Published on May 2nd, 2014 | by Guest Contributor


Poland’s Renewable Energy Story (Warning: It Sucks)

May 2nd, 2014 by  

Editor’s Note: If you are curious about Poland’s renewable energy history, current climate, and future, this guest post by Michal Bacia is excellent. However, the story isn’t particularly uplifting. Nonetheless, it deserves a read, and 48 million shares.

By Michal Bacia

Michal Bacia hs2The Polish government published yet another version of their renewable energy legislation in April. It’s hard to tell which version it is. Everyone has lost track, including the government itself I believe, as the first proposed legislation was presented some 3 years ago.

This is a great opportunity to observe how, over the last 3 years, the big 4 energy companies have killed the renewable energy (RE) industry in Poland with support from the government.

This story started somewhere in 2011. Back then, the electricity market was controlled by 4 huge, vertically integrated, state-owned corporations. There were also independent generators on the market, but the entire distribution network (and direct access to customers) was controlled by the big 4.

Enter renewable energy, which was supported by a green certificates (GC) scheme. For each MWh of renewable energy generated, the producer received 1 GC. This was the same for every technology. Electric distribution companies were obliged to buy GC from the generators in the amount set each year by the government. In 2011, the distributors had to buy GCs in an amount equal to about 10% of the energy sold to their clients. If distributors didn’t have enough GC for each certificate missing, they had to pay a fine to the national fund for the environment, in an amount of some €65-70.

This support mechanism worked pretty well during the 1st decade (2000-2010). A lot of renewable energy projects (mainly wind) were commissioned by independent companies. At the same time, the big 4 also developed some renewable energy projects but also came up with the idea of “co-firing.”

Co-fring in Poland means that wood, straw, or peanut shells, typically imported from Southeast Asia, are burned together with coal in a coal-fired plant. The coal plant then claims its GCs and CO2 certificates because this “biomass” is a renewable energy fuel.

In 2011, the EU kept pushing a renewable energy obligation and, surprisingly, was not happy with the Polish biomass co-firing solution. The EU commission began discussing ‘other measures’ (read “penalties”) to persuade Poland to implement EU renewable energy requirements. Money (read “penalties”) talked. The first draft was presented in December 2011. After consultation, the second draft was published in mid-2012.

Renewable energy legislation is prepared by the Minister of Economy. At that time, the Minister was also the leader of the Peasant Party and a fan of Jeremy Rifkin and his “The Third Industrial Revolution.” He understood the importance of distributed generation and saw an opportunity for the Polish countryside in developing renewable energy.

His legislation would introduce feed-in tariffs with different rates for different technologies and capacities (tariffs for solar PV were very attractive). Micro-generators had the highest tariffs, did not require licences, and were tax-exempt. As for co-firing, it would receive much lower support and would be phased out completely within few years.

I doubt anyone took the Minister seriously at first. Then, when the legislation draft was presented, people actually did the math based on the feed-in tariff rates. Independent generators, especially in the PV industry, were very enthusiastic. Polish farmers began planning to rent out their farmland for solar.

Then an interesting thing happened. The big 4 hired a very reputable management consulting company to assess the influence of his proposed legislation on their business. The reputable consultants did some financial modelling to find out that the market value of the big 4 companies would go down by some €3.5 billion. Big 4 presented this report to the Minister of Economy and asked him to reconsider his renewable energy law. He said, more or less, that the renewable energy law should be beneficial for the people, the country, and the entire economy, not for one particular group of interest. This is not very common to hear in Poland. I was very happy hearing about his firm position.

In early 2013, the Rifkin-fan Minister was fired. The new minister announced that he had to reconsider the renewable energy legislation and make sure no group of interest would suffer from it. At the same time, biomass co-firing was flooding the market with GCs. To make it even more interesting, electricity distributors stopped buying GCs from independent generators.

The new Ministry decided it was in Poland’s best interest to simply pay the fine. This fine is conveniently paid by a state-owned company to a state-owned National Environment Fund. (BTW: in the most recent draft of the law, the fine is no longer paid to the fund but directly to the budget, like dividends from state-owned companies). GC prices plummeted from around €65 to about €20/MWh. No bank wanted to invest in any renewable energy projects in Poland anymore.

This situation continues. There is no renewable energy law in place. No one knows if the recently proposed draft is the final one. No one knows when renewable energy legislation will come to force. No one knows what is going to happen with the GCs. Will they be worth anything in 2 years? 5 years? This kind of environment is suitable for gambling, not long-term investing. The 4 big casinos can easily collect all the cash from the small payers without worry of renewable energy, as no one is investing.

The recently proposed version of the legislation introduces renewable energy auctions instead of the green certificates schemes. This means a renewable energy project has to be pre-developed and licensed. Only then can it take part in the auctioning process. This is a significant entry barrier for smaller companies as pre-development costs can be significant. It is also unclear if new generation sites will be treated the same as existing generation assets. Commissioned, operating, and partially paid-off generators would offer better prices at auction only to stay on the market.

Distributed generation is being graciously allowed in the latest legislation draft. Installing solar PV on residential rooftops luckily has not been made illegal. Energy can be exported back to the grid for 80% of the wholesale price (some €0.04/kWh). With no feed in tariff, no grants, a very poor (undervalued) wholesale price, and the Polish weather, a residential PV system will pay itself back in… 22.5 years.

The bill has not been approved by Parliament yet. Initially, Parliament was to approve it just after presentation and then notify the EU. The plan was for the law to be binding within 1 year from EU approval. Now, instead of passing the bill to Parliament, the government wants to consult with the EU first. This stalls the entire process even longer. Experts believe the law will start working no sooner than in 2017. This means the first renewable energy plants (if any) commissioned under the new legislation, would start generating in 2018, 2019.

This results in an extra 8 years in total (2011 – 2019) of co-firing biomass with coal in conventional power plants and an oversupply of green certificates. After 8 years, not one independent energy generator or project development company would ever want to invest in Poland and risk sudden loss of revenues. The only companies capable of handling such risk would be… yes, the 4 big state-owned vertically integrated energy corporations. In 2019, if the EU will still push this ‘silly renewable energy obligation,’ there will be plenty of cheap renewable energy generation assets to buy from the bankrupt independent generators.

So, what is going to happen in the renewable energy market next? Independent generators will start selling assets in Poland. The Big 4 will buy these assets cheaply and start offering cheap renewable energy at auctions. Even more independent generators will be forced out of business and have to sell their assets in Poland. Rinse, repeat.

About the Author: Michal Bacia is a solar energy project manager and consultant as well as an author. He recently completed 3 solar sites in the UK (20MWp in total) and published a book about solar energy for anyone who uses electricity (How to choose the best solar system and financing offer for you). 

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  • nanader

    Welcome to Central Planning… made by the EU, not USSR.

  • Андрей Казанцев

    It is the time for new third alternative – AIR HYDRO POWER –

    Each cloud over your head is NPP unit, but much more cheaper and cleaner…

    NB! Major trends in energetics are associated with the transition to renewable energy sources. It then becomes clear that resources are only sufficient for sun and (possibly) wind. Traditional hydropower does not have enough resources. However, the use of cloud energy changes this assessment. Principally it results from economics. All three methods of conversion (PV, wind, clouds) have the same order of magnitude of the energy density (~ 100 W/m2), but only for AIR HYDRO all this energy with virtually no loss can be merged into one point (pipe / turbine), making part of the proportional m2 far cheaper than for other alternatives. This implies the 1-2 orders of magnitude smaller the specific cost and Payback period that allows quickly rebuild the energetics and successfully avoid the collapse of climate & oil in 2050.

  • Ronald Brakels

    On the bright side, I presume Poland has had significant improvements in energy efficiency over the past decade and a half, although I don’t currently have any actual figures on that.

  • smokiieee

    Naturally some similarities here in Czech Republic.. (sry lazy to check all history facts or sum it better – so little wild..)

    We have just 1 big co. – CEZ – biggest co. in CR (said to pay our good old two biggest pol. parties – now they lost big part of power).

    We started w generous Feed in tarifs, law made by Bursík -changed before accepted to be even less flexible – in sense of possibility of lowering FITs for new sources year by year.. – Then that huge instalation price drop (+wholesale prices drop together w politicians not willing to change that law) meant new sources (in i think 2010-11) were heavily oversupported.. Big part (biggest projects) were by CEZ – now it doesnt own any huge share of solar – just some big projects, but most is in smaller ones. Many of other projects were close to particular politicians. Till today we dont know who owns many of those.. Together with V. Klause`s rhetoric (climate sceptic, against RES, his wife and one of sons worked in CEZ) and media pro nuclear PR (not exceptionally paid by CEZ) renewables generally are very unpopular here (even thus owners of those old highly profitable projects have to pay some money back to state) and seen as very expensive.
    Natural conditions are not really good here neither, Not in my backyard syndrome very strong (espec. by wind).. (+most of solar is on agricultural land – hard to find solar roof here..).

    Coburning? Yes we can – I think that in little different way – we are co-burning waste and naturally not supporting recyclation of biological part of communal waste, so when we burn waste w brown coal, some 50% of that waste (even more i think) is being seen as biomass..
    We dont have any green certificates – just classic allowances – with huge amounts being given to CEZ for free..

    Naturally – bigger project=bigger space for corruption – thats why our politicians are still trying to find new ways for nuclear (CEZ likes it too to maintain its huge share of power..)

    Funny is – CEZ not only gets tons of allowances for free.. – thx to nuclear it says it has lower CO2/production unit than most big cos in Europe so it claims that higher prices of allowances wd make it even more competitive (probably even without those for free – wasnt clear – just in presentation..*they get less and less for free until 2020 when i think is the end..).

    Still we have some 50% of energy from coal – coal = different story w doubtful privatisation in beginning..
    Main problem w coal is its dirty. Naturally thats not problem for those making money on it – which is why we are 5th world exporter of electricity while destroying our nature and health..

    Currently there are no FITs for new instalations (little positive is that in regulator=ERU – are some claims they will try to prepare legislation that should make it at least easier to install small scale sources, bt its head is under criminal investigation..),
    Future totally unclear, whole energy conception obsolete-had been written to show need for nuclear (Temelín 3,4) (w things as steadily rising consumption, not real self consumption by industry, much bigger rise in electromobiles than is happening,…) so it needs to be rewritten..(and yep – New nukes or not – sure is Dukovany will get phased out -probably 2045 latest as it will be over 60 years old..-so sooner or later they will have to find solution..).

    Sadly Poland can be sure our dirty politicians together w CEZ will be good partner in pushing against any reasonable progress on EU level..
    (as we have low share of real renewables and not even public hunger for more.., we have virtually enough with that co-burning + since 1990 we had big drop in CO2 production as Temelín replaced lots of coal after 1990..)

  • CaptD

    State Owned says it all and I’m sure they are doing everything they can to make sure it stays that way, which will make Poland less competitive in the global market, since some Countries will have reduced their Energy costs by requiring that local generation (rooftop and wind) receive a fair amount for “private” generation which will then result in their Utilities to compete by keeping their own prices as low as possible!

    One potential bright spot for Polish ( and other people that are living in countries in the same situation) rate payers is that as when Tesla’s new storage batteries become available, those that generate their own energy will have the option to store as much of it as they can generate for use in their homes and eVehicles, thereby reducing the amount they need to buy at inflated prices from their Utility.

  • Ronald Brakels

    There’s only room for one country as stupid as Australia on this planet and I have to say I don’t appreciate the competition.

    • CaptD

      Ronald – I think that Australia is not stupid but that the Australians, like many other people in too many other countries, have elected Leaders that are in reality far more concerned with making things better for their countries Big Utilities and their shareholders than they are in making life better for the very people that elected them.

      We have seen how even after Fukushima, the Japanese people literally have no say in getting their own Government to stop using Nuclear and they are not alone! There are states in the USA where Big Nuclear controls politics and therefore they push using Nuclear power even though it costs more. In the UK (whose Queen controls vast amounts of Uranium deposits globally), it is no surprise that they are being pushed into building a new nuclear power plants even though it cannot compete with current renewable generation, so that by the time it gets built, it will be yet far more costly making life even tougher for everyone in the UK.

      Because the global nuclear industry is closely tied to governments that possess and/or develop nuclear weapons, what their citizens want is lass important that preserving the status quo internationally, plus as we have seen far to often is those that were chosen to regulate the nuclear industry became too cozy with them so that when they retired, they would be hired to work for those they once regulated!

      • Ronald Brakels

        Thank you for those kind words, CaptD. And it is true that Australians are not stupid, or at least no more stupid than humanity in general. But, as we have a current government that is governing on the basis of tribalism and rejects reality when it suits them, one of the few avenues of criticism that might actually sting them is pointing out that they are making the over-tribe look stupid. And that sort of criticism can only come from within otherwise it is ignored as an attack by outsiders. And so I take advantage of my insider position to state that our Budgie Smuggler in Chief is making Australia look stupid. Tony, make Australia look smarter. In words even an Australian Prime Minister can understand, being a cheerleader for Australia as a whole is more important and will earn more loyalty than bagging Australia by being just a cheerleader for the coal industry.

        • A Real Libertarian

          Don’t know if you’ve seen this but:

          • Ronald Brakels

            Thanks for the link, but it looks like it has something to do with politics and that’s something I don’t need to pay any attention to. When it comes time to vote all I have to do is check which politicians are detached from reality and live in an imaginary world where human activity isn’t affecting the climate and vote against them. It’s nice to think that one day I might have to carefully think to decide just who is the most committed to and most effective at improving the welfare of Australians and humanity as a whole, but that’s not the choice I’m presented with at the moment.

          • A Real Libertarian

            You’re welcome.

        • CaptD

          I’ve said it before and I’m saying again:

          AU has the land mass to go Solar (of all flavors) in a huge way and even use all the extra Solar (of all flavors) energy it generates to make liquid H2, fresh water and all other kinds of things that will always be in demand by a growing global population; all AU needs is true LEADERSHIP, instead of just another Leader that wants to play along with Big Corp. Utilities.

  • Wayne Williamson

    Thanks for the post and the frank comments….

    • Huge appreciation from me too. 😀 I knew many of these things, but this connected a lot of dots and provided useful context and history for me. Good stuff… the article of course, not the story behind it… 🙁

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