17 February 2021 Patryk Figiel  -  Jakub Dabrowski Energy and Infrastructure

Proposed CfD price for offshore wind farms announced

On 16 February 2021, the Polish Government published a draft regulation defining the maximum CfD price for the first phase of the support scheme for offshore wind farms. 

The Government has proposed the CfD price to be PLN 301.50/MWh (approx.
EUR 67/MWh).  

  • As per the Offshore Law, which comes into force on 18 February 2021, the CfD awards will be granted in the first phase of support by way of individual decisions by the Polish Regulator (Urząd Regulacji Energetyki).
  • The support scheme under the Offshore Law is based on the contract for difference (CfD) mechanism.
  • Pursuant to the justification of the draft regulation, the following factors (in the macroeconomic perspective) were taken into account to determine the price (average values):
  1. OPEX (FOM), i.e., the fixed operating costs (approx. PLN 0.28–0.3 million/MW per annum) + additional expenses (generation licence fee, depreciation costs, fee for seabed permit, balancing costs);
  2. CAPEX, incl. costs for technical infrastructure development (approx. 
    PLN 10.7–11.4 million/MW) + decommissioning costs (approx.
    PLN 0.2–0.22 million);
  3. pre-tax real WACC (Weighted Average Cost of Capital) – 6.03%;
  4. technical parameters and reference indicators: distance from the coast (45m), depth (40m), capacity factor (45.7%), average capacity of the offshore wind farm (1 GW), wind speed (9.46 m/s at 100m height), COD year (2026), technical lifetime and depreciation period (25 years), EUR/PLN exchange rate
    (4.31 EUR/PLN), USD/PLN exchange rate (3.81 USD/PLN), annual inflation (2.7% CPI), balancing costs (zero).
  • The draft regulation is subject to consultations between the competent authorities (including the Polish Regulator), who may submit comments by 23 February 2021. Considering the tight  deadline for the applications for the CfD decisions (i.e., 31 March 2021), the regulation should come into force at the end of February or at the beginning of March at the latest.
  • By way of illustration, the maximum CfD price is higher than the average market price of electricity in the past three months in Poland, which ranged between
    PLN 250 and 260/MWh (i.e., EUR 55–57/MWh).