August in Poland.

August in Poland. The politicians are doing what they do best... taking a break.


During this period of inattention, it might be useful to compare what the Polish legislature  is doing on renewable energy compared to the French legislature in the same situation (albeit less severe in France).

The French did not notify Brussels of their wind tariff in their renewable energy law.When the preliminary memo came out that the European Court was getting ready to find the wind tariff to be state aid, everyone was quite attentive to the possible consequences. Unnotified and unapproved state aid is illegal in the European UnionLegal commentators noted that once the case got back to the national, French court, it "essentially has no choice but to cancel the preferential feed-in tariffs to wind power producers agreed to in 2008, likely resulting in massive refunds for consumers. France can expect down-stream lawsuits from wind power producers as a result of government FIT adjustments, or potential FIT payment claw-back."

The strategy adopted by the French wind industry and government was to try to beat the case on remand by passing, notifying Brussels and getting approval on a new wind tariff law, retroactively fixing the situation. One prominent law firm advised clients: "The legal uncertainty which could result from the cancellation of the Feed-in Tariff Order would be strongly mitigated by obtaining clearance of the Wind Tariff Support Scheme (i.e. decision of compatibility with the European Union common market) from the European Commission prior to the decision of the Conseil d’Etat." Other lawyers advised of the dire consequences if the tariffs were held to be state aid  that had not been approved and the situation was not rectified.

At the Eleventh Hour, the French Government passed the new wind tariff law and the French court let pass the years of "illegal aid" caused by the failure to notify Brussels and obtain approval. 

My reaction at the time was why would rationale people let the matter get that far? Once there was a challenge, it would have been prudent to fix it by a notification and retroactive approval, well before the ruling by the European Court of Justice. 

Yet at this point in time, the French reaction seems stellar compared to what we are seeing in Poland.  On June 5, 2012, the head of the Polish agency that deals with this stuff  told the Ministry of Economy  that runs energy policy that their Green Certificate program was state aid and needed to be approved by Brussels. On November 28, 2013, the same agency told the Ministry that the Commission had actually advised the Polish Government that the Green Certificates were considered to be state aid. This program had been operating since 2005 without notification and approval by Brussels. Approval that is required before-the-fact by the European Treaty. By February 2014, the Polish Government learned that there were complaints in Brussels over the Green Certificate program and they were asked to submit a very detailed list of information to the Commission.

Through a similar period, the French Government was racing to re-enact their questioned tariff and get it approved in Brussels. The Polish Government continues to deny there is a problem and has, incredibly, no plans to repair the Green Certificate program to meet the state aid requirements [1] and no plan to notify Brussels


Source: Joseph Wouk
This will mean that the Commission's enforcement action, whenever that culminates, will invalidate all certificates since 2005, require recovery of the money, and lead to endless unfair competition claims.  The Commission has already signaled this result to the Polish authorities and has the power to take these actions without going to court. Challenging these conclusions will require going to court with years of litigation and no chance of winning. 

I suggested last fall that the Polish Government should split the new renewable energy law in half and make the first half a revised Green Certificate program that met all of the Commission's guidelines, similar to the Romanian program that they approved in 2011.  The rest of the new law could include anything that they wanted in theory (but would also have to be notified and approved by the Commission). This suggestion was basically the French solution, i.e. try to minimize the consequences by anticipating the results.

The Polish solution, however, was not so easy, since major parts of the Green Certificate program beginning in 2005 do not comply with the EU state aid guidelines. Aid for co-firing and old hydro would have to be ended as incompatible with the fair competition rules (i.e. overcompensation distorting the market for competitors). This was a decision that the Polish Government simply could not make before the Parliamentary elections, since it involves billions of Euro of support that would have to be returned by state-owned companies. 

It is wholly unclear if the delaying tactic will work to actually defer the results. It is clear that the results will be worse for everyone from the delay. There will inevitably be a revised Green Certificate program and aid to co-firing will end or be sharply reduced., and aid to old hydro will end completely. Without a new law on certificates that meets the guidelines then in effect, all of the aid will have to be returned. Amounts paid for these objectives will be recovered. The transition will be anything but smooth. The biggest losers will be the folks that the government tried to illegally help, i.e. the big state-owned utilities. 

While the law that could meet these requirements was drafted two years ago and ready to enact over a year ago, there is no sign that the Polish Government will do anything to mitigate the damages. Their legislative vacation is not just a respite  from work, but a break with reality.
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[1] The repair involves "levelizing" the certificate values by true costs of production across the different renewable energy technologies. State Aid Guidelines for Environmental Protection, par. 110. See C(2010)2211, State aid No N 65/2010 - United Kingdom Amendments to the Renewables Obligation Certificates (ROCs) scheme, March 30, 2010  (“…levelised costs matching the midpoint of the predicted revenues… will therefore prevent overcompensation in the aggregate of the different producers”).
 

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