Informacje

DMS
  September 15, 2015

 
 

RES News flash


Publication of the draft of the regulation of the Minister of the Economy regarding reference prices

The Ministry of the Economy has published its draft of the regulation regarding reference prices for particular types of renewable energy installations, which reference prices, according to art. 77 sec. 1 of the Polish RES Act, will be the maximum allowed price by which an offer for purchasing renewable energy produced in a RES installation may be submitted to the auction procedure in 2016.

A reading translation of the draft provision regarding the reference prices can be downloaded here.

Please note that the reference price is also a key factor in determining the maximum allowable public aid for a RES installation during the period in which a contract obtained in the auction procedure shall be in force (i.e., 15 years).

The detailed procedure for the calculation of the total value of public aid for producers of electricity from a renewable energy source shall be set forth by means of a separate regulation of the Minister of Economy (draft on that regulation is available in the Government Legislation Centre website: http://legislacja.gov.pl/projekt/12275701, please contact us for details of the draft in English).

According to art. 39 of the RES Act, the total value of public aid for producers of electricity from a renewable energy source in renewable energy source installations (including aid granted by obtaining a contract in the auction system) cannot exceed the difference between:

   a) the product of the amount of electric energy declared to be sold by the producer during the execution of the contract obtained on the auction (in MWh) multiplied by the reference price; minus
   b) the product of the amount of energy declared to be produced during the execution of the contract obtained on the auction (in MWh) and the average electricity sales price on the competitive market, announced by the President of the Energy Regulatory Authority (President of URE), applicable as    of the day when the bid was placed by the producer.

that is

                                                    Amax = ( Iwoze × Cref ) - ( Iwoze × Cure )
where

Amax is the maximum amount of public aid for a particular installation;

Cref is the reference price for a particular type of installation;

Iwoze is the amount of electricity produced by a renewable energy source that will be sold over a period of 15 years, bid by the producer in the auction system, in MWh;

Cure is the average electricity sales price on the competitive market, announced by the President of URE;

The most important part of the regulation on the procedure for the calculation of the total value of public aid from the point of view of investors thinking about new investments is the procedure of calculating the amount of public aid granted within the auction process. The amount is calculated as: 

                                                    Awoze = ( Iwoze × Cwoze ) - ( Iwoze × Cure )

where:

Awoze is the amount of public aid obtained by awarding the contract under the auction system;

Cwoze is the gross price for 1 MWh of electricity bid by the producer within the auction system in PLN;

(other definitions presented above apply).

By subtracting the amount of public aid granted by means of the a contract awarded in the auction system and the maximum amount of public aid, one may calculate the maximum amount of other public aid which the producer may obtain from other sources (e.g. EU structural funds, “green certificates” etc) for financing the expenses connected with the RES installation.

This “free amount” (Ao) of public aid shall be calculated as follows:

                               Ao = Amax - Awoze = Iwoze × Cref - Iwoze × Cure - Iwoze × Cwoze + Iwoze × Cure =
                                                          = ( Iwoze × Cref ) – ( Iwoze × Cwoze )

We prepared two simulations – for a new 3 MW wind turbine and a new 1 MW solar farm. For the purposes of the simulation we shall use the average electricity sales price in the competitive market for 2014 (announced by the President of URE on March 30, 2015: http://www.ure.gov.pl/download/1/7440/InformacjaPrezesaUREnr12wsprsredniejcenynarkonkurencyjnymza2014.pdf) amounting to PLN 163.58 / MWh. We assumed that the installation will produce the same amount of energy applicable for sale within the framework of the awarded contract for 15 years.


Example 1.

Technology: onshore wind;

Capacity: 3 MW;

CAPEX: PLN 18,000,000.00 (roughly EUR 4,500,000.00)

Yield bid (Iwoze): 10,000.00 MWh/yr

Price bid (CWoze): PLN 323.00 / MWh

The Ministry has now proposed that the reference price for this type of installation (Cref) is to be PLN 385.00 / MWh.

In this example:

Amax = PLN 33,213,000.00;

AWoze = PLN 23,913,000.00;

Ao = PLN 9,300,000.00.

Thus, in this example, it will be possible to seek public aid from other sources in the amount of PLN 9,300,000 or roughly 2,200,000 EUR.


Example 2.

Technology: photovoltaic farm

Capacity: 1 MW;

CAPEX: PLN 2,800,000.00 (roughly EUR 700,000.00);

Yield bid (Iwoze): 900 MWh/yr

Price bid (CWoze): PLN 410.00 / MWh

The Ministry has now proposed that the reference price for this type of installation (Cref) is to be PLN 465.00 / MWh.

In this example:

Amax = PLN 4,069,170.00;

AWoze = PLN 3,326,670.00;

Ao = PLN 742,500.00.

While here it would be possible to locate up to 742.000 PLN of aid from other sources.

To sum up, the formula for calculating the public aid and the proposed reference prices clearly encourage more efficient types of RES installations. The general rule – the more the installation yields – the more public aid is available has to be taken into consideration when planning the financial side of the investment.

Please contact us with any questions and let us know your thoughts on this draft.

 
Michał Szpakowski
energy law
mszpakowski@dms.net.pl

 

Awards and recommendations 

Legal 500 2013: energy and natural resources

IFLR 2012, 2013 and 2014: project finance

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

 
 

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