Reality Hits Polish Government Plans for Renewable Energy

The Polish law on renewable energy has been a moving target for years. Originally, the law was deliberately delayed to allow the state-owned energy companies to keep receiving support which the European Commission would have stopped if the new law had been notified under the treaty. Now the delays are being triggered by the new government's efforts to amend the program on the fly.

The government has convinced itself that what RES capacity is already done and more co-firing will be all that we need. Some additional biogas plant construction (actually a lot in real terms) is strongly supported in their mix. But the classic RES technologies are on their black list. They have been completely persuaded by the coal lobby that these technologies are too unreliable to be major parts of the energy mix.

The factual basis for their assumptions is being broadly challenged by the RES sector. Poland will not meet the 2020 target without a serious program that includes the full mix of RES technologies. The need to start addressing the 2030 goal is also closer than it looks. The need to expand the energy production sector by any means to avoid black-outs in next few years also strongly suggests that new electricity generation supported by investors (RES) should be promoted, while the government remains free to consider its fantasy of major new coal blocks filling the void.

Many of the old coal-fired plants that have been co-firing will be offline in 2017-2020. A lot of these are the biggest co-firers. Unless they are operating in 2020, nothing that has been done will count toward the target. A lot of the new coal-fired plant construction is a bit delusional - the financing is just not there for this technology when coal plants are closing all over Europe. The debt and equity markets obviously know this, even if the Polish Government pretends not to notice. Expansion of co-firing will be quite problematic, even assuming that the support scheme to do it gets by the European Commission state aid review.

Now we are seeing the deadlines for the PiS amendment to the law start to drag out. A big part o this is undoubtedly feedback from the Commission looking at the new law. The gap between installations covered by the current law (green certificates) and facilities that will be constructed based on the auctions is growing. This is the period when facilities cannot qualify under the old law and cannot get support under the new law. I predicted that it would be 24 months or more and that may be charitable. Continuation of a modified green certificate program approved by the Commission is probably the only viable alternative remaining to meet the 2020 target. This would have to be tweaked to add correction coefficients by technology to reflect their actual cost of production. See prior posts on Mott's Blog. This RES deficit will be especially true when the accumulated green certificates are largely voided by the Commission's action in the enforcement case SA 37244.

The whole situation is made much, much more difficult by the lack of transparency surrounding the legislative process. This has been endemic from the start of the RES legal changes in 2010. Rather than incorporate a bit of reality testing into the internal process, the Polish politicians run into the back office and create their plan. When it hits the streets, they are confronted with all of the realities that they avoided, ignored or were ignorant of when they made their clandestine plan. Real world economics and compliance with European and Polish law apparently only get any attention after the proposal is made in public. Since these twin pillars dictate almost everything that happens in the RES market, the plans seldom bear any relationship to what can actually happen.

The growing bunker mentality of the government, especially vis-a-vis Brussels will only make the problem more acute. While life creates the opportunity of experience, it only promotes forward progress when the right lessons are learned. Transparency and open discussion to flush out the facts is not obviously one of the lessons that is being learned here.


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