- Renewable energy in Poland
- Relevant law
- What is renewable energy
- Certificates of origin
- Quota
- Licensing
- Connection to the grid
- Sale of energy generated from RES
- Transmission priority of electric energy generated from RES
- Tax benefits and subsidies
1. Renewable energy in Poland
1.1. Power production in Poland is still based on traditional energy sources like coal and lignite and only a small percentage of energy is generated by hydroelectric plants, mostly located on rivers. Renewable energy is only beginning to be used on a major scale, with wind farm projects being implemented by municipalities, as well as developers. Despite the fact that demand for electric energy in Poland is still much smaller than in the countries of western Europe, the growth in both electricity production and consumption, remains stable. Polish electricity demand is predicted to grow on average 2,2 percent annually. If new power plants are not developed, Poland will be facing a shortage of power production capacity in a few years.
In recent years the consciousness of the environmental harms caused by conventional power has grown in Poland and the membership in the European Union has created an additional impulse giving rise to the restructuring of the Polish energy sector. The notion of renewable energy sources (“RES”) is gaining a clear recognition within Poland’s energy and environmental policies.
1.2. Development of RES is one of the priorities listed in the document called Energy Policy until 2030, yet to be adopted by the Council of Ministers. It provides for mechanisms that are intended to encourage the development of RES power plants (some of which have already been implemented), such as:
- exemption of the green power from excise tax (already in force);
- green certificates and the relevant mechanisms supporting green power producers (already in force);
- tax support tools (some tax relieves have already been introduced);
- support of RES projects from the EU and environment protection funds.
Once the above objectives are adopted by the Government (the document is currently in the closing phase of approval by the Council of Ministers), they will need to be treated as directives for the legislative process at the national level and for the administrative proceedings at the grassroots.
1.3. Further to the terms of Poland’s accession to the EU, in accordance with Directive 2001/77/EC on the promotion of electricity production from renewable energy sources in the internal electricity market (RES Directive), by 2010 the share of electric energy from renewable energy sources in the gross consumption of electric energy in Poland should reach 7.5% (currently it amounts to approximately 5%). The new indicative objectives set by Directive 2009/28/EC on the promotion of the use of energy from renewable sources amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC require that by 2020 Poland should reach a 15% share of electric energy from RES in the gross consumption of electric energy. The above targets are a visible evidence of opportunities for investors interested in the development of RES power plants in Poland.
2. Relevant law
2.1. The most important national act in the area of RES development is the Energy law dated 10 April 1997. The Energy law regulates the entire energy sector, however it also provides for rules applicable specifically to RES, including:
- special rules with regard to the connection to the power grid as well as transmission of electric energy generated by power plants using RES;
- sale of electric energy generated by power plants using RES;
- the issuance and trade in the certificates of origin (so-called green certificates) issued in respect of renewable energy.
2.2. The system of the certificates of origin (so-called green certificates) has been provided for in detail in the Regulation of the Minister of Economy dated 14 August 2008 establishing detailed provisions on the obligation to acquire certificates of origin and submit them for collection, the obligation to pay a compensation fee, the obligation to purchase electric energy and heat generated from renewable energy sources, and the obligation to prove that the amount of energy generated from the respective source of energy stated is accurate.
2.3. Technical requirements regarding the connection to the grid and operation of power plants using RES are comprised in the Regulation of the Minister of Economy of 4 May 2007 on detailed conditions of functioning of the electric energy system.
3. What is renewable energy
According to the Energy law, RES is a source which, in the course of energy processing, uses wind power, solar power, geothermal energy, sea waves, sea currents and tidal energy, or energy obtained from the fall of rivers, as well as biomass energy, energy from landfill biogas as well as biogas produced in the process of sewage disposal and treatment, or decomposition of plant and animal remains. Only energy produced in one of the above-mentioned manners qualifies for support mechanisms provided in the Energy law and other relevant regulations.
4. Certificates of origin
4.1. One of the mechanisms implemented by the Energy law in order to promote renewable energy generation is the trade in the certificates of origin, which in other countries are often referred to as green certificates. According to Article 9e of the Energy law, the electric energy generated at renewable energy sources shall be certified to have originated there by means of the so-called “certificate of origin”. Energy enterprises producing or trading in electric energy, which deliver energy to end users, have a choice between:
• obtaining of such certificates and applying for their redemption at the Energy Regulatory Authority (“ERA”), or
• payment of a so-called substitution charge (buy-out price) calculated in accordance with a formula provided for by the Energy law.
The above obligation is fulfilled when the redeemed certificates, or the paid substitution charges, reach a pre-determined target share in a given energy enterprise’s yearly sales to end users.
4.2. Certificates of origin are issued by the President of ERA to energy enterprises producing electric energy derived from RES, confirming – inter alia – the amount of renewable energy produced over a certain period of time. The certificates are issued by the President of ERA upon an application of the energy enterprise within 14 days of the date of receipt of the application. The application needs to be submitted via the local electricity system operator, within 45 days of the day ending the period when the electric energy, which the application concerns, was produced. The whole procedure is subject to the Administrative Procedure Code regarding the issue of certificates.
4.3. The rights attached to the certificates of origin constitute tradable commodities. The rights materialize at the moment the certificate of origin is first registered to the account of the relevant register maintained by the commodity exchange, and are vested in the person or entity in whose name that account is kept. The trading system in the certificates of origin is operated by Towarowa Gie³da Energii commodity exchange, which maintains a so-called Green Certificate Register. Energy enterprises dealing with production of electric energy generated from RES, whose electric energy capacity does not exceed 5 MW, are exempt from fees payable in respect of registration in the Green Certificate Register and from stamp duty with regard to the issue of certificates of origin.
Certificates of origin can be traded both via the commodity exchange and off-exchange.
4.4. In 2007 a similar system of certificates has been introduced with regard to energy generated as combined heat and power (so-called high performance co-generation). However, in the case of certificates issued in respect of energy generated as a result of a high performance co-generation no exemptions apply with regard to registration in the Green Certificate Register and stamp duty.
5. Quota
5.1. In 2009 the target share of the electric energy generated from RES, to be reached individually by energy enterprises in the yearly sales, is 8.7%. The target share will grow from 10.4 % in the years 2010 and 2011, to reach 12.9% by 2017.
5.2. The targets for the years 2008-2012 were set at the same level as the targets previously determined in the Regulation of the Minister of Economy dated 19 December 2005 (which expired on 25 February 2008) and serve as a tool with which to meet the requirements set for Poland in Directive 2001/77/EC. However, the Polish national targets are insufficient to meet the indicative EU targets adopted in the recent Directive 2009/28/EC. Since the deadline for the implementation of Directive 2009/28/EC is set for 5 December 2010, it can be expected that in the near future new instruments supporting the development of RES will be adopted.
6. Licensing
6.1. Business activity in the area of production of energy generated from RES requires a license issued by the President of ERA.
6.2. The license is granted to entities (or individuals) which:
• are incorporated (or have residence) in an EU member state or EFTA member state being a signatory of the agreement on the European Economic Area, or in Switzerland,
• has sufficient financial funds or is able to document the capacity to obtain such funds, offering warranty of a regular carrying out of activity,
• has technical capabilities offering warranty of a regular carrying out of activity,
• ensures employment of personnel having adequate qualifications, as provided for by the Energy law,
• has obtained a relevant zoning decision.
6.3. On the other hand, a license shall be denied to applicants:
• subject to liquidation or bankruptcy,
• who in the last 3 years lost their license or were removed from the register of a regulated activity for reasons enumerated in the Freedom of Business Activity Act,
• have been sentenced for crimes related to the activities regulated by the Energy law.
6.4. Licenses are granted for a definite time, between 10 and 50 years, unless an applicant moves for a shorter license.
6.5. The grant of the license for a business activity in the area of energy is subject to the stamp duty in the amount of PLN 616. Additionally, annual fees are payable to the President of ERA by the license holders. The fees are calculated as a multiplication of the yearly revenue generated from the licensed activity and a coefficient, which – with regard to production, storage, transmission, distribution and trade in electric energy, heat or gas fuels - is set at 0,0006.
6.6. Energy enterprises dealing with production of electric energy generated from RES, whose electric energy capacity does not exceed 5 MW are exempt from the license fee and the annual fees paid by the license holders.
7. Connection to the grid
One of the measures introduced to support investments in RES is a reduction in the fees payable in respect of connection to the grid. Due to interim provisions of the Energy law, the scope of reduction in the fees varies in time, as follows:
• Until 31 December 2010, all enterprises generating electric energy from RES, irrespective of their capacity, shall pay only 50% of the fee calculated on the basis of the actual costs of connection expenditures;
• Until 31 December 2011, the connection fee will be reduced by 50% also with regard to the sources of energy which cogenerate electricity (combining power and heat) of less than 5 MW of electric capacity; after 31 December 2011 the reduced fee will apply only to those sources of energy which cogenerate electricity (combining power and heat) of less than 1 MW of electric capacity;
• After 31 December 2010, the connection fee will be reduced by 50% only with regard to those energy enterprises generating electric energy from RES, whose electric energy capacity does not exceed 5 MW.
8. Sale of energy generated from RES
8.1. The Energy law provides for an obligation on the part of energy enterprises whose activity consists in the generation of or trade in electricity, which sell electricity to customers using it for their own needs in Poland, to purchase the electricity generated using RES. Therefore, so-called official energy sellers are obliged to purchase all electric energy generated from RES interconnected to the grid located within the area of operations of such a seller. Official energy sellers are defined in the Energy law and can be generally described as entities licensed to trade in electric energy, providing so-called comprehensive services to household customers.
8.2. The purchase obligation also operates with regard to heat energy. Based on the Energy law, energy enterprises dealing in heat energy are obliged to purchase heat generated from RES interconnected to the grid located within the area of operations of such a seller, to the extent not exceeding the demand of the customers interconnected to that grid. In this respect the advantages, which under the Energy law are mostly afforded to the producers of electric energy generated from RES, in this particular case are extended to the producers of heat.
8.3. The price of electric energy generated from RES is predetermined. Pursuant to the Energy law, it is equal to the medium price for electric energy in the preceding year in a competitive market, determined pursuant to specific provisions of the Energy law. This price is calculated and published by the President of ERA each year. At present it is provided in the communiqué of the President of ERA dated 31 March 2009 which states that the medium price in a competitive market in 2008 amounted to 155.44 PLN/MWh.
9. Transmission priority of electric energy generated from RES
According to the Energy law, electric energy system operators should ensure priority, within the area of their operation, to all entities providing transmission or distribution services of electric energy generated from RES or in high performance cogeneration (combining power and heat).
10. Tax benefits and subsidies
10.1. Despite various mechanisms of support applied with regard to RES, such projects remain relatively expensive. Therefore, as a consequence of Poland’s favorable policies with regard to RES, investors operating in this energy sector may count on direct benefits in the form of tax benefits and subsidies.
10.2. Electric energy generated from RES is exempt from excise tax. The exemption takes effect on the basis of redemption of the certificates of origin issued with regard to energy generated from RES.
10.3. Investors planning to develop RES projects can apply for subsidies from various EU funds, as well as national environmental protection funds. In particular, the EU cohesion funds are available within the Infrastructure and Environment Operational Program. There is also a possibility to acquire support from 16 Regional Operational Programs (RPO). Furthermore, the National Fund for Environmental Protection and Water Management (NFO¦iGW) offers additional funding for which RES projects can be eligible.
10.4. Tax payers subject to agriculture tax can reduce their tax by subtracting the costs of their investment in RES infrastructure, up to 25% of their documented investment.
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(Last update: October 2009)
If you are interested in receiving more information regarding legal aspects of renewable energy sources, you are welcome to contact the author of this paper:
Adam Morawski, Managing Partner
Tel: (+48) 22 861 21 21
E-mail: adam@amorawski.eu
The information contained in this paper is correct to the best of our knowledge and belief at the time of being published, however it does not constitute legal advice. Legal advice can only be provided by our lawyers in respect of a concrete question.
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