Renewable energy law and regulation in Poland

1. Brief overview of the renewables sector

The support for renewable energy sources (RES) in Poland has been stimulated by two major support mechanisms: certificates of origin and the auction system. Certificates of origin (green certificates), issued by the Regulator, confirm the generation of electricity by a renewable energy source. The property rights resulting from green certificates can be traded on the Polish Power Exchange and OTC. However, the green certificate system is being gradually phased out and replaced by the auction system introduced by the Renewable Energy Sources Act of 2016. Significant changes to this support scheme were made in July 2018 and in August 2019.

Support systems have underpinned the intensive development of the RES sector in recent years. According to data gathered by Eurostat, the share of renewable energy in gross final energy consumption increased from 6.9% in 2005 to 9.3% in 2010, and 11.8% in 2015. In 2016 and 2017, the share fell to 11.3% and 11% respectively, while in 2018 it rose again to 11.3%. 

In order to comply with the RES strategy laid down in EU legislation, Poland needs to achieve a 15% RES share in final energy consumption by 2020. Unfortunately, Poland will not be able to achieve this target by the end of the year. Since the RES Directive sets forth the next ambitious target – ie the share of energy from renewable sources in the EU’s gross final consumption of energy in 2030 shall be at least 32%, and Poland, in its integrated national energy and climate plan, committed itself to contribute to this target by achieving a 21-23% share of renewable energy in the gross final consumption – it became necessary to provide certain measures to enlarge the RES market. Therefore, the Polish government decided to stimulate the RES market by strengthening the auction support system. As the auction system has reinvigorated the RES market, a new wave of investment has been attracted into the market, particularly in the wind farm and PV projects. In addition to this, the government plans to develop the offshore wind farm sector through its own dedicated support subsidy scheme.

2. Recent developments in the renewables sector

Auction system

The auction system offers the opportunity to participate in auctions organised by the Polish Regulator, ie the President of the Energy Regulatory Authority. The maximum volume and value of electricity which can be auctioned in the next calendar year is determined annually by the Council of Ministers. The sole criterion of the auctions is the price – the lowest bidders are selected until the maximum volume determined for the given auction has been reached. Auction winners are guaranteed protection against a “negative balance” that may arise between the market price of energy and the auction price, which makes the system similar to CFDs (contracts for difference). The support is paid out by Zarządca Rozliczeń S.A., a state-owned entity that is responsible for the financial side of the subsidy scheme and settlement of the “negative balance”. The period of support is 15 years from the date of the first sale of electricity, although it will not run beyond 30 June, 2039. 

The first auction took place at the end of December 2016 and the second in June 2017. Both were mainly dedicated to installations below 1MW of installed capacity. The auctions announced by the President of the Energy Regulatory Authority in August 2017 were cancelled. Subsequent auctions took place in 2018 and in 2019. In 2019, the small PV projects (up to 1 MW) achieved a total of 731 MW, while with regard to large scale projects the total capacity of successful projects amounted to 62 MW for PV projects (above 1 MW) and 2220 MW for wind farms. Subsequent auctions are planned for the end of 2020 and in 2021. 

Onshore wind

Only a couple of years ago, the sector faced numerous challenges from a regulatory perspective, as well as uncertainty resulting from the fact that no auctions had been announced for onshore wind installations above 1 MW. However, most of the legal obstacles have been removed or relaxed, which, alongside the yearly auctions, has encouraged investment in onshore wind projects in Poland.

One of the obstacles that onshore wind market faced was the introduction of rigorous provisions in the Act on wind turbine investments. The Act sets a minimum distance between new wind turbines and households or mixed purpose buildings of at least ten times the total height of the wind turbine (the 10h rule). However, these requirements have been slightly mitigated by the legislator. This liberalisation may also be accelerated by the CJEU ruling of 28 May 2020, which lays the groundwork for questioning the distance restrictions under the Act, provided that the Polish court assesses - whilst taking into account the necessity and proportionality of the regulation - whether the Act has directly contributed to the slowdown of wind energy development in Poland. Moreover, there is a new draft law liberalising this requirement. Although the 10h rule will not disappear, there are plans that it will be amended subject to certain conditions being fulfilled (such as the consent of the local community). 

There was also a dispute concerning the property tax on wind turbines in 2017, which sees companies obliged to pay this at a higher rate due to amendments in the law. These disputes were ended by the Supreme Administrative Court’s ruling in 2018, which stated that the property tax for 2017 based on the legislative amendments should be paid at a higher rate – 2% on all the elements constituting the wind farm, both its construction parts and technical elements. However, the law has now been changed again and the tax is now paid, as before, at a lower rate – ie only on the construction parts. This issue was also the subject of the judgment of the Constitutional Tribunal of 22 July 2020, pursuant to which the regulations that introduced changes in the taxation of wind farms with retroactive effect from 1 January in mid-2018 were deemed inconsistent with the Constitution. 

Therefore, while there have been some unfavourable regulations in the past, the development of wind farm projects in Poland now has quite a lot of appeal for potential investors, including foreign IPPs and funds. Irrespective of the subsidised projects, there is a growing interest in the merchant plants and corporate PPAs as an alternative way to secure financing for onshore projects. 

Growing interest in PV

The photovoltaic (PV) sector has been one of the fastest-growing renewable energy sectors in Poland. The total installed capacity in PV power sources at the end of 2018 was about 500MW, while in August 2020 the installed capacity had reached 2200 MW.

The Institute of Renewable Energy estimates that, by the end of 2020, the installed PV capacity in Poland may reach 2.5 GW. IRE forecasts also indicate that the turnover on the photovoltaic market will increase this year by as much as 25% compared to the previous year and will exceed PLN 5 billion. In 2025, the total installed capacity in photovoltaics may reach 7.8 GW.

The draft Energy Policy for Poland until 2040 indicates photovoltaics as the installations that – next to the offshore projects – will play a key role in achieving the RES targets. So far, there have been four auctions in which solar projects with a capacity below 1MW have succeeded (in 2016, 2017, 2018 and 2019). The total capacity of the winners’ PV projects was almost 1700 MW.

The increased interest in the auctions and the falling investment costs of solar are a current market factor. This trend creates a major opportunity for investment in Poland and with the support envisaged under the Act on Renewable Energy Sources, PV installations are becoming the most popular renewable installations for investment. The latest tendency is to develop large-scale solar projects – ie projects with a capacity above 1MW – or to combine PV with other RES technologies. The Ministry of the Climate envisages that a large-scale solar project of 700 MW will be granted support in the auction to be held in 2020.

3. Forthcoming developments / opportunities in the renewables sector

Offshore opportunity

Poland has significant industrial potential to develop offshore wind investments. According to the integrated national energy and climate plan, the idea is to achieve 3.8 GW of capacity from the offshore wind farms by 2030 and approximately 8 GW by 2040. According to the newest version of the Energy Policy for Poland until 2040, offshore wind farms will play a key role in achieving the RES targets set for Poland by the EU. This document sets out that Poland will achieve 5.9 GW of capacity from offshore wind farms by 2030 and approximately 8-11 GW by 2040. 

In order to achieve this, the first draft of the Polish offshore wind legislation was released for public consultation in January 2020 and the second, revised version was subsequently published in July 2020. The Act sets out the framework for a dedicated support system for offshore wind projects. The offshore projects will be entitled to reclaim the negative balance resulting from the difference between the fixed price and the average market price. The right to reclaim the negative balance will be awarded in two different ways:  for the most advanced projects – by way of an individual decision of the Regulator, and for the rest – through a competitive auction. The Act also addresses other important areas related to the development and operation of offshore projects, such as local content requirements, changes to the planning procedure, the rules for grid connection, as well as a pre-emptive right to purchase the devices needed for the offtake of power from the offshore wind farm by the TSO. 

The goal is for this Act to come into operation by the end of 2020, which will speed up the development of offshore projects in Poland. No offshore project has yet been constructed, but key energy companies are showing a growing interest. The most advanced investments are developed by Polenergia (a private company) with Equinor, and PGE (a state-owned company), which plans to team up with Ørsted. Other companies that are developing the most advanced projects are PKN Orlen (a state-owned company), EDPR and RWE. 

Energy storage

In order to balance the generation of energy from RES, energy storage projects are planned for the coming years. However, they are still at an early stage of development. As electricity storage is a relatively undeveloped field in Poland, there are still no detailed regulations in this area. 

There are storage projects under development in Poland. In 2018, construction started on the largest energy storage facility in Poland with a capacity of 27 MWh, near the Bystra wind farm. The construction of the hybrid-battery energy storage is a critical project in the Polish energy sector. It is being developed by the Energa Group (Energa Wytwarzanie and Energa Operator), the Polish transmission system operator Polskie Sieci Elektroenergetyczne, and Hitachi, as part of the joint project “Smart Grid Demonstration Project in Poland”. The goal is to build a system for the protection of the electrical network, which will ultimately enable the appropriate management of a large number of wind farms. 

Other Polish companies are also developing energy storage projects. Polska Grupa Energetyczna S.A. (PGE), a state-owned company, plans to implement eight storages with a capacity of approximately 40 MW. The energy storage located in Rzepedź, with a capacity of 2.1 MW, will be finished by the end of 2020. PGE is also working on stores near the photovoltaic installation on Żar Mountain and near the wind farm Karnice I.

Another state-owned company, Tauron, is developing a system of energy storages in Cieszanowice. The goal of this system is to ensure a more effective management of the electricity from onshore wind farms.

In mid-2020, the Minister of the Climate restarted work on the set of provisions dedicated to energy storage, which will cover a new definition of energy storage, as well licensing aspects. However, at this moment it is still a new draft regulation. 

Recent regulatory amendments to the RES support system

In August 2019, an amendment introduced some improvements to the RES support system, including: 

  • extending the deadline for selling the electricity generated by a RES installation for the first time.
  • (for producers planning to participate in auctions in 2019 and 2020) the right to postpone to 30 June 2021 the deadline for feeding electricity into the grid for the first time under existing grid connection agreements.
  • a procedure allowing one-off modifications (updates) to the bid after winning the auction with respect to the planned date for selling electricity for the first time. 

The amendment also specified the maximum volumes and values that can be sold in the auctions in 2019, both for new RES installations and existing ones.

In 2020, due to the COVID-19 pandemic, the renewable sector was supported in several ways. Among others, the so-called Anti-Crisis Shield Act provided investors with the right to request an extension of the deadlines for the commencement of sale of power within the auction system for the first time.
Recently, the Minister of the Climate introduced the regulation for the auctions planned for 2020. In these auctions, for large-scale projects (ie above 1 MW), it is estimated that the support will be secured for wind farms up to 800 MW and for up to 700 MW of PV projects. In the case of small PV projects (below 1 MW), the Minister of the Climate estimates 800 MW of capacity.

As regards the auctions in 2021, for now the Ministry of Climate has presented a draft regulation which determines the volumes of energy planned for sale in auctions in 2021. The Ministry’s first proposal indicated that there is 300 MW secured in the auction for wind farms, 1000 MW for small scale PV projects and 700 MW for large scale PV projects. However, the general impression from the wind and PV sector was that the proposed volumes were too small.

Planned regulations in the RES sector

As indicated above, there are plans to soften the 10h rule introduced by the Act on wind turbine investments. The plan is to retain this rule, but to add new conditions. According to the new proposal, a new wind farm could be located only on the basis of the local spatial plan prepared for the entire 10h area around the planned wind farm. Thus, the right to reduce the 10h area will be given to the local communities, which will be able to decide whether or not to accept the change to the aforementioned rule.

According to the current legislation, installations with an installed capacity greater than 50 kW but less than 500 kW are only required to be entered in the register of energy producers, while the obligation to obtain a licence is set for an installed capacity of 500 kW and over. However, the Ministry of the Climate proposes to raise the second threshold up to 1 MW.

Portrait of Piotr Ciolkowski
Piotr Ciolkowski
Partner
Warsaw
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Ada Szon