Analysis of the new amendment to the Renewable Energy Sources Act

On 29 August 2019, the Act of 19 July 2019 (the “Amendment Act”) amending the Renewable Energy Sources Act dated 20 February 2015 (the “RES Act”) came into force.

The key changes of the Amendment Act extend the term of grid connection agreements, clarify the obligation to participate in the Polish Power Exchange and aim at improving the auction mechanism.

1 Prolongation of the grid connection agreements

1.1 Pursuant to Polish Energy Law, the deadline for the first energy off-take shall be set in grid connection agreement and may not be longer than 4-years following the execution of the agreement (10-years in case of the offshore wind farms). Under the previous wording of the RES Act, if the agreement was executed before its entry into force (i.e. before 4 May 2015), such deadline shall fall not later than on 4 May 2019 (except for the offshore wind farms in relation to which the final deadline falls on 4 May 2025).

1.2 The Amendment Act extends the deadline for the first energy off-take until 30 June 2021. It relates also to the deadline for the grid connection agreements concluded after 3 May 2015, if they stipulate that the energy shall be delivered for the first time before 30 June 2021. The deadline for delivery of the energy from the offshore wind farms remains the same.

1.3 The operator of the electricity grid must therefore extend the deadline under the grid connection agreement at the request of the energy producer. In case the operator refuses to update the schedule, the electricity producer may submit a request for the settlement of the dispute to the President of the Energy Regulatory Office, who has 30 days to issue a decision in this respect.

2 Clarification of the RES power exchange obligation 

2.1 Under the previous wording of the RES Act, a producer, which produces electricity in the RES installation until 31 December 2020 may only sell that electricity on the Polish Power Exchange, which could lead to the conclusion that such obligation applies to all RES installations that do not qualify as a micro-installation or small installation.

2.2 However, according to the interpretation issued by the President of the Energy Regulatory Office, this obligation is applicable only to (i) RES installations in which the energy would be generated for the first time before closing of the auction (as an exception to the general principle that the electricity should be generated after closing of the auction) and only to (ii) the quantity of the energy which is not covered by the RES support scheme.

2.3 The Amendment Act rectifies the wording of the said provision in line with the President of the Energy Regulatory Office interpretation.

3 Changes in the auction mechanism

3.1 Previously, the winner of the auction had a right to cover the negative balance (between the market value of the electricity sold and value presented in the offer) for 15 years following the first sale of electricity covered by the support scheme but no later than until 31 December 2035 (or 31 December 2040 in case of offshore wind farms). The Amendment Act extends the time for exercise of such right from 31 December 2035 to 30 June 2039 at the latest. The deadline to exercise such right in case of offshore wind farms remains 31 December 2040.

3.2 The Amendment Act has also extended the time limit for the first sale of the electricity from 36 months to 42 months following the day of auction closing. This time limit does not apply to the PV plants (in relation to which, new deadline is 24 months), onshore wind farms (new deadline is 33 months) and offshore wind farms (still 72 months).

3.3 Under the previous wording of the RES Act, the electricity may have been covered by the auction system if the RES installation’s components were not older than 36 months at the day of the first electricity generation, except for components in the PV plants (18 months), onshore wind farms (24 months) and offshore wind farms (72 months). The Amendment Act amends this requirement, so the components may not be older than 42 months, except for in PV plants – 24 months, in onshore wind farms – 33 months, and in offshore wind farms – 72 months.

3.4 The Amendment Act removes the requirement to attach the environmental decision to the application for the certificate on admission to the auction, except for the offshore wind farms. The environmental decision is attached to the application for the building permit, so there is no need for the re-examination of that decision by the President of the Energy Regulatory Office. Separate rules for offshore wind farms result from the building permit not being required as an attachment to their application for the admission to auction.

3.5 The Amendment Act includes a provision allowing for the one-off revision of the offer, which won the auction. Such revision can relate:

3.5.1 to the date of commencement of the support period, however, the date for the first sale of the electricity may not be extended, the support period may not last beyond June 2039, and the total quantity of the electricity indicated in the offer may not be changed; and/or

3.5.2 to the installed capacity of the RES installation, however, such revision may not affect the division into the RES installations with the installed capacity exceeding 1 MW and the RES installations with the installed capacity up to 1 MW (for which separate auctions are carried out).

4 Amendment of the Distance Law

4.1 Pursuant to the Distance Law, building permits obtained before its entry into force shall remain in effect subject to the relevant occupancy permit being obtained by 16 July 2021.

4.2 The Amendment Act extends this deadline to 16 July 2024.

5 Interim provisions

5.1 The interim provisions of the Amendment Act are crucial for the RES support schemes applicable in 2019 and 2020.

5.2 First, the interim provisions cap the maximum amount of the electricity, which may be sold at auction in 2019. Without these provisions, it would not be possible to carry out auction this year. Auction in 2019 may result in development of new RES generation units with total capacity of 3,414 GW (with major share of onshore wind farms and PV plants).

5.3 The key figures for the 2019 auction are:

5.3.1 the maximum value of energy to be sold (in 2019) in the basket for PV plants and onshore windfarms with the capacity below 1 MW is 11,445,000 MWh with its value amounting to PLN 4,213,650,000 (in 2018, it was 16,065,000 MWh with its value amounting to PLN 6,243,300,000);

5.3.2 the maximum value of energy to be sold (in 2019) in the basket for PV plants and onshore windfarms with the capacity above 1 MW is 113,970,000 MWh with its value amounting to PLN 32,577,000,000 (in 2018, it was 45,000,000 MWh with its value amounting to PLN 15,750,000,000);

5.3.3 the maximum value of energy to be sold (in 2019) in the basket for installations using biomass with the capacity above 1 MW is 14,910,000 MWh with its value amounting to PLN 5,577,600,000 (in 2018, it was 57,699,309 MWh with its value amounting to PLN 24,929,301,412);

5.3.4 the maximum value of energy to be sold (in 2019) in the basket for installations using agricultural biogas with the capacity above 1 MW is 1,170,000 MWh with its value amounting to PLN 678,600,000 (in 2018, it was 3,510,000 MWh with its value amounting to PLN 1,930,500,000).

Consequently, the 2019 auction shall be dedicated mainly for onshore wind farms and PV plants. Interestingly, the government set a higher cap of energy volume allocated for sale at auction in 2019 (145,748,400 MWh) than in 2018 (131,136,000 MWh) and at the same time a lower cap of public aid for this purpose (the difference amounts to app. PLN 17 billion).

5.4 Second, the interim provisions of the Amendment Act provide for the minimum share of the electricity from RES in total amount of sold electricity in 2020 at 19,5% and the share of the agricultural biogas at 0,50%.

6 Status of the Amendment Act

6.1 The Amendment Act entered into force on 29 August 2019 subject to the following:

6.1.1 the amendment regarding the extension of the deadline for RES support scheme and the provisions on revision of the offer and permitted age of RES installation’s components shall enter into force once the European Commission approves them; and

6.1.2 other provisions of limited importance shall enter into force on 1 January 2020 and on 15 February 2020.