Enacting a Renewable Energy Law in Poland: the Uphill Marathon

     The press is filled with new accounts of an admission by the Prime Minister's office that we may not have a renewable energy law in place and approved by Brussels before 2017. This squares up pretty well with my predictions on the process early this year. Almost no one understood that the renewable energy support program will not ultimately be written in Warsaw, but in Brussels. Due to the need to approve state aid, the European Commission has a major role to play in determining what can occur in every Member State.

     While the Directorate General for Competition in Brussels is rewriting the rules to be applied in 2017 and thereafter, Poland has not completed the required procedure for state aid that started in 2005. The new State Aid Guidelines for Environmental Protection announced on April 9, 2014 require that changes be made by 2017. The Prime Minister's staff person mentioning a review in 2017 while speaking at a conference this week signals that the Polish Government will likely not attempt to confirm its proposed law to the new guidelines until the eleventh hour.

     The options open to the Polish Government superficially seem to be to pass something now and obtain approval from Brussels on consistency with the current guidelines and then to act again in 2017 top conform the program to the new guideline's deadline. Given that it has taken four years of confusion (with only about six months of work) to get this far, it seems improbable that the Polish Government could enact and obtain approval of two RES laws in thirty-six months. But either that is the plan or the Government expects the status quo to stay in place until the 2017 changes.

     The continuation of things as they are, however, is not an option. The Commission enforcement action against Poland on illegal state aid will require that the Government repair the system to conform with the state aid rules as enforced up to 2017.[1] This means a levelized Green Certificate program, nullification of co-firing and old hydro certificates, and recovery of the illegal aid, all to be approved by Brussels. However, Brussels can only nullify it cannot enact. So the Polish Government will have to revise the Green Certificate program pretty much along the lines of the 2012 Ministry of Economy draft with coefficients based on the cost of production. See "Dlaczego Polska Potrzebuje Pilnie Nowego PrawaDotyczącego Zielonych Certyfikatów," Gramwzielone.pl , October 23, 2013. 

     Before Poland can seriously think about the bold new world of auctions after 2017, it has to deal with the problems that have been ingrained in the system since 2005. There may have to be two laws: one for the repair of the status quo and one for the new rules post-2017.  However, since a Green Certificate program can still be done under the new Guidelines after 2017, and levelized support can be used if the Member State can make an argument it is necessary,[2] the same system could apply for compliance with both the old and new guidelines. 

     The Government will argue that it wants to achieve "savings" by enacting "an optimized system" including auctions. However, those savings can be achieved by ending support for co-firing and old hydro. Both types of energy will continue without support[3] and the savings is 70% of the total current system burden. Virtually nothing will be gained by instituting auctions except the risks of under-performance of the RES section, buy non-bidding and non-performance of successful bids. 

     Having had to fight through the Green Certificate problems well before 2017 - most likely in the next twelve months - the Government should consider making the necessary findings to allow that system to satisfy the Commission's new guidelines as well. Then we will have one new law and compliance with all of the guidelines as well as the cost savings from not supporting things that do not need support.

     Every other alternative is full of problems, and not just for the green energy sector. Maybe the politicians will consider this, if they have finally noticed that every other plan that they have tried with the new law has failed miserably.

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[1] See Energy and Environmental State aid Guidelines – Frequently asked questions, European Commission - MEMO/14/276   09/04/2014.  The old rules will apply for state aid until the new rules take effect.

[2] Section 3.3.14 of the new Guidelines provides: "(136) Member States may grant support for renewable energy sources by using market mechanisms such as green certificates..... (138) The Commission considers in particular that no differentiation in support levels through green certificates may be applied unless a Member States demonstrates the need for a differentiation...." [including the need to achieve diversification -such as the National Action Plan sector targets - and the need for stability].

[3] Old hydro will continue because it was never built on a dependence of special support. Co-firing will largely continue because it counts as RES compliance under the law and costs less than buying Green Certificates, investing in real green energy or paying the substitution fee.