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The 7th issue of Cleantech magazine concentrates on the environmentally friendly building and construction sectors. Also in the issue: a recap of the Warsaw COP19 climate conference, analysis of the new proposal to support renewable energy, and much more.
Cleantech Magazine | by Wojciech Kość
ENERGY POLICY

New RES Rules: a Green Fig Leaf?

New RES Rules: a Green Fig Leaf?

After a three-year debate, the Polish government now has a wholly new idea for a support scheme for renewable energy. Critics say it will kill the market it’s supposed to strengthen.

From the Cleantech magazine's Spring 2014 issue.


The ongoing saga of Poland’s failure to pass a renewable energy law is sometimes given as an example of Warsaw’s lack of a clear energy policy. That isn’t true: the policy has never been clearer. The government finally seems to know what they want.

In the fall of 2013, a new proposal was tabled that - according to the renewable energy sector - lay the previous three-year debate to waste in the name of meeting the government’s current fundamental of an energy policy that mandates energy must be produced as cheaply as possible.

Polish officials, including the prime minister Donald Tusk, have said repeatedly over the last several months that Poland will take its energy from coal first of all, with second priority to shale and nuclear, with renewables as an auxiliary source.

In line with this, the new proposal - that was scheduled to go to the parliament in January and enter into force in the second half of 2014 - stipulates that companies will bid for the right to develop renewable energy. The cheapest offer will win and will become a guaranteed price for the winner for the next 15 years (see box for the proposal’s basics).

According to the government, the new system is more market-based and will ensure that the state won’t carry the burden of top-down fixed feed-in tariffs, as seen in the Czech Republic, for example. According to the ministry of economy, which is overseeing the work on the new proposal, the system will help Poland save PLN 4.5 billion by 2020 in the costs of having to support renewables and meet its 15 percent 2020 target of renewable energy’s share in total consumption.

The proposed system is a far cry from what used to be in the works. Between 2011 and late 2013, the sector had been anticipating a system that differentiated support for renewable energy on the basis of type and size, effectively promoting smaller, perhaps more expensive installations. The support was tied to market price of green certificates. Under this - now abandoned - proposal, solar PV and offshore wind were expecting to receive the highest support. In the case of some solar PV installations, for example, the value of green certificates would be multiplied by a factor of almost 3.

While the auctions system may have some potential in bringing down the cost of support for renewable energy, the government’s assumption that it will help Poland achieve its national target is made a little flaky by the experience of other EU states.

In the EU, the auction system is currently operating in Hungary, Latvia and the Netherlands, and was also employed in Ireland, Italy and the UK.

In the UK, the auction-based support system remained in place from 1990 to 1998. “[Under the auction regime], the electricity price continued to decline in each subsequent auction round and, consequently, new investments were characterized by low technological diversity – the majority of projects to receive the support were wind and landfill gas projects," a November 2013 report on wind energy market in Poland by TPA Horwath, a law firm, noted.

In Hungary, Latvia, and the Netherlands, the application of the auction system damaged these countries’ progress towards their national renewable energy targets in 2020, according to TPA Horwath.

“A conclusion from the analysis of the impact of the tender model in other EU countries is therefore such that this model is not suitable to regulate the RES market at early stages of its development, as it puts a damper on its growth,” said Wojciech Sztuba, partner at TPA Horwath and co-author of the report.

“Bidding prices down will favor technologies that are least capital intensive, where investment in innovation is disincentivized. We’d rather see auctions carried out within “baskets” of particular renewable technologies,” Michał Siembab, director general of the Polish Chamber of Commerce for Renewable Energy told Cleantech.

“Without innovation, the proposed system promotes no added value. There’s only a short term economic gain of affordable energy that doesn’t support job market, industrial production and so on,” Mr. Siembab said.

“The government is scaring Poles with energy bills going up because of renewables while at the same time it has been supporting coal-fired energy production with enormous money from the budget. The same is with nuclear energy,” goes the argument of a group of business and environmental organizations presented in an open letter to the Polish Prime Minister Donald Tusk in January 2014. The letter was signed by the Climate Coalition, a group of green NGOs, the Polish Foundation for Solar Development, and several other organizations.

In a rather uncommon move for a prime minister, Mr. Tusk even took the floor in the parliament in January only to defend the government’s position on renewables.

“It’s good that we didn’t pass the renewable energy bill [in the previously proposed form]. We would end up with too much of too expensive energy,” Mr. Tusk said.

After three years of dodging the EU in terms of implementing a new support framework for renewables, the Polish government is currently seeing that an opportunity is arising not to worry about renewable energy too much anymore.

Support schemes are falling throughout the EU and there’s a discussion in the 27-nation bloc about relaxing long term emissions and renewable energy targets and making them non-obligatory.

For better or for worse, Poland finally appears to have chosen a path in terms of an energy strategy.

NUTS AND BOLTS OF THE PROPOSED SYSTEM

  • The auction model assumes that contracts for the sale of a certain amount of energy from renewable sources be awarded on a reverse auction basis (bidding prices down) for a period of 15 years.

  • The basic criterion for the selection of projects would be the price per MWh of electricity generated, which may not exceed reference price set by the Energy Regulatory Office

  • Energy producers would be required to sell the contracted amount of renewable energy at a determined price, even if the market price is higher.

  • Only projects that meet specific quality requirements provided in the regulation, e.g. those having connection terms, environmental approval and financing, would be allowed to participate in the auction.

  • In addition, the auction will only cover installations employing technology not older than four years.








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