October 31, 2013

  New RES Act draft to be presented at the first half of November by the Ministry of Economy.

At the first half of November, the Ministry of Economy is going to publish the new RES Act draft to be implemented in 2014. After public consultations, the new draft should enter the parliamentarian legislation proceedings before the end of this year. Implementation of the RES Act by the end of of 2014 still seems likely. Since Poland follows the recommendation of DG Competition, the pre-notification process should be relatively smooth. Most of the major stakeholders such as the RES Council with the leading employers’ association Konfederacja Lewiatan, the Polish Wind Energy Association PSEW and the Polish Bank Association ZBP positively assessed the new support system.
Poland is going to introduce feed-in-tariffs to be distributed via an auction system. Poland, therefore, follows the recommendation of DG Competition. The FiT/Auction system will most probably not implement any technology baskets, as the auction system should support the most efficient technologies. One quarter of the yearly support for new projects goes to installations of up to 1 MW. The electric energy produced by RES installations permitted in an auction should be primarily purchased by a state-owned “single buyer” Sprzedawca Energii Odnawialnej S.A., whereas SEO was supposed to sell the acquired electricity on the power exchange, while the difference between the purchase price and the sale price should form part of the compensation to be calculated as part of the distribution tariffs. Actually, it seems that the government favors contracts for difference where RES-producers sell their electric energy at the power exchange and another state-owned (existing) entity Zarządca Rozliczeń S.A. compensates the difference between the non-indexed contracted FiT and the sale price which will be calculated as part of the distribution tariffs and finally paid by the consumers.
The recent quotation model supporting green energy by green certificates won’t be phased-out by 2021 as it was primarily intended, but it will last for 15 years after the RES Act enters into force. This is of major importance for the already concluded long-term CPA’s and the existing project finance schemes with loans amounting to approximately PLN 8 billion. It is also likely that the concluded long-term CPA’s will be excluded from the obligation to trade a certain percentage of green certificates at the Power Exchange. It is still unclear whether the compensation fee will be valorized by the consumer index or frozen at the existing level. Unfortunately, the quotation obligation will not be published 10 years in advance according to the existing energy law but from year to year. Therefore, the political risk with the certificate system increases substantially.
The government will introduce a FiT/Auction system for the existing installations – including installations to be commissioned and licensed within two years after the new RES Act entered into force - on a voluntary basis. Investors can switch from the green certificate system to the FiT/Auction system for the existing installations at any time. Neither the auction system for new projects nor for the existing installations will implement a minimum bidding price.
The support system will provide certain limits for a number of technologies. Depreciated large hydropower plants with more than 1 MW installed capacity (major stakeholders require an increase of the limit to 5 MW) will be phased out from the existing support system and naturally will not form part of the FiT/Auction system. So-called direct co-firing with an average solid biomass share of less than 30% yearly will receive one certificate per 2 MWh (instead of one certificate per 1 MWh as all other operating RES installations). Co-firing is not allowed to start at auctions too. Support for biomass installations is capped at a level of 50 MW-e of the installed capacity or 100 MW including thermal power.
To take part in an auction, an investor has to prequalify his project. Generally, a project has to be almost fully permitted – master plan or building conditions, environmental permit, grid connection conditions, but no construction permit. Additionally, a timeframe for the construction of the project has to be presented and capability proof that the investor is able to realize the project within the declared time frame. Finally, a financial proof (bank statement) or alternatively a deposit will be required to take part in auctions. After the auction, the investor will have 4 years to connect to the grid and start to produce electricity.
The market outlook for the next years is sophisticated. Onshore wind seems to be the winner but planning and environmental hurdles will not make its life easier in the future. Therefore, projects have to be checked more carefully as regards these risks. In 2014 onshore wind projects at a RTB stage may start new auctions, or can be constructed within the 2Y transition period to start at auctions for the existing projects most probably facing less competition. Without any doubt this solution seems to be a better alternative for projects with an average productivity due to wind conditions and smaller blades. Hence, one major question in 2014 will be if and under what conditions construction finance will be available for these projects. Solid biomass has already had its best times ahead and will have problems to take the 15-years’ price risk with the increasing price for solid biomass. Therefore, only a few larger brownfield investments may be able to compete with onshore wind. All other techniques will rather compete within the 1 MW basket. Biogas has a similar price risk with long-term substrate delivery contracts as biomass. Hydropower seems to be too expensive due to environmental obligations. And onshore wind pays off rather at a larger scale, as small installations will face the same planning and environmental hurdles as larger projects. Therefore, ground-mounted photovoltaic installations should become really competitive. Nevertheless one tendency is clear: the Polish RES market will be more professional as in the past, and non-experienced private business will have problems to keep the path.
And finally, micro-installations: they will rather not develop on a recognizable scale with a 4 Eurocent FiT as long as net-metering is not implemented. And even with net-metering direct subsidies, it seems that it will still be necessary to convince consumers that it is worth to produce their own electricity.

dr Christian Schnell
venture agreements

  Location of photovoltaic installations in the master plan.

Confirmation of the admissibility of the location of photovoltaic installations on a certain area in accordance with the provisions of a binding master plan (miejscowy plan zagospodarowania przestrzennego – MPZP/PL) is of key importance for any investor planning such investment. There is no doubt that photovoltaic installations, i.e., investments including the construction of photovoltaic panels used to generate energy which are combined and attached to the inverter and which are placed on the structures (profiles) directly attached to the ground, constitute production investments. What constitutes their specific feature is the fact that they are used to generate energy from the renewable sources. In certain municipalities, municipal offices issue written statements confirming that the location of photovoltaic installations along with the accompanying infrastructure (cable lines and container end-user station) will comply with the provisions of the master plan where production functions constitute the primary designation of a given area. Occasionally, they are also supported with information that location of technical infrastructure devices is admissible as part of the supplementary function. From the technical point of view, photovoltaic installations undoubtedly constitute technical infrastructure devices. Nevertheless, admissibility of the location of the photovoltaic installations of the capacity exceeding 100 kW on the areas which the plan generally designates for the production purposes (usually marked with P symbol) but does not expressly indicate a given type of RES devices with the capacity exceeding 100 kW, may raise certain concerns. Pursuant to the Act on Management and Spatial Planning (as amended by the bill in force since September 25, 2010), the master plan determines (depending on the needs of a given municipality) the borders of the areas for construction of devices producing energy from the renewable sources with the capacity exceeding 100 kW and the borders of their protection areas which are associated with the limitations in the development, management and occupation of the area and existence of major impact of these devices on the environment. One should also bear in mind the requirements stipulated in the Energy Law. An applicant shall attach to the motion for connection conditions (for sources other than micro-installations) an extract from the master plan or a planning permit confirming the admissibility of the location of a given source on the area where the said investment is planned. The Act requires that a given source, i.e., a specific source for which the applicant applies for the grid connection conditions, be admitted. Therefore, it does suffice if the area is generally designated for the production purposes, even if the plan contains additional provisions on promotion of ecological actions through elimination of traditional sources of energy and their gradual replacement with renewable energy sources. Photovoltaic installations have far less impact on the environment than wind installations. Nevertheless, protection areas for them need to be determined, at least through indication that the impact of the installations does not go beyond the borders of the area on which their construction was allowed. What might be necessary though is the determination of limitations in the development in the areas directly adjacent to the borders of such area, for instance due to the possible shadow coverage and lying of the cable line. Therefore, to avoid legal defects in resolutions adopting the master plans that would allow the investment opponents appeal against them or that would hinder the implementation of the planned RES projects, the urban planners preparing a new master plan or an amendment of an existing master plan as a result of an investor’s initiative should take care that the master plans establish the borders of protection areas either in the text of the plan alone or, if necessary, also in a drawing. A proper approach will be of major importance to pre-qualify for future auctions.

Joanna Świostek
project development/planning
and building law/commercial

  Legal risk connected to a decision on site location of a public purpose investment issued for wind turbine generators or photovoltaic power plants.

In the past many investments have been undertaken on the basis of a public purpose investment. But the legal risk with these investments increases. Pursuant to Polish law, only such investment may be deemed as a public purpose investment that has been included in a catalogue of public purposes determined in the Act of Real Estate Management. In the judgment of May 11, 2011 the Supreme Administrative Court decided that the law does not allow to treat the construction of wind turbine generators (energy generating devices) as public purpose investments since this type of an investment does not consist in the construction and maintenance of drainage network, wires and equipment used in the transfer or distribution of liquids, steam, gas and electricity as well as other objects and devices necessary to use these wires and equipment. Neither does it fall within other public purposes referred to in this provision. The administrative courts took analogical standpoint with respect to the photovoltaic collectors. The investment consisting in the assembly of photovoltaic collectors on the area for which no zoning plan has been adopted, which is not a public purpose investment, requires a planning permit rather than a decision on the site location of the public purpose investment (“Decision”) – vide judgment of the Voivodeship Administrative Court in w Lublin dated November 20, 2012. Therefore, only the development of the external power cable network being an element of the associated infrastructure of the wind or photovoltaic power plant planned to be located on the area that is not covered by local zoning plan may be subject to the Decision. In light of this reasoning, there are no grounds to commence a procedure of issuance of the Decision for the wind turbine generator or photovoltaic collectors, and if, nonetheless, such a procedure is instituted and the Decision is issued, it lacks legal grounds and ultimately the final decision may be declared as invalid in the extraordinary complaint procedure. Even though according to the Act on Spatial Planning and Management, the Decision shall not be declared as invalid if 12 months have passed since it was served or announced, the expiry of the 12 months’ deadline does not guarantee that the Decision that has been defectively issued for the wind turbine generator will be safely upheld. As it was determined by the Voivodeship Administrative Court in Warsaw in the judgment of June 19, 2013 (that is not yet final and enforceable) the right to declare invalidity due to the fact that the decision was issued with no legal grounds or in gross violation of law is not limited in time, contrary to several other reasons for invalidity stipulated in the Code of Administrative Procedure, to which this limitation applies. Even though the Act on Spatial Planning and Development does not differentiate the reasons for the invalidity, the Supreme Administrative Court maintains that relevant provisions of the Code of Administrative Procedure should apply in this respect. In practice, even after the lapse of 12 months from the moment of issuance of the Decision for a wind turbine generator, the Decision can be challenged. More to the point, if pursuant to a defective Decision, a building permit has been issued, it can be deemed as invalid too since declaration of invalidity of a decision on which another decision relied substantially, may constitute grounds to declare invalidity of the dependent decision, as issued in gross violation of law. Declaration of invalidity may take place at a request of an authority or a party.

Joanna Świostek
project development/planning
and building law/commercial


Awards and 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


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