January 30, 2014

  RES Act ready for governmental approval

On January 29, 2014 a new draft of the RES Act Version 6.1 dated January 29, 2014 was published after consultation between the Ministries. The Permanent Committee of the Council of Ministers (a representation of the Vice-Ministers) will most probably accept the draft today at the afternoon, and the Council of Ministers (government) itself on the next Tuesday. After the final editorial approval by the legal commission, the RES Act draft will be sent to the Parliament very soon, after more than two years of legislative process. Notification with the EU Commission should start after the first hearing in the Parliament, i.e., this year in March/April. What is of major importance is the change from a feed-in tariff for larger installations of more than 1 MW to a feed-in premium in the means of contracts for difference.

When enacted – the Minister of the Economy promised to finish the parliamentarian legislation process by the end of July 2014 - the RES Act will enter into force 30 days after publication, however without the new support system, changes to recent support system (chapter 4 of the RES Act) and some changes to energy law which will enter into force 12 months after a positive decision of the EU Commission is issued, i.e., most likely by the end of 2015. RES installations can therefore still connect under the green certificate system during the transition period and may therefore take part in auctions for the existing installations. The support system will exist until December 31, 2035, and any RES installation (existing or new) can benefit from the support for a maximum of 15 years.

The new draft implements some important changes in comparison to the version 4.1 dated December 31, 2013: (1) the definition of round-wood not to be used as biomass finally excludes wood classes S2 a/c, i.e., mid-sized round-wood often used by the furniture and paper industry, (2) the operational support by the RES Act will be capped in total to avoid over-support so that any RES installation which enters an auction – as a new installation or as an existing installation - cannot achieve higher support including investment aid, tax or fee reductions and similar than the so-called reference price as an upper limit allows – so called cumulation of aid requirement, (3) the payment of the compensation fee will qualify after all as qualified cost for calculation of tariffs, (4) net-metering with a 6 months billing period is introduced, (5) the support for hydroenergy is limited to 5 MW - rather than to 1 MW, (6) dedicated co-firing installations (concerns only the existing installations with a production potential of 1 – 1.5 TWh per year) - are not allowed to take part at an auction for the existing installations.

Furthermore, the RES Act provides for important changes to the Energy Law act. According to new article 7 sec. 8.1, the realization of a grid connection means the construction of a grid connecting the RES installation with the existing grid. Therefore, the common practice of distribution grid operators to shift grid extension costs to RES producers should find its end. Furthermore, the possibility to connect more installed capacity than the grid connection conditions allow if energy storage covers the surplus of capacity has been removed. Finally, the grid operators have to provide priority access to the grid-system of electricity produced from renewable energy sources according to Article 16 sec. 2 of the EU-directive 2009/28.

Most importantly, the RES Act draft Version 6.1 implements a feed-in premium system (in the means of contracts for difference) to be distributed via an auction system for RES installations with more than 1 MW capacity. According to this support scheme the electric energy produced by RES installations permitted in an auction should be sold at the Power Exchange or OTC, whereas RES producers are refunded with the difference between the strike price and the arithmetic average daily price for electric energy at the power exchange (i.e. index IRDN24). The difference is calculated as part of the grid tariffs and redistributed to RES producers by a new established public entity named OREO on a monthly basis. If the IRDN24 index exceeds the strike price, the difference will be settled in the future monthly billing periods or has to be paid back to OREO 6 months after the 15-year-support period ends if the difference cannot be settled by the end of this period. For installations of up to 1 MW, a feed-in tariff is implemented and the obliged suppliers have to purchase electricity produced by these RES installations as we informed you in our previous newsletter.

According to the Paper of the Services of DG Competition containing draft Guidelines on environmental and energy aid for 2014-2020, certain issues should be still implemented to be in line with the guidelines. The Commission will authorize aid schemes for a maximum period of ten years, i.e., the green certificates system should expire ten years after notification if not re-notified after the end of this period. The new auction system which is generally covered by the general block exemption regulation allows to enter the support system for a 15 year period. Member States may grant aid to small installations with an electricity generation capacity of less than 1 MW, on the basis of feed-in-tariffs, rather than t up to 1 MW as defined by the new RES Act. And finally, small installations with a common connection point to the electricity grid will be considered as one installation. This clause should be also implemented and the ERO should implement this obligation at the pre-qualification.

  Legislative process regarding energy efficiency speeds up

Since no new support system for combined heat power is visible thus far, the Polish Parliament has decided to proceed with the prolongation of the support system until 2018 especially enlarging the quotation obligation for gas-fired CHP plants. According to politicians, the EU Commission agreed to this solution to stimulate new investments. Larger cogeneration installations with electricity capacity exceeding 200 MW will still have to notify the individual aid.

The draft of the Sustainable Building act to implement the EU directive 2010/31 will pass the Ministers’ Council soon. At least partly the second energy efficiency directive 2012/27/EC will be implemented by resolutions in time. Therefore, Poland seems to be prepared for the ex-ante evaluation required by the EU Commission before remitting the EU subsidies. Therefore the next EU subsidy programs concerning the 2014 – 2020 budgeting period should start timely, i.e., at the beginning of 2015.

dr Christian Schnell
venture agreements


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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