Energy 16 August, 2017 9:00 am   
COMMENTS: Mateusz Gibała

Amendment to Renewable energy act signed by the President

President Andrzej Duda signed the amendment to the Act on renewable energy sources. This has been confirmed on Monday on the President’s official website. The amendment’s basic assumption is to eliminate the fixed value of the so-called alternative fee and instead link it with market prices of certificates of energy origin issued for specified renewable energy sources. 

At the end of July the Senate approved the amendment to the Act on renewable energy sources (RES act), which was then submitted to the President. The amendment eliminates the fixed value of the so-called alternative fee, which is PLN 300.03 per MWh. Instead it links the fee with the market prices of certificates of energy origin issued for specified renewable energy sources, i.e. green certificates (in practice this is about wind turbines) and blue certificates (agricultural biogas). The fee will be now worth 125% of the average price of the given certificates from the previous year, but not more than PLN 300.03 per MWh.

Sale of green certificates

The support system for renewable energy sources is based on property rights. A producer who generates energy from renewable energy sources is allowed to sell the produced power and in addition receives a certificate for every 1 MWh. The document is a property right and can be sold either on the exchange or in an individual OTC transaction. The sale price is to support the producer. Whereas sellers of energy to end users have to possess an amount of certificates that matches their sales volume, which means they have to buy them, or pay the so-called alternative fee.

Due to oversupply, the market price of green certificates dropped by 90% within a few years. The authors of the bill believe that that linking the alternative fee with the market price will increase interest in certificates and a gradual reduction of the oversupply.

Vice-Minister of Energy Andrzej Piotrowski stressed while the bill was still at the parliament that in the last few days the market price of green certificates soared precisely because the market was anticipating the bill’s impact.

President of Energy Regulatory Office critical of the amendment

Maciej Bando President of the Energy Regulatory Office (URE) is one of the amendment’s critics. During the Senate proceedings he pointed that the tables presented as part of the justification for the project were “full of errors and untrue information.”

“This data actually misled all of the MPs who voted for the bill,” Bando said. “One of the reasons is that they did not realize that the estimated future price for the consumers will be at least twice as high,” he added. The justification says that by 2020 the “standard costs for a regular household will increase by less than PLN 10 a year.” Bando also stated that the bill will not contribute to eliminating the oversupply, which is today estimated at 20 TWh. In his opinion 8 TWh of oversupply will still be left.

The President of URE said that the bill is beneficial only to those who signed with renewable energy producers contracts for the purchase of green certificates at the prices linked to the alternative fee. “Today they believe these contracts should be cancelled,” he said.

In his answer, Vice-Minister Piotrowski stated the contracts were not signed by small entrepreneurs, because large companies did not want to sign deals with them. “The truth is that this amendment applies to a very small group of businessmen,” who have large generation sources able to produce “over a dozen MW,” he explained.

The Vice-Minister also argued that a large portion of the certificates is traded outside of the exchange at prices a lot higher than on the market. “Perhaps the regulations formulated something incorrectly and thus encourage such a distortion of the market. If a law breeds pathology the foundation of this pathology should be removed and this is the essence of the amendment,” Piotrowski pointed.

Renewable energy sector against the amendment

According to the representatives of the sector, the new regulation will lead to the downfall of the private wind farms sector and large energy companies will benefit from the bill because they will be able to fulfill their RES requirements, but not through direct contracts with green energy sellers, but through, e.g. paying a significantly lower alternative fee.

After the bill passed in the Senate the biggest organizations of the renewable energy sources sector appealed to the Polish President not to sign the bill, which, if entered into force, “will conclusively lead to the bankruptcy of the majority of private renewable energy operators, most of all companies from the wind sector.”

According to experts the sustained low prices of certificates stem from the oversupply of green certificates, which is, in the opinion of some specialists, at 22.6 TWh.