1. Market Overview
The outlook for wind energy in Poland is positive. Expansion is expected in the short and medium term, especially in the offshore sector. Important market drivers and obstacles are:
- Rising energy prices for both businesses and consumers
- EU-2020 goals
- Distance rule (10H rule) for onshore wind turbines
- Unpredictability of energy policy
- Strength of local coal industry
2. Political Objectives
Continued headwind for onshore wind farms
Coal remains the most important source of energy in Poland, and the government aims to continue on this path in the future. The share of renewable energy (RE) in electricity generation is around 14%. Wind energy is the largest supplier of green electricity in Poland, accounting for more than 60% of renewables.
According to a draft of the Polish government’s Climate and Energy Plan 2021-2030 (KPEiK 2021-2030), the share of renewable energy will be gradually increased. In 2030, renewables will provide 21% of total energy consumption. Wind energy plays an important role in the plan, but only in the offshore sector. The Ministry of Energy is even forecasting a reduction in energy supplied by onshore wind turbines in the coming years. Photovoltaics, on the other hand, will become the largest renewable electricity producer. Construction of nuclear power plants is also planned. To implement the climate plan, the ministry is forecasting investments of almost EUR 90 billion by 2040.
The Climate and Energy Plan is based on the strategy “Poland’s energy policy until 2040” (PEP2040) presented by Energy Minister Krzysztof Tchorzewski in November 2018. Both documents were in the consultation process as of the beginning of 2019. Results are not yet known.
However, the Climate and Energy Plan takes a more positive view of onshore wind technologies, as does the PEP2040 strategy. For example, onshore capacities will not be cut to zero by 2036, as provided for in the PEP2040 strategy. Deputy Energy Minister Grzegorz Tobiszowski confirmed this to the Gazeta Prawna newspaper. Auctions for renewable energy – including onshore wind farms – will take place again in 2019. Notwithstanding, the Ministry of Energy has also promised to change the controversial distance rule (10H rule), regarded as the biggest hindrance of onshore expansion.
Poland: Installed and forecasted capacity of wind energy (GW)
Sources: URE, PEP2040
3. Market Organization
Auction system promotes use of renewable energy sources
In Poland, there are four public (PGE, Tauron, Energa, Enea) and one private (Innogy) energy companies responsible for the supply of electricity in different regions of the country. The grid operator is PSE, which is also a state-owned company. The privatization of public companies is currently not under discussion.
Renewable energies have been promoted through an auction system since mid-2016. The system distinguishes between plants with a capacity of more or less than 1 MW. 25% of the tendered quantity should be accounted for by plants with a capacity of less than 1 MW.
Besides, various energy sources are divided into seven categories, which are auctioned off independently of each other. Wind and solar energy are put in the same group and are auctioned together. In the auctions, different purchase quantities and maximum auction prices (reference prices) are determined for the seven different groups. If a bid is accepted, the annual purchase quantity and the subsidy are guaranteed for 15 years.
10 GW offshore capacity is planned
After a break of one and a half years, renewable energy auctions were held again in Poland in November 2018, eagerly awaited by the industry. The auctions were based on an amendment to the Renewable Energy Sources Act passed in July 2018. In addition to the tenders, it also included tax relief for renewable energy: Previously, property taxes were levied on the plant building and the technical equipment in it, but now only the plant itself is taxed.
In addition, the so-called 10H distance rule was partially revoked. It was introduced in 2016 and stipulates a minimum distance between a wind turbine and residential buildings: at least ten times the turbine’s maximum height, including rotor blades. This makes onshore projects difficult to implement in practice. According to the Polish Wind Energy Association (PSEW), 99% of the areas were ruled out as locations for wind turbines because of the rule.
The result was an investment gap and a halt to the development of wind energy in Poland. Although the 10H rule was not abolished by the amendment, the legislature now allows companies that already had a building permit before mid-2016 to use it despite the 10H rule. However, construction may only take place exactly as applied for, i.e. possibly with outdated technology and only with the planned capacities.
Rising energy prices increase pressure on government
The average price of the winning bids during the November auctions was EUR 45 per MW-hour. At the same time, the average price on the electricity exchange was around EUR 70 per MW-hour. According to industry experts, however, the average price in the tenders was probably not sufficient to cover costs. At the time of the auctions no information about potential follow-up auctions was known, which likely depressed the prices offered.
Due to sharp increases in energy prices in Poland, the results of the wind auction generated a lot of controversy and increased pressure on the government. “It seems that the Ministry of Energy is beginning to understand that the blockade of onshore wind energy was a mistake. That is why we are now discussing legislative changes” comments Michal Kaczerowski, president of the environmental consulting firm Ambiens, on developments in the onshore sector.
Polish industrial companies in particular are confronted with sharply rising energy prices. As the PSEW reports, some companies are already planning to build their own wind and solar farms or purchase green electricity under long-term power purchase agreements (PPAs). An example is Mercedes-Benz’s new engine and electric battery plant in Jawor: the factory has signed a contract with VSB Energie Odnawialne for the supply of green electricity.
Government announces new auctions
Aneta Wieczerzak-Krusinska, PSEW spokeswoman, sees evidence of a change in government thinking in the latest activities of public energy companies. Tauron, for example, is in negotiations to buy wind farms in the north of the country. And the Polish Energy Group PGE has participated in the auctions as of November 2018.
The new draft of the Renewable Energy Amendment of February 2019 has also been received positively. It provides for an extension of the connection guarantees, which are due to expire in May 2019. New auctions of 3.4 GW of renewable energies are also planned. Of that, 2.5 GW will be allocated to onshore plants larger than 1 MW. For wind turbines smaller than 1 MW, 10 MW will be auctioned off.
Offshore capacities are not planned in the draft amendment. Consultations on the amendment were concluded in March 2019. However, details on the introduction and implementation of the auctions are not yet known. The announcement of the auctions is urgently awaited by the industry. According to Michal Kaczerowski (Ambiens), projects of onshore wind farms with a capacity of 2.5 GW to 3 GW are awaiting new auctions.
Uncertain future for onshore windfarms
Apart from the auctions announced for 2019, the draft strategy for Poland’s energy policy (PEP2040) does not envisage any further onshore auctions until 2040. Grzegorz Tobiszowski, Deputy Energy Minister, stresses that there will be no support for renewable energy sources in their current form after 2030. “Examples from other countries show that the support is no longer needed, as renewable energy technologies are now competitive in the energy system,” Tobiszowski added.
The deputy energy minister rejects criticism against the PEP2040 draft related to the fact that the government wants to limit wind energy on land. “After 2030 there will be space for onshore windfarms in the Polish energy system, their share will be determined by the market, i.e. by the energy price,” Tobiszowski explains.
Distance rule might be softened
According to experts, the distance rule will be decisive for the further development of onshore wind energy. During a parliamentary session at the end of January 2019, Undersecretary of State Dabrowski provided information on current work to soften the controversial rule. According to Dabrowski, the prerequisite will be approval by local municipalities. According to the government’s plans, they will decide in their spatial development plans whether they want to reduce the prescribed distance. However, the majority of rural communities do not have such plans.
The 2020 targets of the European Union (EU) are another driver for the development of renewable energy. By 2020, the share of renewables in Poland’s final energy consumption should be 15%. According to its own estimates, the country will miss this target by around 1%. Poland will therefore have to buy green energy abroad. The costs for this have been estimated by the supreme supervisory authority at almost EUR 2 billion.
In its Climate and Energy Plan (KPEiK), the Ministry of Energy assumes that the growth rate of renewables after 2020 will be faster due to technological advances. The Ministry therefore believes that it is still possible to achieve the target of 21% of final energy consumption accounted for by green energies by 2030.
Offshore market gets tailwind
The offshore sector is a decisive component in the expansion of renewable energy in Poland. The energy strategy (PEP2040) provides for 10 GW of installed wind capacity in the Baltic Sea by 2040. For Irena Gajewska, communications specialist at PSEW, the explicit reference to offshore wind energy in the PEP2040 is a major step forward and signals a turning point for companies in the entire supply chain.
According to Gajewska, Poland’s Ministry of Energy has started an analysis of which mechanisms could be introduced to support offshore wind energy. However, the outcome of this work will depend on final decisions on the general development (PEP2040 and KPEiK 2021-2030) of the energy sector.
The offshore wind law is expected to be implemented in spring 2019. A possible mechanism could be so-called difference contracts, where the government guarantees a fixed electricity price to the operators of offshore wind farms. However, according to reports, approval by Brussels is needed with this system.
Poland: Wind energy projects
|MFW Polenergia Baltyk I, II, III (offshore)||I: 1,560 II: 240 III: 1,200||Polenergia, Equinor||I: Grid connection conditions assured, II and III: Environmental impact decision and grid connection conditions assured|
|Baltica 3 (offshore)||1,045||PGE Baltica||Grid connection conditions and contract at hand|
|Jasna, Barwice (onshore)||174||WKN (PNE Group)||Construction contract signed, completion planned for 2020|
|“Klaster” (3 wind farms Starza, Rybice, Karnice II) (onshore)||88||PGE Energia Odnawialna||Completion planned for mid-2020|
Source: author’s research
Several offshore projects are advancing
The two most advanced offshore projects in Poland are planned by the private company Polenergia in cooperation with the Norwegian energy company Equinor. Legally binding environmental impact assessments and follow-up agreements have already been signed for the two wind farms OWF Baltyk II and OWF Baltyk III.
Public oil company PKN Orlen also plans to build wind farms in the Baltic Sea. The company is currently holding talks and intends to find a project partner in 2019. The Polish energy group PGE wants to enter the offshore business as well. The company has location permits for 3.5 GW and has already applied for environmental impact assessments for 2.5 GW of this capacity. The first electricity should flow into the Polish grid by 2026 at the latest.
5. Market Barriers
RE laws are unpredictable
The distance rule introduced in 2016 is one of the biggest market obstacles in the onshore wind sector. According to experts, if the rule continues to exist, greenfield investments and modernization of existing plants will be impossible.
Market participants report that the biggest problem for the industry are not the regulations themselves, but their constant changes. The instability of the law is the biggest concern for companies. “The risk is great, and the confidence too low”, says an industry analyst.
In its study on the development of the offshore sector in Poland, the Institute for Structural Research (IBS) also mentions a limited network infrastructure as a problem. Another challenge is the influence of employees in coal mining. They are regarded as a large electorate of the current government. The Climate and Energy Plan (KPEiK 2021-2030) points out that coal will remain the basis for power generation in Poland. In addition to energy security and stability in power generation, the very important social role of coal mining as a large employer is mentioned.
PSEW also sees market barriers for offshore wind in the regulatory area. According to the association’s assessment, Poland offers more capacity than the 10 GW provided for in the Climate and Energy Plan. In the view of the experts, for example, the size of military zones in the Baltic Sea should be reconsidered. Some of these zones (not used for military purposes) could offer great potential for offshore technologies, but are currently inaccessible to wind farms. The same applies to sites that are blocked by oil and gas concessions with a term of around 30 years, but whose use is highly unlikely.
6. Local Industry Structure
Poland as a supplier of offshore components
Despite the fact that there is so far no domestic demand for offshore wind turbines in Poland, local companies are already supplying components abroad. These include both domestic companies and subsidiaries of foreign companies operating in Poland. ST3-Offshore, for example, supplies platforms for offshore wind turbines and had a European market share of 5%, according to WindEurope 2018.
Operators of wind farms in Poland are divided equally between Polish companies and foreign investors. On the Polish side, it is mainly the public companies PGE, Tauron, Enea and Energa as well as the private company Polenergia. Small and medium-sized enterprises account for about 20% of the market.
|Ministry for Energy||https://www.gov.pl/web/energia|
|Urzad Regulacji Energetyki||https://www.ure.gov.pl||Energy Regulatory Office (supervisory authority for the energy market)|
|Polskie Sieci Elektroenergetyczne SA||https://www.pse.pl/home||Operator of the public transmission system|
|Polskie Stowarzyszenie Energetyki Wiatrowej (PSEW)||http://psew.pl||Polish Wind Energy Association|
|Polskie Towarzystwo Morskiej Energetyki Wiatrowej (PTMEW)||http://www.ptmew.pl/pl/strona-glowna.php||Polish Offshore Wind Energy Association|
|Instytut Energetyki Odnawialnej||https://www.ieo.pl/pl/||Institute for Renewable Energy|
|Stowarzyszenie Energii Odnawialnej||http://seo.org.pl||Association for Renewable Energy|
|Greenpower||https://greenpower.mtp.pl/pl/||International trade fair for renewable energy, parallel to Expopower (International Trade Fair for Energy)|
|Pol-Eco System||https://polecosystem.pl||International trade fair for environmental protection|
|Pomeranian Offshore Wind Conference||http://pomeranianoffshore.pl||Annual meeting of the offshore wind industry in Poland|
|Annual Conference of the Polish Wind Energy Association||http://konferencjapsew.pl||One of the largest industry events in Poland|
|Wysokie Napiecie||https://wysokienapiecie.pl||Internet portal for energy topics|
|Gram W Zielone||http://gramwzielone.pl||Internet portal for green energy|