On 18 February 2021, the Act on the promotion of power generation in offshore wind farms, i.e. the Polish Offshore Wind Act (“OWA”) will become effective. The OWA provides a comprehensive regulatory regime for the development and support of offshore wind farms (“OWFs”) in the Polish exclusive economic zone in the Baltic Sea.
The key matters regulated in the OWA are: (i) a support scheme for offshore energy, (ii) a regulatory regime concerning the maximum price of power, (iii) a regulation concerning OWFs grid connections, (iv) a reset of existing seabed permit proceedings regarding OWFs projects, (v) the supply chain plan, and (vi) fast-track permitting procedures.
The large energy potential of the Baltic Sea, estimated at 80-90 GW (depending on the methodology used) makes it an area with the second-largest offshore wind potential in Europe after the North Sea. The OWA allows Poland to use this potential – Poland can become a leader in offshore wind development in the Baltic Sea, with its target installed capacity of 28 GW in 2050, providing one-third of the total capacity that could be built in the region. By creating a regulatory framework for the offshore wind sector, Poland will join the implementation of the European Green Deal, opening the possibilities for investors to obtain additional funding for energy transformation.
The OWA provides for a support scheme for OWF project owners (beneficiaries). The support is based on the contract of difference formula – this will create the right to settle the negative balance resulting from the difference between the average market price and the strike prices (“CfD”). In the case of a positive balance, the beneficiary will be obligated to pay back the surplus. The beneficiaries will be entitled to a CfD-based subsidy for 25 years (counting from the first power generation). The subsidy will be capped by multiplying 100,000 hours and the installed capacity of the OWF. The beneficiaries will be obliged to generate power and feed it into the grid within 7 years of the date the CfD was awarded.
The OWA defines two different schemes in which the CfD may be awarded, i.e.
Stage I (only for the most advanced projects) – support granted by means of an administrative decision issued by the President of the Energy Regulatory Office (”CfD Decision”), and subject to the individual notification of State aid to the European Commission,
Stage II – support granted within the auction-based incentive scheme.