Revenue Caps for Energy Producers

Recent Amendments

The cap on the revenues of RES energy producers has been in force for less than a month, but the government has already decided to modify it. The new act on the protection of certain consumers of gaseous fuels in 2023 in relation to the situation in the gas market (the “Gas Act”), accompanied by the regulation on the amendment to the regulation on the calculation of price limits (the “Price Regulation”), introduces certain changes to the revenue cap mechanism, but does not dispel all doubts about its practical application (in particular related to vPPAs). 

Allowance for Producers not Participating in the Auction Support Scheme

As a reminder: under the revenue cap mechanism, certain energy producers are required to pay a portion of their revenues exceeding their price limits to a designated government entity. Price limits are specified in the Price Regulation and vary according to the technology and whether the producer participates in the auction support scheme. If a producer does not participate in the auction support scheme, its price limit is equal to the reference price for the given generation technology (e.g., PLN 355/MWh for PV installations with capacity over 1 MW). This solution was criticized for not taking into account the operational costs of running a RES installation. 

This issue is addressed in the amended Price Regulation, which introduces a fixed costs allowance for producers of energy from renewable energy sources (excluding biomass and hydro energy) equal to PLN 50/MWh. The allowance is added to the reference price and effectively increases the price limit. 

A similar measure was not implemented in relation to producers participating in the auction support scheme. 

Multiple Installations with Capacity Under 1 MW 

Originally, the revenue cap applied to installations with installed capacity greater than 1 MW. Operators of multiple small  projects faced uncertainty as to whether their revenues were covered by the cap. The Gas Act introduces an amendment that clarifies this issue – in the case of operators of multiple projects with capacity less than 1 MW, the revenue cap will apply only if the combined capacity of such projects is greater than 3 MW. 

Maximum Price for Energy Producers 

Back in November, revenue caps were introduced alongside a maximum price mechanism, which, so far, applied only to energy trading companies. Starting from January 2023, however, RES energy producers will also have to observe statutory price limits in settlements with certain protected categories of consumers. In the case of energy sold to entities such as SMEs and local governments, the maximum price is equal to PLN 785/MWh. 

Producers applying the maximum price will be entitled to compensation for applying the maximum price. The amount of the compensation will depend on the date on which the contract for the sale of energy was executed, but, in most cases, it will not cover the entire difference between the contractual price and the maximum price. 

The maximum price mechanism does not replace or override the revenue cap mechanism, which means that energy producers will be covered by both of them. However, considering that the revenues of RES energy producers are effectively capped at levels far below the maximum price, this does not seem to pose a significant risk at the moment.