Rumors that the Treasury Ministry Thinks the Small Auction Will be Pointless and Expensive

There are rumors in Warsaw that the Polish Treasury Ministry thinks that the small auction for renewable energy support (below 1 MW) will be waste of time and resources. Because 25% of all of the support provided from 2016 and beyond must go to small sources, and small sources will not be sufficient to meet the target, anyone who bids in an auction within the maximum price will win. At the same time, the cost of setting up the auction is pretty much the same whether 250 kW a project are being bid or 150 MW.

The Ministry of Economy conceded in the Parliamentary debate on the RES bill that there will be more support offered small sources than there will be projects. This means that there will really be no competition for support and no real pressure on the prices sought. All bids will win.... causing us to ask earlier why have an auction at all?

Apparently the Treasury thinks the same thing. The European Commission must accept the "GBER notification" from the Polish Government on the new law and there has been at least one objection to the small auction as not meeting the GBER criteria because it is not a competitive procedure. The Commission defines competitive procedures as those where twice the amount to be awarded is bid.

No one needs more uncertainty in the Polish renewable energy market right now. But it is a fact of life. The best solution, of course, would be to go up to sources up to 2 MW or even 5 MW and announce fixed tariffs. The amounts should vary with technology to avoid market distortion.

Alternatively, the government could use the coefficients developed under the earlier proposed law and adjust green certificate prices accordingly. The Commission will void the old hydro and at least half of the value of co-firing certificates to reduce the market glut. The new state aid guidelines allow this approach and Poland will have to do it anyway to meet the state aid rules applicable from 2005 to 2017.

Some re-visitation of the RES legislation seems inevitable. The "dead zone" created by the end of green certificates in 2015 and the delay in the auction construction starts until 2017 or 2018 will be one major problem pushing for a new legislative fix. The Commission decision on green certificates as state aid and the GBER decision will also likely raise the need for new legislation. Fortunately, the 2013 law substantially meets the needs likely to emerge and should be dusted off and enacted.


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