„The so-called Proximity act, which is still in force, may cause an investment gap in wind energy to emerge as quickly as next year. This void could be filled by large-scale PV investments, which need a guarantee in the form of large auction volumes until 2026,” Grzegorz Wiśniewski, Director of the Institute for Renewable Energy, said in an interview with BiznesAlert.pl.
BiznesAlert.pl: Looking at this year’s RES auctions and those planned by the Ministry of Climate next year, it is apparent that PV will start dominating energy production from renewable sources in Poland. How did this trend emerge?
Grzegorz Wiśniewski: In Poland the balance between energy sources that depend on the weather is disturbed. This is an issue that needs to be addressed. In Germany the sun and wind energy are balanced at about 60 GW each. Our neighbors are developing these sources harmoniously. Whereas Poland’s the development of RES looks more like a sinusoid. At the beginning we focused on wind projects. However, that got blocked for reasons that were not justified well. The Proximity act stopped new projects, as well as merging already existing projects and connecting them to the network. This happened between 2016 and 2020. But today we are also experiencing a deluge of this type of wind projects. It is difficult to invest in wind energy in the current circumstances because their scale is at an unprecedented level. This pushes up the prices, but also shows that once the projects, which had been started before the Proximity act entered into force in 2016, are completed, an investment gap will emerge. Due to the stringent rules, which are still binding, no new wind projects that applied for a decision after 2016 can be developed. Today we have 3.2 GW worth of installations, which have connection conditions to the grid and 1.4 GW worth of installations, which have construction permits and can take part in auctions. This year about 230 MW worth of wind projects were added, but those were smaller projects with regard to connection conditions to the grid. However, the wind sector is not applying for construction permits because it is waiting for the 10H rule to be abolished. If we complete the projects started before 2016, which so far had not received support via auctions or PPAs, then an investment gap will emerge in about five years because that’s how long it takes to develop projects.
Will PVs fill in the gap?
This sector is now booming. If the development of the wind industry hadn’t been stopped, PV would not have developed so quickly, because it is still more expensive than wind. Political and market space was created which allowed PV to develop quickly. That is what is happening in two segments. First, in the prosumer segment, which will have its own limitations. In a few years we will reach 4-5 GW, and we might have to face problems related to the functioning of this type of installations in the system. Over-voltages may occur if the grid is not modernized by then. Prosumers will cause the prices of energy from PVs to drop. Therefore, this is the perfect moment where the „cannibalism” of prices in this segment does not take place.
How many PV projects are waiting to be constructed?
Today the projects have a total of 4.5 GW with connection conditions to the grid. And 1.3 GW worth of projects have construction permits. In the first half of this year, 200 MW from new installations were added. The number of 1 MW projects is growing, but there are also projects that generate more than 1 MW, even over a dozen MW. The PV sector is not afraid of oversupply of small projects, and it is still counting on auctions for up to 1 MW. The government has already announced that the support system would be extended by another 5 years.
What about large-scale projects?
We have enough wind projects, so that with these reference prices of wind energy, the PV sector could earn its own place in this year’s auction. Still, it will not be a dominant player. Next year will be different because large-scale energy auctions will take place. Investments in PV will exceed 1 GW. In 2021, if the auction takes place in June, there will be few wind projects, so the PV sector will be more successful, which means projects that are over 1 GW will win.
How can the development of large-scale PV be facilitated?
The installed capacity in PV is 2.3 GW and prosumers dominate this sector. PV farms are responsible for 400 MW only. PVs will eventually be applied at an industrial scale for business clients, because today the Polish industry pays the highest bills for energy in Europe. Also, there are no limits as to the location of PVs, whereas investments of up to 1 MW are to be simplified. This will be the first segment. However, sources above 1 MW may encounter problems. A question comes up whether large volumes of energy will be guaranteed to that segment until 2026. Regulations should guarantee that auctions will be opened in the coming years to develop large PV projects. According to some plans, large PV farms will enter the market in 2022. There has been talk of building large farms of up to 60 MW without a support system, but that is not the rule because forecasting energy prices has become more difficult due to the coronavirus. It will be hard to convince banks to finance large PV farms, which would work directly on the wholesale market. This means large PV farms may be delayed by a year or even two. In this situation a big role may be played by guarantees in the auction plan for 2022-2026.
Interview by Bartłomiej Sawicki