Obstruction continues. RES auctions in 2018
On 13 December 2017 the European Commission (“EC”) approved a Polish renewable energy scheme (renewable energy sources –“RES”; decision issued in case no. SA.43697). It is the Commission’s view that the approved support scheme will facilitate development of various RES technologies, help increase the share of energy from RES in Poland’s energy mix, and further climate goals.
This decision is crucial for electricity producers, as upon completion of the notification procedure any reasons to continue to postpone auctions of energy from RES in 2018 cease to exist.
Yet, the completion of the notification procedure, pending since November 2015, has translated neither into announcing new auctions nor better legal environment for RES. The works on draft amendment to the RES Act and some other acts came to a halt, and the draft amendment is still in public consultation due to the broadness of views and concerns notified thereto. The EC decision, acknowledging the consistency of the Polish RES scheme with EU state aid rules, has not sped this process up in any way.
One of the anticipated changes, introduced in the draft amendment, is the revocation of the so-called Distance Act in respect of real estate tax, and restitution of the old real estate tax rate on wind farms. The draft amendment also proposes a new division into auction baskets based on types of technology utilized in RES installations. What will be revoked is the division into baskets with the capacity utilization rate threshold of 3504 MWh/MW per year, and separate baskets for energy cluster members and members of an energy cooperative, as questioned by the EC.
The planned end of works on the draft amendment is, at this juncture, still unknown, and any rumors in this respect should be treated extremely cautiously in light of the fact that the amendment was initially set to enter into force in September 2017.
The legislator’s works falling behind schedule already caused that three out of four auctions announced in 2H 2017 were cancelled, yet at the phase when participating energy producers had already incurred most preparation costs (including costs of legal counsel). The reason why those three auctions were cancelled and the fourth one was unresolved was the fact that the Government regulations serving as the basis for their organization were adopted too late. Currently, the lack of further RES auctions puts Poland’s climate targets (a 15% share of energy from RES in Poland’s final gross energy consumption in 2020) at risk. In 2017, only 2 auctions were concluded. The fact that there are no auctions held has a bearing on the price of green certificates, hitting a historic low after the implementation of the so-called Lex Energa.
Prior to the conclusion of the notification procedure, i.e. 4 December 2017, the Government draft regulations were published, setting the maximum volume and value of electricity from RES which may be sold at auctions in 2018 at the level of zero. Due to the pace of works on the amendment to the RES Act, we cannot exclude the possibility that these draft regulations will be adopted and stay in force at least until the RES Act amendment is passed.
Pursuant to the initial assumption of the Ministry of Energy, only the auctions which were planned and not concluded on the turn of October and November 2017 would be finally concluded in 2018. These auctions covered: RES of installed capacity ˂1 MW and RES of installed capacity >1 MW, with the division into RES utilizing exclusively biogas, and RES with the criterion of capacity utilization rate >3,504 MWh/MW per year. As laid down in the regulations’ statement of reasons, the auctions would be held in 1Q 2018, on “new terms” and on the basis of separate regulations.
As there is no information about any progress of works on the draft amendment of the RES Act and the draft regulations, the fate of “auction backlog” is still unclear. Both the conclusion of the notification procedure and the approval of Polish RES support scheme by the EC (with consideration given to the EC comments on the RES Act in force) at least open the door to the auction announcement. We will keep you in the loop in respect of this year’s developments regarding RES auctions.
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