Bartosz Dębski
Office: Warsaw
Practice areas: Corporate and Commercial,
Real Estate, Energy
Position: Radca Prawny / Partner
E-mail: [email protected]
Phone: +48 22 257 83 00
New support scheme for producers
of energy from renewable energy
sources: auction model
After several years of intensive preparation, on 8 July 2014 the Polish
government submitted a draft of the Act on Renewable Energy Sources
(“RES Act”) to the Polish parliament.
The draft RES Act provides for a new support scheme for producers
of energy from renewable energy sources (“RES”) based on an auction
model. Currently, it is planned that the new support scheme will enter
into force on 1 January 2016.
(i) wholesome wood, wholesome grain, artificially contaminated biomass – irrespective of their share in total fuel consumption;
(ii) biomass from energy crops, waste from agricultural production or
grain other than wholesome grain – if the share of this kind of fuel
in total fuel consumption exceeds levels indicated in the regulations
which will be issued on the basis of the RES Act.
Functioning of the auction model:
In order to safeguard the rights acquired by the owners of existing
installations, it is assumed that the current support system based on the
certificate of origin will function, with some modifications, in parallel with
the new model. Most producers that have commenced work prior to the
RES Act entering into force will be free to choose between the current or
new support system.
General principle of the auction model:
The auction model proposed in the draft RES Act assumes that contracts for the sale of energy from RES with state support will be awarded
by the President of the Energy Regulatory Office (“the President of the
ERO”) on a reverse auction basis (bidding prices down). The basic criterion for the selection of projects will be the price per MWh of electricity
generated offered by the entities participating in auctions, which should
be as low as possible and may not exceed the maximum price set by the
President of the ERO (for further information see “Energy Price”).
Auctions will be held at least once a year and will be published, organised and conducted by the President of the ERO. Auctions will be
held separately for all new energy producers and for those who had
been beneficiaries of the certificates system prior to the RES Act entering
into force. Moreover, the production of energy in installations of total capacity above 1 MW and those of total capacity up to 1 MW will be subject
to separate auctions, with at least 25% of the energy limit intended to be
produced in the latter.
Every year until 31 October the Council of Ministers of the Republic of
Poland will set the maximum quantity and value of energy that may be
produced from RES, including the maximum amount and value of energy which can be produced by installations from RES with efficiency below
4,000 MWh/MW/year which will be sold in auctions held in the following
calendar year. The quantity and value of the energy stipulated in the
aforementioned resolution of the Council of Ministers will be taken into
consideration by the President of the ERO when organising auctions.
Beneficiaries of the auction model:
Generally, the auction model will apply to energy producers from RES
commencing operations after entry into force of chapter 4 of the RES
Act. This method of support will not however be available for energy
produced in installations with a total installed capacity of more than 50
MW that is produced using biomass, bioliquids and biogas, unless the
fuel is burned in high-efficient cogeneration with a total capacity of up to
150 MW and for water power plants with a capacity of more than 5 MW.
In addition, it should be noted that under the draft RES Act, the producers of energy from biogas will only be eligible for the auction scheme, if
they do not use:
A notice about any upcoming auction will be published in the Public
Information Bulletin by the President of the ERO at least 30 days prior
to its launch. Such a notice will contain the exact date of the session of
the auction, the exact time of the opening of the session and its closing,
the maximum quantity and value of energy that may be sold during the
auction. The auction is opened if there are at least 3 valid bids submitted. The auction will take place on an internet auctioning platform.
Participants are entitled to submit only one bid, which in particular contains the price and quantity of power they will produce, without knowing
the offers of the competitors. Bids submitted one hour before the closing
of the auction or later cannot be withdrawn.
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/ New support scheme for producers of energy from renewable energy sources: auction model /
The auction is won by the participant bidding the lowest price as long
as the maximum quantity and value of the energy is reached. However,
the price offered by the participant may not exceed the maximum price
set by the Ministry of Economy (for further information see “Energy
Price”). If there are two or more participants offering the same price and
the maximum quantity does not allow both bids to be accepted, the offer
that bid first wins. In case the maximum quantity of the energy that may
be produced will not be reached in one auction, the President of the
ERO will be entitled to organise further auctions.
Upon commencement of the auction participants will have to make a
cash deposit in the amount of PLN 30/kW of capacity of the installation.
The aforementioned deposits will be returned to winners of the auction
within 60 days after the day in which the energy is produced for the first
time. Cash deposits will be returned to producers who do not win the
auction within 14 days after the closing of the auction and upon a declaration on not participating in further auctions.
After closing the auction the President of the ERO will announce
as soon as possible a list of all participants whose bids have been accepted, the minimum and maximum price of one MWh that the energy
was sold for and its total quantity and value. After the auction is won, the
producer is obliged to sign, within 6 months, a contract with an appropriate obliged supplier (for further information see “Duration of support”),
indicated by the President of the ERO and start production of energy
within 24 months for photovoltaic sources, 72 months for sources using
sea wind power and 48 months for all remaining RES. As a general rule,
the energy producer will have to settle his obligation to sell energy every
three years. In the event, that within a given settlement period, the energy producer fails to produce the volume of energy declared during the
auction, the President of the ERO will impose a fine on such a producer.
The Minister of Economy will each year, at least 60 days prior to the
first auction, announce the maximum price for which 1 MWh can be sold
during an auction. The maximum price will be established based on
the average energy price on the competitive market published by the
President of the ERO and weighted average prices of certificates of origin in the years 2011-2013. As regards installations launched following
the date of the first auction, the maximum price will be set on the basis
of the production costs of energy from the given RES.
Energy price:
The RES Act identifies several types of RES and capacity thresholds for
which separate maximum prices will be set.
Any offer that exceeds the maximum price will be considered invalid
for the purposes of an auction.
Prequalification for participation in the auction:
An entity willing to participate in an auction will have to obtain a certificate from the President of the ERO. The certificate will be issued by
the President of the ERO upon an assessment of a number of documents
concerning the energy producer and the proposed project, including
among others: a copy of a building permit, an environmental decision,
a local spatial development plan or a zoning decision. The President of
the ERO will grant the certificate only after a positive assessment of the
project. The certificate will be valid for a period of 12 months. Taking into
consideration the documents which will have to be submitted to obtain
the certificate, it should be noted that the new system assumes that the
investors will have to spend significant amounts of time and money to
develop their projects up to an advanced level without any guarantee
that their projects will qualify for public support. This may work to the
benefit of larger investors who will be ready to risk significant amounts
of time and money in the projects which may later fail to obtain the state
support.
Additionally a state-owned operator for renewable energy settlements
(OREO) will be created. OREO will compensate the difference between
the guaranteed price obtained by the RES producer during an auction
and the market price for electricity. The funds for reconciliation of such
a negative balance will be financed from the so-called RES fee imposed
on end users.
Duration of support:
Obliged suppliers – companies with the largest volume of energy sales
in a certain region that will be indicated by the President of the ERO – will
bear the obligation of buying the energy sold in auctions for 15 years, no
longer however than until 31 December 2035. If a producer wishes to be
eligible for support after 15 years, the installation that he uses will need
to be modernised with an expenditure of at least 30% of its initial value
and the total capacity will need to be increased.
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