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The year 2018 could be seen as a turning point for the Polish renewable energy sector. After the years of recession, the first auction for large wind turbines was finally held in 2018. And although the auction prices achieved were not particularly attractive, it is already certain that further bidding rounds will be organised in 2019. In 2018, already a third round of auctions for smaller-scale PV power plants was held. However, the transition in the energy sector was not caused by the auction rounds held, but rather by drastic increases in electricity prices. This has prompted the government, which has not been particularly fond of the renewable energy sector so far, to rethink its approach. The government increasingly sees renewable energy as a price-stabilising element of the market and is moving away from its initial anti-renewable energy approach. But the perspective of renewable energy project developers is also changing; many are keeping an eye on the rival markets and want to sell renewable electricity in competition with coal-fired electricity. In Poland, the renewable energy market is developing into a normal business model that is not dependent on subsidies. It is therefore worth taking a brief look back at the most important events of 2018.
By Piotr Mrowiec, LL.M.
According to the information provided by the Energy Regulatory Office (URE), the auction round AZ/9/2018 held on 15 November 2018 attracted 251 project developers who submitted 554 bids for the sale of energy generated by PV power plants and wind turbines with a capacity of up to 1 MWp. The lowest price, less VAT, at which the energy was sold, was PLN 288.99 / MWh and the highest price was PLN 364.99 / MWh. In total, 8 169 917.016 MWh of electricity with the total value of PLN 2 878 556 631.19 was sold. The following table includes information on the three auctions organised so far.
Only after more than 2 years of the entry into force of the Renewable Energy Sources Act, based on which the previous green certificate system was replaced with the auction model, did the Polish state manage to organise the first auction round for large wind turbines. The auction for power plants with a capacity of more than 1 MW, jointly organised for photovoltaic systems and (onshore) wind turbines, was held on 5 November 2018. The maximum amount of electricity that could be auctioned was 45 000 000 MWh. The highest price per 1 MWh that could be bid (so called reference price) was PLN 320 per MWh (about 7.36 Eurocent / kWh).
The expectations for these auctions were high, but the results were very disillusioning from the perspective of the project developers. The average price was PLN 196.17 / MWh. As a result of this auction, more than 41,996 TWh of electricity worth over PLN 8.238 billion was sold. 31 bids were awarded contracts.
In accordance with the relevant provisions of energy law, the deadline for the first feed-in of electricity produced from a renewable energy source is 48 months counted from the date of concluding the grid connection agreement (except for offshore wind turbines). For many of the wind projects, the deadline will expire in May this year, because projects for which a grid connection agreement was concluded before the introduction of the restrictive regulation are subject to a 4-year period counted from the date of the adoption of the relevant law. If the next auction is organised before the expiry of the grid connection agreements, then the projects that will be awarded contracts will enjoy the automatic renewal of the grid connection agreements – this possibility is provided for again in the amended RES Act. It should be however assumed that many projects will not be awarded contracts or will not even participate in the auction, discouraged by the low auction prices. If the grid connection agreement expires and the project developer is not able to conclude a new grid connection agreement, such a project becomes practically worthless. However, the legislator has finally recognised that risk and intends to remedy it by amending the relevant regulations accordingly.
The enactment of the planned amendment to the Polish RES Act is scheduled for the 1st quarter of 2019. The amendment is necessary not only because of the issue of grid connection, but also because of the lack of implementing regulations. According to the current legal situation, no new auction can be organised in 2019. The amendment to the RES Act aims to make the conduct of auctions possible this year. The amendment will determine the maximum amounts of energy to be sold and their price caps. It will also establish new reference prices representing the maximum prices allowed in bids.
Piotr Mrowiec, LL.M.
Associate Partner
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