A direct line could save many energy-intensive Polish company during the raging energy crisis. However, its future depends on the regulations that will outline the development and functioning of such projects. However, not everyone is enthusiastic – writes Mariusz Marszałkowski, editor at BiznesAlert.pl.
Direct line and energy prices
High electricity prices keep many energy consumers up at night. The problem affects both individuals and companies. While there are mechanisms that block large power bill increases for individual customers and small and medium-sized enterprises, the situation of energy-intensive companies is very different. The topic of a “direct line” comes back like a boomerang whenever there is talk about the negative impact of rising energy prices.
A direct line is a solution that originally appeared in 2015 during the drafting of the first version of the Act on Renewables. It was proposed as an amendment, but was not supported by MPs from the then ruling coalition. What is a direct line? It is a connection that links the source of energy production directly with the consumer of this energy, i.e. an energy-intensive company, but without a distribution network. A company wishing to use this solution should build and then maintain a line connecting it to an energy source, such as a wind farm, solar farm or a biogas plant. The energy produced there would go directly to the recipient, which means they would not have to buy power from the market (e.g. on the exchange) and would save on distribution/transmission fees. In addition, energy would be produced from zero-or low-carbon sources, which would also have a positive impact on the possible sales results of the enterprise, as it would obtain green energy certificates.
In the face of high energy prices, as well as even greater increases in the coming years, it is necessary to look for solutions that will minimize the impact of high electricity prices on production, and therefore also on the competitiveness of the Polish economy. Today, regulations do not allow a production plant to be directly connected to a power plant. Yes, the manufacturer is allowed to install PV panels on their roof, but generally speaking they generate little energy in comparison to the demand. Such plants need access to large, industrial sources of power, but at the same time they must have a connection to the grid, which, in the absence of energy production or its insufficient amount, will supply energy. Today, even if a given industrial plant is located in the vicinity of a wind or photovoltaic farm, it can still be supplied with electricity only through the National Power System (KSE).
Currently, there are two draft laws that would help to introduce direct lines. The first is a draft amendment to the Energy Law and the Law on RES, which appeared in 2021. In this case, the fee for transmission of power via the direct line became a bone of contention. The idea was that large energy consumers would continue to participate in the development of a transmission network based on KSE, which they would also use it in certain situations. Less energy consumption from the grid would mean lower charges for distributors and transmission companies. This, in turn, could negatively affect the modernization and expansion of the network. In February 2022, the Energy Regulatory Office proposed that companies using direct lines pay a cogeneration, RES and power fees, as well as participate in fixed costs associated with investments in KSE. In practice, such provisions significantly reduce the profitability of the investment. Due to the indolence of the Ministry of Climate and Environment in preparing its proposals, as well as the opposition of many entrepreneurs to the proposed amendment, the Ministry of Development and Technology (MRiT) announced that it would propose its provisions to the Direct Line Act.
The MRiT proposal included a provision ensuring that the entrepreneur would not incur the “vast majority of the fees” that are currently imposed at the energy distribution stage. BiznesAlert.pl has asked MRiT about the announced changes. “Currently the regulation and the act in which the stipulations are to be included are being discussed among the ministries. The project was recently discussed at a meeting of the European Affairs Committee. We would like the changes to come into force in the first quarter of 2023,” the Ministry answered.
The Climate Ministry also seems determined to have the legislation come into force as soon as possible, even faster than the MRiT declares. During a conference about the year’s sectoral agreements, Minister Anna Moskwa told BiznesAlert.pl: “We have already included solutions for the direct line in a draft of our act, which has been submitted to the permanent committee of the Council of Ministers, which means it will be discussed at the next permanent committee meeting, and then at the Council of Ministers sit-down. Then it will be submitted to the parliament, where, hopefully this year, it will be adopted,” she explained. In addition to the distribution and transmission network operators, there is another side that has concerns about the new rules – state-owned energy companies. For them, energy-intensive entrepreneurs are a valuable customer. It is not in the interest of energy companies to let their customers go, as this will mean lower revenues and profits, these companies are reluctant to answer questions about the potential impact of new regulations on their activities.
In response to a question from BizesAlert.pl Tauron said: “We look forward to the outcome of the ongoing legislative work. Once the law is amended, it is expected that there will be interest among customers in direct lines. Currently, it is difficult to estimate to what extent our clients will be interested in such a service.” We also sent questions to Polska Grupa Energetyczna and Enea, but we did not receive an answer by the time this article was published.
Energy companies are also concerned about the impact of such lines on the electricity system. Such plants will not operate in isolation, which raises concerns that the energy produced in a power plant that is also connected to the production plant may go to the grid without any control. It is expected that new technology will save the day, and devices will be installed at the energy inputs and outputs that will prevent the energy from flowing in an uncontrolled way.
Hope for cheaper energy
The direct line is a hope for energy-intensive companies, especially since the various forms of government support are not available to them. Let us remember that the increase in energy prices for these enterprises will result in a significant increase in the prices of the products they manufacture, including pulp and paper companies, smelters, sugar factories or cement plants. Therefore, the new rules must take into account the specifics and nature of such solutions in order to encourage companies.