Informacje

DMS
  April 3, 2013

  International PV seminar on May 9 and 10, 2013 in Warsaw
 

On May 9 and 10 SC Consulting is organizing a two-day international seminar devoted to successful development of PV farms in Poland. DMS partner Christian Schnell is one of the speakers.

For more information please click here.


  Polish Wind Energy Association conference on April 24 and 25, 2013 in Serock
 

The annual Polish Wind Energy Association conference will be held in Serock, near Warsaw on April 24 and 25, 2013. DMS DeBenedetti Majewski Szczesniak is a new member of the Polish Wind Energy Association.


For more information please click here.


  Infringement procedure speeds up the RES Act
 

Due to the lack of transposition of the Internal Market in Electricity Directive 72/2009 as well as the Internal Market in Gas Directive 73/2009, in October/November last year the Commission requested that the European Court of Justice impose daily penalties payment against the Republic of Poland of € 84,748.24 and € 88,819.20 respectively. The daily penalties would be accruing from the date of the Court's ruling until Poland notifies the Commission that it has fully implemented the rules into the national law, i.e. when the respective law enters into force. The small ”tri-pack” [amendment to Energy Law to avoid penalty payments due to the above-mentioned EU infringement procedures] is delayed, but should come into force within the next months to avoid penalty payments to be calculated from the Q4 of this year. In addition, to date Poland has not yet transposed the Renewable Energy Directive 28/2009, which had to be transposed by Member States by December 5, 2010. Finally, the Commission requested that the European Court of Justice impose daily penalties payment of € 133,228.80 against the Republic of Poland. Penalty payments will accrue from the end of Q1 of 2014. Prime Minister Tusk recently announced that the small ”tri-pack” will not implement any solutions required to transpose the Renewable Energy Directive, i.e., a large “tri-pack” [Energy Law, Gas Law, the Renewable Energy Sources Act with the new support system and secondary legislation] will be necessary to do so. Due to the legislative procedures and notification obligations, the large “tri-pack” should enter into parliamentarian legislation proceedings soon to come into force at the end of the Q1 of 2014 to avoid penalty payments.


  Oversupply of Green Certificates lower than expected
 

Due to unofficial information provided by the Polish Power Exchange PGE, the oversupply of green certificates is lower than the experts recently expected. The likely volume of oversupply of certificates should not exceed the level of 5 TWh after redemption of green certificates by the end of March. Official information should be published next week. Due to limitation of (co-) firing of biomass, the recent oversupply is supposed to be partially reduced by the end of this year by 2 TWh.


  Average Electric Energy Price higher than expected
 

The Energy Regulatory Office URE has recently published an average price for electric energy in 2012. Although many market participants expected a slight drop, the average electric energy sale price on the competitive market – so called URE-price - in 2012 reached an amount of PLN 201.36 per MWh compared to PLN 198.90 in 2011. Suppliers of last resort are obliged to purchase electric energy produced by RES installations for the URE-price.


  More details concerning the revised draft of the RES Act are known
 

In March the price of certificates of origin (so-called “green certificates”) stabilized on the Warsaw Power Exchange at a level of 120 to 140 zloty. According to unofficial information provided by the Polish Power Exchange, the average price on the OTC market covering approx. 80% of the trade volume of green certificates amounts to 160 zloty [a new index for the average price on the OTC market should be published by the Polish Power Exchange soon]. This dissatisfactory situation accompanied by public protests of Polish biomass producers and infringement procedures at the European level has finally speeded up the political decision making process. More and more details of the final draft to enter the parliamentary legislative process are known.

Re-calculation of correction coefficients

This Minister of Economy has recently announced a tender for re-calculation of correction coefficients. Presumably, the final result will not be known before the end of May. As the most important element for calculation, the minimum level of the certificate price is still under discussion, an open formula for each technique and size of installation to be adopted in the final version of the RES Act will most likely be subject of expertise.

Not all correction coefficients will be published for five years

Most probably not all correction coefficients will be published every five years. If the project development loop is shorter, publication for a short period of time is discussed, e.g. 3 years for PV-installations. On the other hand, offshore wind might receive a correction coefficient for an undefined period of time, as the project development loop might take from 10 to 12 years.


PV under pressure

Under discussion are the following negative provisions for development of PV farms: plants will be supported only up to 2 MWp – instead of 10 MWp according to the recent draft. A two kilometre distance between each installation which is connected within 24 months is required, otherwise several installations are calculated as one plant regarding the above mentioned support limit. Finally, a global cap for PV installations is under discussion. The limitation of the support level to 2 MWp is already highly criticized, as it will not allow to connect installations to the high voltage grid due to the grid connection costs. Ongoing discussions are expected during the parliamentary legislative process. Therefore, it is far too early to make final evaluation. Nevertheless, this discussion will contribute to slowing down the development projects that are underway until the fog goes down.

Increasing the quotation obligation

The Ministry of Economy plans to issue a revised regulation "on detailed scope of obligations to be met to receive and present certificates of origin for redemption..." dated October 18, 2012 increasing the limit of green certificates which in a given year should be acquired by utilities and energy trading companies. This will be necessary since large energy consumers will not be obliged to acquire green certificates in the future, which provides for a lower amount of the calculation basis for the quotation obligation. Although according to the Ministry of Economy the increase of this limit should require notification similar to the RES Act, many experts doubt in that necessity. Combining the quotation obligation with the final gross energy consumption [EU target] rather than with the final net energy consumption is being discussed. This would contribute to an increase of the quotation obligation by approx. 20 percent.

Market maker funds

The market maker funds initially announced by the Deputy Minister of Economy Mr. Pietrewicz to stabilize the price on the Warsaw Power Exchange at a certain level of the compensation fee – between 85 and 75 percent - are subject to ongoing discussion. The Ministry is considering the cleaning of the system of non-redeemed (banked) green certificates after redemption of green certificates and payment of the compensation fee. The market maker funds should be provided with an initial payment by the Environmental Funds NFOS at an amount of 1 billion zloty and should receive payments from power production and distribution companies.

Trade limitations with green certificates

The plans to limit the validity of green certificates to a period of 24 or 36 months to avoid “certificate stashing” are getting common sense. Actually, green certificates issued in 2006 and 2007 are still on the market which causes uncertainty. Additionally, an obligation to trade at least 50 percent of green certificates on the power exchange is being discussed. Only 20 percent of green certificates are traded on the power exchange now, the remaining certificates are traded OTC, often within large vertically integrated energy groups. An obligation makes sense if it is linked to a market maker funds as discussed above. Furthermore, payment of compensation fees under certain circumstances will be prohibited, e.g. if the price of green certificates on the Power Exchange amounts to less than 75 percent of the compensation fee.

Limitation of co-firing

In the draft of the RES Act and the act implementing the so-called tri-pack of October 9, 2012 the legislator proposed to exclude the co-firing installations from the system five years after a given installation receives its concession as a RES installation. A significant majority of the operating co-firing installations were granted concessions in 2008 and 2009. Hence, exclusion from the system would take place shortly after the entry of the RES Act into force. Due to the intervention of the Ministry of the State Treasury this solution did not win governmental support. Actually, the main players including PGE propose a limitation of so-called direct co-firing [burning of coal and biomass in the same boiler] at the existing level for the already licensed installations. Co-firing would therefore slowly disappear if these installations are shut down due to LCP directive and technical acceptance test. Indirect co-firing [co-firing of biomass in a separate boiler with injection of cinder into the coal burning boiler] will still be allowed. In Poland direct co-firing constitutes more than 90 percent of co-firing. The fact that direct co-firing will not have its market maker function in the future is of the greatest importance.

Limitation of biomass imports

Although the Minister of Environment announced ongoing consultations to implement a regulation limiting biomass imports a month ago, it is already known that such a solution would not be allowed by the EU law. Nevertheless, a system of obligatory biomass certification according to ISCC or REDCert or other authorized systems is still under discussion. In other countries, such as in Germany, the utilities have already implemented a self-obligation to burn only certified biomass. A regulation at a European level is expected soon.

No support for large depreciated hydropower plants

Large hydropower plants built a long time ago still receive support as RES installations. The Deputy Minister correctly described this support as useless. Large depreciated hydropower plants produce approx. 1.5 TWh of green power which will disappear from the support system, thus decreasing the risk of oversupply.


  Facing a potential risk of blocking a renewable energy investment
 

According to recent publications related to the investments in the renewable energies sector, potential investors should take into account the risk that their planned investments may be blocked or in somewhat less extreme scenarios they may be significantly delayed due to unfavorable interpretation and application of the provisions of law by Polish authorities. It is indicated that when a motion for an environmental decision for a fictional investment on the real estate where an investment is to be based or in its neighborhood is filed by someone having no legal rights to the said real estate, for instance by a "pseudo-ecologist" or by competing investors, it may have detrimental impact on the actual investment in the renewable energies sector because certain communes interpret the law in such a way that more than one proceeding concerning the impact of the investment on a given area cannot be conducted at the same time. Please note however that such a conduct is based on incorrect interpretation of the provisions law. Although it is suggested that the requirement of having a right to real estate could solve the above described problem, in practice most often the potential investors at such an early stage do not even have lease agreements concluded because they are not sure whether the investment will be profitable or whether the bank will agree to support the investment financially. Furthermore, it is also suggested that the requirement of placing a deposit could eliminate those primarily intending to disturb the investment.


 

For more information please contact:

 

       

dr Christian Schnell
coordination/transactions/
venture agreements
cschnell@dms.net.pl
 
C. David DeBenedetti J.D.
project finance
ddebenedetti@dms.net.pl
 
Joanna Świostek
project development/planning
and building law/commercial
jswiostek@dms.net.pl




DeBenedetti Majewski Szcześniak has been chosen
by Corporate Intl Magazine 2012 as the:

“Renewable Energy Law, Firm of the Year in Poland”

“Project Finance Law, Firm of the Year in Poland”

“Investment Funds Law, Firm of the Year in Poland”

 
 

 

 
 

The aim of this Newsletter is to provide a summary of the subject matter. No part of this Newsletter constitutes legal advice or can replace expert legal advice in specific circumstances. If you would like any further information, contact us.

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