Informacje

DMS
  September 3, 2013

  DMS News. Osborne Clarke, Dauerkraft and DMS inform about perspectives for onshore wind in Poland.
 

International law firm Osborne Clarke, Dauerkraft Renewable Energies consultancy and DMS Legal organize a seminar about the perspectives for the onshore wind under the new RES support system in Hamburg, on October 16, 2013 in the premises of Osborne Clarke. Practical experience is provided also by WKN – PNE Group, one of the leading international developers active in Poland, Nordex and Commerzbank AG/BRE Bank. The seminar is a part of the Renewable Energy Hamburg Cluster initiative.
For more information please click here.


  DMS News. Partnership with wysokienapiecie.pl.
 

DMS is a content partner of the energy law newsletter OLE! - Obserwator legislacji energetycznej, published by the webportal wysokienapiecie.pl. Bartlomiej Derski, former Warsaw correspondent of cire.pl, and Rafal Zasun, two of the most recommended journalists focusing on the energy sector, publish in wysokienapiecie.pl. The webportal is supported by leading Polish employer association Konfederacja Lewiatan and by the utilities Tauron, Enea and Fortum. For more information concerning the subscription, please contact Bartlomiej Derski at bartlomiej.derski@wysokienapiecie.pl.


  Energy Policy. U-turn for the RES support system. Poland is going to implement FiT and auctions.
 

by dr Christian Schnell 

Since the end of 2011 the Ministry of Economy has been trying to improve the existing quotation system based on the trade in green certificates. The last official version of the RES Act was published in October 2012, but the Ministry of Economy could not pass the RES ACT through the Steady Committee of the Ministers’ Council. Unexpectedly, at the end of November 2012 the Minister of Economy Waldemar Pawlak, a dinosaur of Polish politics, was replaced by Janusz Piechocinski, a relatively newcomer and new head of the smaller coalition partner PSL, a rural party. This movement logically affected the political enforcement of the RES Act draft. Then the green certificate market struggled at the beginning of 2013, and the RES support system became a major political issue. Logically, the Economics Council and the Strategic Department of the Prime Ministers’ Office started to analyze the actual situation. First, they started to work on an energy mix for 2060 from scratch, mainly based on the analysis of figures and presented the cheapest mix for Poland for the next decades. The first results were somehow astonishing – black coal is supposed to be the cheapest energy source until 2060, but the document is far from final. Nevertheless, Poland should revise its strategy for the energy sector until the end of this year. As renewables are part of a bigger system, the decision makers started to be interested in the RES support system as well. At the end of spring an informal working group started to meet regularly at the Prime Ministers’ Office to discuss pros and cons of the future support system. At first, it looked like an open discussion, even an implementation of a quick solution seemed to be possible for the time being. But now the fog has lifted.

The outcome is as follows: Poland is going to introduce feed-in-tariffs, a support system cheaper and easier to handle than a quotation system. Mr. Piechocinski confirmed this officially on August 23, 2013. And the second part of the news is: the FiT will be distributed via an auction system. Thus, Poland will generally take the same way as Italy has recently done. Nevertheless, the experts with the Ministry of Economy first analyzed the Dutch experience, where the auction system has been in place for a longer period of time. The Dutch system had its downturns in the last years with less than 10 percent of the successfully tendered projects realized, but recently the system seems to be speeding up the real investments and project finance schemes are being introduced. The Polish legislator is convinced that Poland can learn from this experience.

Thus far, no details of the support system have been known, but some elements are already clear. The auction system should support the most efficient technologies, which favors larger onshore wind projects with large rotor blades and relatively low CAPEX costs. There is no cheaper way of producing green energy with new investments. Another important factor is the achievement of grid stability. Biomass burning installations, biogas installations and (small) hydropowers are able to provide electric energy on a more frequent basis than wind and PV do. So, it is possible that the auction system will treat wind and PV in different way than biomass, biogas and hydropower. The next important factor constitute new investments. Poland needs to support new investments. Co-firing and depreciated large hydropower plants are anything but a new investment. So these technologies will be phased out from the FiT/Auction system. And finally Poland wants to avoid unreasonable profits, for which the consumer has to pay. So any offer above a certain CAPEX/OPEX calculation already being the basis for the calculation of the so-called correction coefficient in the RES Act published in October 2012 (i.e. an average reference price for a given technology) should not be allowed to take part at the auction. But who is going to organize auctions? From the political point of view the ERA (Energy Regulation Authority) should be a guarantor of a fair play of all participants. But the ERA is completely unprepared and needs a budget increase to create new workplaces, so maybe ERA delegates this obligation to the Power Exchange?

Another important question is timing. It is likely that the government will consult only the fundamentals of the new RES Act, rather than the whole draft as such. The government seems to be quite determined to push the RES Act through, so the first presentation of the fundamentals by the end of September is realistic. A draft could therefore enter the parliament even before the end of this year. As Poland finds it difficult to fully implement the RES directive 28/2009/EU by the already passed small tri-pack, fines for the lack of full implementation after Q1 of the next year are still possible.

Like always one of the most actual questions relates to the transition period. Italy needed two years to implement an auction system. The auction system started in January 1, 2013. According to this experience, an auction system could be introduced by January 1, 2016. For the existing projects, the situation is somehow tricky. The government unofficially claims that investors who connected before December 31, 2012 should have been aware that the quotation regulation in force since 2008 published a quotation only for a period ending in 2017. Generally speaking, from 2018 there are no so called acquired rights (according to bilateral investment treaties) that a certificate system will still work. Nevertheless, according to the energy law, the government is obliged to publish a quotation for the next 10 years. It did so at the end of 2012 and published a quotation valid until 2021. Therefore, the situation is unclear, and a compromise should have been found. It seems unreasonable to keep the certificate system alive after 2017, similarly to eliminating all support by the end of 2017 as well. After 2018, a separate feed-in-tariff will most probably be the cheapest solution, e.g. based on the 2013 to 2017 average. With limited amount of co-firing at the moment of implementation of the new RES Act and with the lack of support for large hydropower plants the development of the certificate price might be quite promising and exceed PLN 200 considerably, so the government might at a certain moment start to offer investors a flat rate of e.g. 380 PLN/MWh in total to achieve a cheaper solution. Among the important stakeholders to agree to a compromise in the nearest future are the Polish Wind Energy Association and the owners of large biomass installations such as GDF Suez or PGE. Another unknown element constitutes the development of the average price for electric energy, the ERA-price published every year and guaranteed for green energy producers.

DMS Legal will keep you informed about further news regarding the support system and would be pleased if you joined as on our seminar on October 16, 2013 in Hamburg.

 
dr Christian Schnell
coordination/transactions/
venture agreements
cschnell@dms.net.pl

  Energy Policy. Non-certified forest biomass under trouble. Green certificate price recovers.
 

by dr Christian Schnell 

At the beginning of July we predicted an increase of the certificate price to PLN 200/MWh if biomass firing in dedicated installations and onshore wind took over a market maker function. It seems that this development is already ongoing with an average certificate price of PLN 179 on the Polish Power Exchange in the period between August 20 and August 29. So, recently a RES installation “earns” 380 PLN/MWh or respectively 8,94 Eurocent/kWh. The average price for the combined PX and OTC index, the so-called POLPX index, amounted to PLN 207, with a volume on the OTC market being still four times higher than on the Power Exchange. 

Since the beginning of 2013 utilities burning (non-certified) forest biomass (co-firing or dedicated installations) question the approach of URE requiring full documentation that burned forest biomass does not state the quality of wood in accordance with the Polish legal requirements. The definition was changed by December 31, 2012, and as utilities were used to fire non-certified forest biomass, they find it difficult to fulfill the requirements of ERA. At least ERA has already agreed that for the electric energy produced by forest biomass until December 31, 2012 the procedure will be somehow simplified, which pushes an amount of 1.5 to 2 TWh of green certificates on the market within the next months, when an amendment to the relevant regulation dated October 18, 2012 will be published. But for 2013 production based on forest biomass the view is less optimistic. The ERA has recently proposed to implement a certification obligation on voluntary basis. Although implementation of a Polish certificate system is time consuming, Polish biomass producers could easily certify according to REDCert/EU or ISCC/EU standards for the time being. For biomass exports to Germany they already do so. Therefore, it seems not to be a lack of Polish speaking auditors. Also biomass importers could import certified biomass according to the same standards or the FSC standards, which would allow the ERA to prove whether the burned forest biomass complies with the Polish standards. A third option is to burn only the agricultural biomass as Tauron has recently done. Of course certified forest biomass and agricultural biomass are more expensive, and a stable certificate price plays a more important role in securing a reasonable profit. Thus, the utilities should be interested in behaving more reasonably in the future than in January of this year, where they started to float the market with green certificates contributing to the price collapse.


  Legal Insight. “Small tri-pack” and RES directive.
 

by dr Christian Schnell 

The purpose of the amendments to the Energy Law Act and Certain Other Acts dated July 26, 2013 (“Small Tri-pack”) in their primary assumptions was to fully implement the Directive 2009/28/EC on the promotion of the use of energy from renewable sources (“RES Directive”). Only certain provisions of the RES Directive have been implemented, though, still in an incomplete or selective manner, while the remaining have not been implemented at all. Several detailed analyses of the implementation process demonstrate non-compliance of the Small Tri-pack with the RES Directive. Firstly, due to the failure to ensure the priority access for the electricity from renewable sources of energy, and secondly, by allowing a power utility to refuse the ordinary (non-priority) access by requiring an undefined “technical and economic conditions for connecting to the network and receiving electricity”. Despite the advantageous provisions of the amendment which introduce an exemption for micro installations from the charge for connection to the distribution network, which will facilitate its development, the RES Directive imposes an obligation to ensure the priority access for all renewable energy installations, irrespective of their capacity or type. Additionally, the required substantial streamlining and expediting of the national administrative procedures allowing for the development of renewable energy, including in particular those concerning the obtaining of access to the grid, spatial planning and development and environmental impact assessment are of particular importance for the investments in renewable energy sector. The small Tri-pack does not contain any provisions of a deregulatory nature, and thus, it fails to properly implement the RES Directive also in this respect, by neither reducing the administrative barriers nor ensuring that they are proportionate and necessary. Given the concerns which the Small Tri-pack has raised in respect of the improper implementation of the RES Directive, it is highly probable that the action of the European Commission against Poland dated March 21, 2013, imposing a financial penalty amounting to EUR 133,228.80 for each day without transposition of the RES Directive, might be partly successful without further legal steps.


  Legal Insight. “Small tri-pack” and FiT for micro installations.
 

by dr Christian Schnell 

The “small tri-pack” will be in force soon, but it still seems to lack clarity as regards the support for micro installations.
The Law has created two new types of production installations:
   • micro-installations – RES with a total installed capacity up to 40 kW power (connected to the grid below 110 kV) or 120 kW thermal.
   • small-installations – RES with a total installed capacity of 40 kW to 200 kW power (connected to the grid below 110 kV) or 120 kW to 600 kW thermal.
It also introduces a price an energy producer receives for the sale of a surplus electric energy to the obliged purchasers. The price amounts to 80% of the average energy price for the previous year published by the ERA, which currently amounts to PLN 200/MWh. The intention of the legislator was not to motivate consumers to buy conventional power for a cheaper price and sell produced green energy for a higher price. Including the transmission and distribution grid fees, the final price to be paid by the consumer amounts to PLN 600/MWh, so logically a producer of green energy should receive 80% of this amount. But unfortunately a producer of green energy receives only PLN 160/MWh. So micro-installations pay off only as saved costs, rather than as profits from energy production. Nevertheless, the National Fund for Environment implements support schemes to partly refund micro installations, mainly rooftop PV, with great success thanks to enormous interest among the Polish energy consumers.


  Legal Insight. Environmental procedures for PV installations.
 

by Joanna Świostek

Classification of photovoltaic installations as undertakings that could potentially have impact on the environment within the meaning of the Regulation of the Ministers’ Council and as such – depending on the individual assessment– that could require that an environmental impact assessment be carried out has thus far not been unambiguously settled in the Polish legal regime. Pursuant to the interpretation of the General Directorate for Protection of Environment the development of the land with photovoltaic installations should be treated as industrial development which if exceeded the area stipulated in the regulation constituted a type of an undertaking that could potentially affect the environment. Nevertheless, it was not a binding interpretation and practice of the bodies of municipalities in this respect was not consistent.

On August 1 this year an amendment to the regulation of the Ministers’ Council was introduced whereby the development with photovoltaic systems is directly treated as a type of the industrial development. Presently – in compliance with the wording of the Regulation – an undertaking that could potentially have impact on the environment is an industrial development, including a development with photovoltaic systems, or warehousing development with an associated infrastructure with a development area no lower than 0.5 ha on areas subject to other forms of protection of nature or in the areas directly adjacent to these forms of protection of nature, however no lower than 1 ha on other areas, with the reservation that the development area should be understood as the area covered by the building structures and the remaining areas designated to be transformed as a result of the performance of the undertaking. Thus, before the photovoltaic systems, the developed area of which along with the infrastructure exceeds the values stipulated above, obtain a planning permit or a building permit they require an appropriate environmental procedure and an appropriate decision declaring that a given undertaking does not require an analysis of the impact on the environment or a decision on environmental conditions of the undertaking.

 
Joanna Świostek
project development/planning
and building law/commercial
jswiostek@dms.net.pl

  Legal Insight. Procedure in front of the Competition and Consumer Protection Court from the point of view of an entity applying for connection - practical remarks concerning the initiative to take evidence.
 

by Janusz Strankowski 

For entities applying for connection to the grid, the procedure in front of the President of the ERA and the Competition and Consumer Protection Court is often a necessary way to implement an investment consisting in the development of a wind farm. Despite the seemingly quite unambiguous European regulations that could facilitate the development of the renewable energy sector, Polish operators often say no to the entities applying for connection or issuance of conditions of the same or execution of the agreement itself. In the more and more frequent situation, in which the operator of the National Electric Energy System refuses to agree the conditions of connection to the distribution grid for the potential threat to the system it is of particular importance, which in fact decides of the effectiveness of the appeal filed.

One of the most present problems as part of the procedures concerning the connection seems to be the issue of contradictority of the procedure initiated by an appeal against the decision of the President of the ERA – which in a nutshell translates to the evidence initiative, time and types of evidence as well as the need to react to the actions of other participants, in particular the system operators. The juristic structure of the appeal procedure consisting in the transfer of the appeal against an administrative procedure to the court is rather exceptional and quite rare in the Polish legal system – an example of such a structure constitute also, for instance, a procedure concerning the appeals against the retirement decisions, or for instance appeals against the decision updating the annual fee for the perpetual usufruct of the real estate. This often causes problems and mistakes at the stage of the court procedure. It turns out that entities connected often structure their appeal in such a way as if they constituted appeals against the administrative decisions addressed to the administrative courts and concentrate only on pointing out the mistakes on the part of the President of the ERA as regards the evidence collected in the procedure preceding the issuance of the decision, or presenting their own views which are contrary to the decision. The entities often “forget” that the appeal “replaces” a statement of claim and initiates a contradictory, litigious court procedure which aims not only on the verification of the correctness of the position of the President of the Office of Energy Regulation but also on the settlement of the case concerning the connection to the grid. Thus, the most practical consequence of the shift from the administrative to the court procedure constitutes the need that the entity applying for connection shows broad evidence initiative. From an official procedure in which the initiative to settle the major circumstances of the case pursuant to Article 7 of the Code of Administrative Procedure is on the President of the ERA, being the authority in force, one moves to a procedure that requires that the participants be much more active. If an entity applying for connection does not show a far reaching initiative as regards the collection of evidence in the court procedure, often it may face nothing more but a failure. According to the analysis of the course of the procedures in front of the Competition and Consumer Protection Court, entities applying for connection to the grid are often quite passive at the stage of the court procedure and do not use the basic source of evidence in this procedure, which seems to be an expert opinion. As far as it is difficult to question, for instance, the arrangements of the President of the Energy Regulatory Office which are beneficial for the system operator by witness testimonies or even evidence in the form of documents, an opinion of a person who has special knowledge often constitutes the only method of questioning the position of the system operator. It turns out very rarely that the operator of the distribution systems as well as the operator of the National Electric Energy System base their decisions on their own opinions and analyses that can be verified only by an opinion of an expert witness. Such an opinion, if necessary in the circumstances of the case, should in our opinion be submitted as early as at the stage of the procedure in front of the President of the ERA, while if it was not prepared, the procedure in front of the Office of Competition and Consumer Protection is the very last moment to submit such a piece of evidence. What is more, for the present procedural regulations which oblige the parties to concentrate the motions to take evidence and theses, it seems that an appeal against the decision of the President of the Office of Energy Regulation is the place where a motion to prepare such an opinion should be formulated. Similarly, the text of the appeal should contain motions to take evidence and theses that could be formulated at this stage.

Nevertheless, one should not forget that in the procedure in front of the Competition and Consumer Protection Court the code of the administrative procedure gives the capacity to act as a party in the court to the President of the ERA as well as the parties to the procedure pending thus far, who together with the President of the ERA are parties to the procedure. Therefore, on the one hand, at the initiative of these entities new pieces of evidence important for the settlement may be submitted, while on the other hand, their passiveness – either through decision to not take the initiative to take evidence or through the lack of effective questioning of the position of the appellant - may facilitate the obtaining of a positive settlement.

Summing up, the legal structure of an appeal in front of the Competition and Consumer Protection Court forces and promotes active conduct of entities applying for execution of the grid connection agreement, and in the majority of cases does not allow to simply negate the same. A civil procedure gives a wide scope of possibilities, which unfortunately are rarely used by entities applying for connection, which cannot effectively negate the wrong position of the operators, including the National Electric Network operator. Therefore, they are worth to remember when you decide to take such a path of implementation of the investment.

 
Janusz Strankowski
litigation/regulatory
jstrankowski@dms.net.pl

 

DMS recommendations 

Legal 500 2013: energy and natural resources

IFLR 2012 and 2013: project finance

Corporate Intl Magazine 2012 and 2013: renewable energy and project finance








Our texts are published in  

 

 
 

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.

Subscribe now or click here if you wish to unsubscribe from the DMS Newsletter