On 15 November 2016, the implementation regulations for 2016 auction regarding the reference prices regulation and the auction volume regulation were published in the Journal of Laws, and will enter into force 14 days after publication, i.e. 29 November. In case the Energy Regulatory Office publishes the date for the auction on this date, which has to take place not earlier than 30 days after publication, the auction will take place at the earliest on 29 December. As the results of the 2016 auction will be published in 2016 they should be published on Friday 30 December.
The draft of the 2017 Auction volume regulation was published on 23 November. The support system switch from green certificate system to a contract for a difference system envisages the following volumes for the rest of the individual 15-year support of the relevant RES generators:
1) RES generators with up to 1 MW and (i) more than 40% capacity factor without CO2 emissions limitation – 1.66 TWh (small biomass and non-agricultural biogas), (ii) more than 40% capacity factor with CO2 emissions limitation – 0.78 TWh (small hydropower, the volume in 2016 auction amounts to 1.13 TWh, so that almost all small hydropower plants can switch the support system), but (iii) there is no volume envisaged for small agricultural biogas plants, whereas the volume in 2016 auction amounts to 2.11 TWh. So it is unclear whether those installations should start in the first auction basket.
2) RES generators with more than 1 MW and more than 40% capacity factor without CO2 emissions limitation – 10.5 TWh (large biomass and dedicated co-firing, but might be also large non-agricultural biogas), also there is no volume envisaged for large biogas plants, whereas the volume in 2016 auction amounts to 2.3 TWh.
Assuming a 15-year support period, the volume for new projects amounts in total to 2.3 TWh. Including a current production of approx. 22 TWh, it remains unclear how the Polish government plans to close the gap to the 32 TWh 2020 target what has been required by the EU Commission during ongoing notification proceedings. To switch simple co-firing on again before 2020 to its technical limit of 5 TWh might be an option, but simple co-firing achieves only 0.5 Green Certificate per MWh, which makes this source of RES production highly unprofitable with the current level of green certificate prices, even assuming a remarkable increase of green certificate prices to a level of PLN 100 – 150 per MWh, as the wholesale prices in Poland, which are currently about 20% higher than in neighboring power markets will decrease in the coming years to a level of PLN 150 per MWh due to increase of import capacities. Generally, this technology requires at least PLN 300 per MWh, and an increase of the co-efficient of 0.5 would require notification at EU Commission.
The following volumes have been awarded:
1) RES generators with up to 1 MW and (i) more than 40% capacity factor without CO2 emissions limitation – 0.82 TWh (i.e. 53 GWh per year, which correlates to approx. 7 MW installed capacity assuming a capacity factor of 85% for small biomass and non-agricultural biogas), (ii) more than 40% capacity factor with CO2 emissions limitation – 0.54 TWh (i.e. 36 GWh per year, which correlates to approx. 9 MW installed capacity assuming a capacity factor of 40%, e.g. small hydropower), (iii) small agricultural biogas plants – 8,19 TWh (i.e. 550 GWh per year, which correlates to approx. 70 MW installed capacity assuming a capacity factor of 90%), and (iv) other installations 4.75 TWh (i.e. 350 MW of 1 MWp PV ground-mounted installations with 900 MWh grid feed-in per year).
2) RES generators with more than 1 MW and (i) more than 40% capacity factor without CO2 emissions limitation – 10.5 TWh (i.e. 700 GWh per year, which correlates to approx. 90 MW installed capacity assuming a capacity factor of 90%, i.e. biomass plants, or approx. 280 MW installed capacity assuming a capacity factor of 40%, e.g. hybrid installations consisting of onshore wind farms and biomass/biogas plants), (ii) more than 40% capacity factor with CO2 emissions limitation – 0.54 TWh (i.e. 36 GWh per year, which correlates to approx. 14 MW installed capacity assuming a capacity factor of 40%, e.g. highly effective onshore wind farms or hybrid installations), (iii) large agricultural biogas plants – 3.51 TWh (i.e., 235 GWh per year, which correlates to approx. 30 MW installed capacity assuming a capacity factor of 90%, however, with current reference price of PLN 550, i.e. 12.5 eurocents per kWh no installation pays off which requires purchasing substrates), and (iv) other installations 5.175 TWh (i.e. 115 MW onshore wind farms with an average production of 3,000 MWh/MW/year). The volume of the last basket is most crucial, as 2.5 GW of ready-to-build onshore wind projects should achieve operational permit by mid-2019 to avoid the new 10H distance rules. So, only the 2017 auction is feasible to construct and commission the wind farm in time, and with a volume of 115 MW speculative underbidding by one of the larger players is almost certain. So, it is doubtful whether the successfully bidding onshore wind farms will be constructed at all.
Furthermore, it is unclear whether technologies can start in one or more baskets, e.g. whether hybrid installations which have a CO2 output of less than 100 kg CO2 per year can start in the basket without CO2 emissions limitation. Although representatives of the Energy Regulatory Office do not see any legal obstacles, this seems to be not intended by the Ministry of Energy, and this standpoint was also presented to the EU Commission.
As the EU Commission has already questioned the current structure of the Polish auction system as enacted on 1 July 2016, a further delay with the notification is likely, although not intended by relevant administrative bodies. After finishing consultation with the EU Commission the RES Act requires further changes, and after those changes enter into force the notification procedure can continue, and a positive decision of the EU Commission may be issued and published in the EU journals of law. After publication the Energy Regulatory Office can publish an auction date and proceed with the auctions not earlier than 30 days after publication. So, auctions in the first half of 2017 become unlikely.
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