agreed to be sufficient.

On the other hand, one change to the legislation that the entire renewables industry wants is the reshaping of the auction “baskets”. The current tender design is technology-neutral: auctions are to be organised in separate baskets for new and existing projects, each divided between installations below and above 1MW.

Projects with productivity of less than 4GWh per MW per year (in essence wind and solar) are to be capped in volume. However, the absence of any minimum price, and a long period (up to four years) to build onshore wind projects, are likely to cause underbidding, similar to the Italian and Dutch experience with auctions.

Conversely, baskets up to 1MW and for technologies, such as biomass, with productivity of more than 4GWh/MW/year might see unreasonably high bid prices, due to lack of competition. The design of the current system will also result in less diversity in the energy mix, as all renewable technologies will have to compete against each other in the same baskets.

Another area for improvement is the rules on renewables projects that are built in stages.

Under the Energy Regulatory Office’s interpretation, projects that are developed in stages but have one common interconnection point will enjoy a shortened period of support — 15 years for the first phase, but less for subsequent phases (with the period of support calculated from the day of production of the first kWh by the first phase).

Currently, a practical solution for investors is to establish their own distribution system operators; however, it is a complex and not always successful exercise.

Despite the uncertainties as to the final shape of the auction scheme, the government confirms that meeting the 2020 EU goals and renewables growth, including onshore and offshore wind, are among its priorities.

Further developments in the renewables market will depend on the timing of the first auction and its results. It will take several years before it is clear how much actual capacity will be added as a result of the first tender.

The provisions of the RES Act give developers that win the auction 24 months (PV), 48 months (onshore wind and most other sources) and 72 months (offshore wind) to build their installations. Only then will it be known which projects will start producing electricity.

Inevitably, however, renewable energy will be taking the place of decommissioned conventional power sources, mainly coal-based. Poland has to decommission 7GW of coal-fired capacity by 2020 and 12GW by 2030.

Since no nuclear plant is expected to be operational by these dates, there is an unprecedented opportunity for wind to fill the emerging power capacity gap.

Hubert Wysoczański is a Warsaw-based lawyer at K&L Gates, an international energy and environmental and dispute resolution practice

This piece was published as part of the Thought Leaders series. Recharge’s Thought Leaders Club brings together leading thinkers and participants from the renewable-energy sector to examine the key challenges facing our industry