Market likely to stimulate renewable energy in Poland

1 Jul 2013

The key driver for the development of the new law on renewable energy resources is the intention to provide a boost to the RES construction market and, case at the same time, medical a gradual phasing out of the state?s support to the market. These measures are expected to stimulate market innovation in the sector. In view of the proposed solutions, stuff photovoltaic systems will benefit the most from the new law. On the other hand, biomass co-combustion plants stand to suffer the biggest impact after the adoption of the new act on renewable energy resources.

According to the report entitled ?Renewable energy construction in Poland 2013 ? Development forecasts and planned investments? prepared by the research company PMR, the currently drafted act on renewable energy resources will be the key factor in determining the shape of renewable energy resources market in Poland. Key objectives of the new law are as follows: to reduce greenhouse gas emissions by 20% compared with 1990 and to achieve a 20% gain in energy efficiency and a 20% share of renewable generation sources in total power consumption. In the long-term, the law will have a major effect on the condition of the Polish power system, nearly 90% of which is based on fossil fuel.

According to the information presented by the government, the RES act should be adopted and enter into force in the second half of 2013. The work on the act started several years ago ? the first draft was developed at the end of 2011 and was subsequently amended several times. The latest draft is dated October 2012 and, by all signs, it is expected to be the final version of the law.

An important factor which will determine RES companies? income from power generation will be the size of the units and the base type of fuel they use. Correction coefficients are to be assigned to individual types of facilities, increasing or, in some cases, decreasing the number of green certificates previously awarded to the unit.

The solar energy segment will benefit the most from the new solutions. Photovoltaics, which, to date, was the most marginal segment of renewables, will likely receive twice as much additional funding as previously. Small units with capacity under 1 MW are to receive 2.85 or 2.75 green certificates per MWh, depending on the type of system (mounted on a building or directly on the ground). As a result, an increase in proceeds from the disposal of green certificates is expected, which will automatically have a positive effect on projects? economic return.

Regarding the fastest growing segment, i.e. wind farms, the situation will be varied. Small units with capacity of up to 0.5 MW are likely to gain when the coefficients are introduced, but bigger projects will see their revenues cut by 10% in the act?s first year of operation. Offshore wind farms, which have been previously absent from the Polish market, are also likely to receive substantial support. A higher coefficient value for this category is attributable to twice as high spending required to implement projects compared to the traditional onshore wind turbines. Poland?s potential capacity of offshore wind power is estimated at 10,000 MW wind farms located over an area of around 3,500 km?.

Biomass co-firing facilities are likely to suffer the most, not only regarding the term of support but also its value. The term of support shortened to five years accompanied by a 70% decrease in proceeds from the sale of green certificates will greatly diminish the appeal of this investment vehicle. It should be noted that the effects of such plans alone are already visible ? at least four large projects have been put on hold partly for this reason. Among these projects are Fortum?s schemes in Zabrze and Wroclaw, whose aggregate value is estimated at approximately PLN 5.5bn (?1.3bn). Other projects expected to be based on the use of biomass in fossil fuel-fired boilers include Ostroleka and Rybnik power plants.

A general trend observed in the presented group of correction coefficients is that units with smaller capacity will receive greater support, which confirms the government?s policy of supporting distributed generation projects. The legislators assumed that the state should support electricity generation for one?s own needs so as to foster the growth of distributed energy resources.

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