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Polish Briefing 2 March, 2020 10:00 am   
Editorial staff

Energy cooperatives and the Polish law (ANALYSIS)

The goal of the EU climate and energy policy is to decentralize and democratize the energy system so that every citizen can participate in it. In this vision a network of grassroots energy communities emerges, where the end-users, i.e. average citizens are able to generate green energy on their own with the support of local governments – writes Bartłomiej Kupiec, expert at Young Leaders in Energy.

The goal

Poland’s energy sector still mostly depends on coal. This means the country will not even be able to meet the 15% requirement of RES in the total energy consumption. It seems that one way to move things forward and speed Poland’s green transformation is to popularize energy cooperatives (communities) and decentralize energy production. In order to enforce EU directives on, among others, development of RES and citizen-driven energy communities, Polish lawmakers introduced the idea of an energy cooperative and an energy cluster as new participants in the country’s energy market.

Energy cluster

According to the Renewable energy sources act (RES Act), an energy cluster is a civil law agreement represented by a coordinator. The participants of the agreement include natural and legal persons, schools of higher education and local government units. The objective of such an entity is to produce and balance the demand for distribution and trade of energy from RES, or other kinds of fuels as part of a distribution network with a rated voltage not lower than 110kV in an area that is not bigger than a poviat (a territorial unit-transl.) or five communes.

By allowing such a diverse group of entities, including scientific institutions, to participate in energy clusters, the lawmakers made it more likely that the entities will generate innovative solutions through exchange of experience and know-how. The above description of an energy cluster suggests that its structure is based on the so-called innominate contract, which means it does not have a legal personality. Therefore, from a legal perspective it constitutes a group of independent entities interested in generating “green energy” to achieve profit. A good example of a cluster that is growing dynamically is the Zgorzelecki Energy Cluster (Zgorzelec is a town on the Polish-German border-transl.). Its participants are successful at creating an atmosphere of cooperation, which facilitates the development of RES and new technologies. The cluster built a 4×4 off-road car called “Sokół” (the Falcon) that runs on an 85 kWh battery, which means it has an impressive range of about 300 km.

Energy coop

An energy cooperative is the second form of assembly available for people who want to produce power from renewables. According to the RES Act’s definition, an energy cooperative is an administrative unit whose legal personality is stipulated in the Cooperative Law. The entity generates electricity, biogas or heat from renewables and balances the demand for electricity, biogas or heat only for the benefit of the coop and its members. The maximum number of the coop’s participants is 1,000, it can operate within a rural commune or a rural and urban commune. Its goal is to ensure energy security for its members who work with each other in the spirit of solidarity. Coops are founded on democratic principles, which means there is no hierarchy, all members are equal and all decisions are voted on. Such a solution increases the members’ engagement within the group because every person feels responsible for the coop’s future. In other words, the coop unites individual end-users in order to ensure access to cheap electricity generated from renewables, which makes it possible to spread the project costs across many investors.

There are no successful energy cooperatives in Poland because this model of organization is not very popular. This is because cooperatives do not generate profit, which goes against the contemporary reality where individuals start an enterprise to earn money to provide for themselves. In order to make energy cooperatives more popular, the lawmakers have to create an environment that facilitates the creation and implementation of such projects.

It seems that a satisfactory solution to this is to abandon licenses for generating and trading electricity when the total installed capacity of the RES installation that operates in the cooperative’s area is not higher than a certain level (instead the cooperative should be included in a pre-determined registry because power is a foundation of the economy, which means its producers need to be registered). This would encourage the creation of cooperatives because there would be no need to apply for a license to produce green energy for members of the cooperative. Additionally, the requirement to cover at least 70% of annual energy demand from renewables for the cooperative should be reduced to 50%.

The current requirement of 70% significantly increases organizational and investment costs, which may make the cooperative financially unattractive. The definition of a cooperative should also be amended in the Cooperative Law. A cooperative defined as an association of persons brings to mind Polish partnerships, which instead of paying the corporate income tax, only pay taxes for the dividend that is paid out to the partners. The cooperative’s job is to first fulfill the needs of its members and not to increase capital. This is why the government should consider a tax exemption for cooperatives (including energy cooperatives), which provide services only to their members. In order for energy cooperatives to develop, Poland needs to create a good legal environment.

The difference between energy cooperatives and energy clusters is that cooperatives have a legal personality. As participants of legal transactions they can, on their own behalf, perform duties and acquire rights. This is in contrast to clusters, which constitute an agreement signed by independent entities represented by a coordinator. This impacts how agreements are made – energy cooperatives may sign them on their own, whereas a cluster can sign them only through its coordinator. Energy clusters are a solution for entities interested in participating in the renewable energy sector for commercial purposes and the Zgorzelecki Energy Cluster is a good example of this. Clusters’ flexible legal structure that allows their members to shape them as they wish (within the rules of social coexistence) makes it an ideal form of enterprise for entities that want to design an innovative product or earn profits. Whereas energy cooperatives are dedicated to those entities that want to address their demand for energy in an environmentally friendly way and unite the local community through participation in a common enterprise.

Energy cooperatives are Poland’s opportunity

To ensure its energy security and develop renewable energy sources Poland has to decentralize energy generation. The popularization of energy cooperatives will actively engage a large chunk of the population in the green transition.