RENEWABLE ENERGY
A change
in the weather
I
It’s been a case of feast followed by famine for renewable energy developers in Poland over the last few years. After dramatic growth in 2016, when renewables jumped from meeting 10.7% of final energy consumption to 12.3%, the market came to a juddering halt last year. That pause puts Poland on course to miss its EU renewables target of 15% by 2020. However, hopes are high for a revival: a new prime minister has voiced support for investment in renewables; and the next ound of the annual UN climate talks is planned to be in Katowice, at the heart of Poland’s coal country, in December. Investors could be forgiven for being wary. Following its election in 2015, theconservative Law and Justice party introduced its 2016 Act on Investments in Wind Farms, which effectively killed new wind farm development by a requirement that no new wind farm could be established if existing buildings are closer than a distance equal to 10 times the height of its turbines. The act also increased real estate taxes on onshore wind installations, imposing a financial burden on wind farms that were already suffering from the loss of revenues from the green certificate system, introduced in 2005 as a key support for renewables. Changes to its rules increased supply and reduced demand, leading to prices sliding 90%between 2012 and 2017. In addition, last year a number of state-owned energy companies either terminated PPAs or insisted on renegotiating terms. At least one developer, US renewables group Invenergy, is demanding US$700m compensation via international arbitration. By some estimates, around 70% of Polish wind farms lost money last year. High levels of debt taken on by developers means there is a significant degree of distress in the market, with banks looking to offload wind
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farm exposure. International investors are on the hunt in the country for existing assets but depressed prices mean developers that don’t have to sell are holding out. The result was that just 36MW of new wind energy capacity was added in Poland in 2017, compared with around 1.5GW in 2015. Last October, the country dropped out of the RECAI Index, having been at 34th place in May. However, market participants are hopeful that the outlook for the sector may be about to improve. With Ecofys calculating that Poland is likely to meet no more than 13.8% of final energy consumption from renewables by 2020, the Polish Government is under growing pressure to demonstrate how it plans to fill the shortfall. In February, a consultation began on mendments to the Renewable Energy Sources Act, which, among other things, could reintroduce the earlier real estate tax rates, and offer more favorable uilding permits for projects acquired prior to the 2016 legislation. The consultation also gives details of renewable energy auctions for 2018, offering tenders for new and large onshore wind farms up to a total capacity of 1,000MW. The auctions are part of a program that began at the end of 2016 with a total budget of €9.4b (US$11.6b) up to June 2021. Successful bidders with installations above 500kW win premium payments above the electricity market price, while installations below that threshold can apply for a feed-in tariff. The program was given state-aid clearance by the EU in December. There is also potential for growth in biomass, offshore wind and solar. Biomass plants have the potential to benefit from payments via the new capacity market — legislation for which was passed by the lower house of parliament in December and approved by the EU in February. Although it is designed to incentivize coal-fired power, biomass
plants could also qualify for payments if they do not benefit from dedicated renewable energy support. potential to deploy up to 4GW of capacity by 2030, according to the Warsaw-based Foundation for Sustainable Energy (FNEZ). It says local suppliers are in a strong position to service a domestic offshore wind industry, given their existing success in providing components to the sector across Europe. However, FNEZ adds that deploment will depend upon a stable regulatory framework and financial support. The sector received a boost with the news, in March, that Norway’s Statoil is taking a 50% stake, alongside Polenergia, in two early-phase offshore projects, with a planned capacity of 1.2GW. Some growth is also expected in solar, as costs continue to fall and grid parity is achieved. A couple hundred megawatts of capacity per year are expected to be installed by 2020, according to recasts from Greentech Media. Large orporates may also provide a new ource of demand. A number of multinational consumer products companies, with commitments to source renewable power, have manufacturing plants in the country; these companies are now seeking PPAs to meet these commitments. Furthermore, Poland is se to benefit from EU efforts to help coal-dependent regions diversify. In December, the European Commission launched the Coal Regions in Transition Platform to address the social and economic effects of the low-carbon transition. The growth of the country’s wind energy industry — which already represents an export success story — can only encourage the Government to provide greater support to domestic renewable energy generation.
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