Polish incentive schemes for renewable energy generation – March 2019

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I. General overview of existing legal framework

The incentive schemes applicable to renewable energy sources are regulated in the Renewable Energy Sources Act dated 20 February 2015 (“RES Act”) and the secondary legislation issued thereupon.

[Applicability of the main incentive schemes] Under the foregoing legislation, the installations generating electricity from renewable energy sources (hereinafter “RES Installations”) may benefit from one of the following incentive schemes, depending on the date of commissioning of the installation:

(1) CERTIFICATE-BASED SCHEME – applicable solely to the RES Installations commissioned by 1 July 2016;

2) AUCTION SYSTEM – applicable to all RES Installations:

a) commissioned before 1 July 2016 – if the operator of the pertinent RES Installation decided to start in the auction available to such installation and give up the certificate-based incentive scheme upon winning the auction, except for the following types of RES Installations commissioned before 1 July 2016:

  • hydro power installations with total installed electric power exceeding 20 MW;
  • multi-fuel power plants which are not qualified as “dedicated multi-fuel power plants”

b) commissioned after 1 July 2016 and upon completion of the pertinent auction,

c) commissioned after 30 June 2016 but before completion of the auction in which given RES installation was selected – if the entire electricity from such installation generated before completion of the respective auction was sold at the commodity exchange and/or organized market by end of December 2020 and such manner of electricity sale was notified to the President of the Energy Regulatory Office not later than 14 days before the date of commissioning;

– with reservation that the total period of support available to the RES Installation under either certificate-based or auction-based schemes cannot exceed 15 years from first generation.

II. Certificate-based incentive scheme

[General assumptions of the certificate-based incentive scheme – RES installations commissioned by 1 July 2016]

The certificate-based incentive scheme is based on tradable certificates of origin whereby renewable energy producers receive:

a) price for electricity sold at competitive market (with the right of the renewable energy producer to sell the entire generation to the so-called “obligated supplier” at a price equal to the average electricity price in the preceding quarter which is currently equal to PLN 186.21/MWh – approx. EUR 43.30/MWh (based on EUR/PLN 4.30), such right being applicable to all RES installations with installed capacity below 0.5 MW as well as all the biogas-fueled installations), as well as

b) price for tradable certificates of origin granted to the operator of the RES Installation (either as the so-called “Green Certificates” granted for RES Installations other than those fueled by biogas or “Blue Certificates” granted to the biogas-fueled RES Installations), such certificates of origin to be purchased in particular by suppliers selling electricity to final consumers (or major final consumers) and thus burdened with obligation to obtain and redeem certificates of origin up to the redemption quotas specified in the law.

[Redemption quota]

The redemption quotas for certificates of origin create a demand for those certificates and thus have impact on certificates market prices. The RES Acts sets forth the maximum redemption quotas for the certificates of origin (i.e. the obligatory level of certificates of origin that have to be redeemed compared to the total amount of electricity sold to the final consumers in Poland) separately for Green and Blue Certificates at the levels of: 19.35% for the Green Certificates and 0.65% for the Blue Certificates. However, the secondary legislation decreased those redemption quotas to the following levels:

  1. in 2017 – 15.4% for the Green Certificates and 0.6% for the Blue Certificates;
  2. in 2018 –5% for the Green Certificates and 0.5% for the Blue Certificates;
  3. in 2019 – 18.5% for the Green Certificates and 0.5 for Blue Certificates.

As a result, while the redemption quotas for Blue Certificates correspond to the maximum generation from the existing biogas-fueled power plants, the redemption quotas for Green Certificates are much below the level of supply of Green Certificates.

The certificate-based incentive scheme operates so that market price for certificates should not exceed in practice the so-called “substitute fee” (“buy-out” price) which is an alternative method of fulfillment of the obligation to obtain and redeem certificates of origin. Such substitute fee is currently calculated separately for each type of certificates of origin (Green Certificates and Blue Certificates) as 125% of the annual weighted-average market price of respective certificates of origin calculated for the last year but not more than PLN 300.03/MWh (approx. EUR 69.77/MWh) and such substitute fee operates as a cap for the market price of certificates. In practice, as of February 2019 the average-weighted market price of the property rights resulting from the Green Certificates was equal to PLN 118.25/MWh (approx. EUR 27.50/MWh) while the average-weighted market price for Blue Certificates was equal to PLN 300.65/MWh (approx. EUR 69.92/MWh).

[Limitations and exclusions]

 The support within the certificate scheme is not available to hydro-power installations with installed capacity exceeding 5 MW. As regards the multi-fuel power plants using biomass, biofuels, biogas and agricultural biogas, other than “dedicated multi-fuel power plants”, the support is also limited by: (i) implementing cap on Green Certificates that may be obtained in each year at the level corresponding to the average annual “green generation” in the period 2011-2013 and (ii) applying further correction with special “co-efficient” set by the Council of Ministers to such certificates.

The certificates of origin are not granted to RES electricity generated in those hours for which an average market price quoted on the day-ahead market is negative for at least 6 subsequent hours.

If the price of certificates of origin quoted at the Polish Power Exchange is lower than the substitute fee for the period of more than 1 month, there will be limited possibility to pay “substitute fee” as an alternative method of the fulfillment of the obligation to obtain and redeem certificates of origin.