First RES Auction in Poland: Problems and Opportunities


The first RES auction in Poland had problems and bidders could not complete their offers online. But the Ministry has decided to go ahead and award support from those bids that were received. Some issues arise since the bidding was arbitrarily cut-off due to technical problems and because the number of bids seems to be less than the support that was awarded. See European Commission, State Aid Guidelines for environmental Protection, 2014,Sec. 1.3(19)(43).
Bidders had to consider state aid density in their bids and count any grants received to avoid a total amount of support that exceeded the EC guidelines. This is a complex calculation, but the results of the auction seem to reflect that it did not constrain bids by very much. Seven biogas plants bid and won with prices from 502-504 PLN/MWhr. The reference price is 550 PLN. PV plants bid and won many more awards in the up to 1 MW general category. Prices for those winning bids are not yet clear from the published information.
My take from this is that there will not be as many biogas projects bidding in auctions as planned by the government. This reflects the experience everywhere in other countries and the fact that the reference price offered is difficult for farm-based biogas. On the other hand, projects that can be successful at 500 PLN/MWhr seem to have excellent prospects in future auctions, including those planned by CEERES. See CEERES Facebook and website.   For inquiries contact randymott (at) ceeres.pl.

Note: A more detailed analysis of the auction in Poland will be posted in the next couple of weeks.


Comments

Randy Mott said…
The low levels of participation in some baskets where a fraction of the allotted electricity volume was sold indicate that there is a lack of competition in the auctions under the EC definitions. Given the reference prices and the additional control imposed by the state aid limits, the government could easily just make this support available to all qualifying projects at the fixed price (less grant aid) and achieve far better results with no major additional expenditures for support.

But by doing the auction, the government imposes a big burden on small projects and their developers with an uncertain assurance of support. This has not worked on small projects anywhere else and is unlikely to produce the projects hoped for by the Polish Government. “Unfriendly for small projects and actors. A major empirical lesson of tenders is that they are unsuitable for small installations and smaller actors.Competition may thus be affected. It has been argued that some of the afore mentioned factors and,namely, information failure and difficult access to finance,have a disproportionately negative impact on small actors and, thus, that the instrument is not suitable for small actors, suggesting that smaller projects should be promoted with a different instrument.” Del Rio, “Back to the Future,” Renewable and Sustainable Energy Reviews 35 (2014).

When a large number bid, the opposite problem occurs in that half of more of the projects ready to go will not receive support. This seems pointless when there is a real need for the RES capacity to be built, not only because of the EU Directive, but also due to the need to replace aging coal-fired power plants in Poland.
Already results is published for new installations up to 1MW, The bids were mostly from PV project developers. The wining bid prices are from 5,5 to 9,3 EURO cents /kWH. The main winers is the big companies divided in to many small projects. But price 5,5 EURO cents /kWH is unrealistic in any case. Such pressure from big companies create really the unfavorable conditions conditions for smaller investors.
Randy Mott said…
You are absolutely correct. The whole auction mechanism favors big companies that have lower cost of capital and tolerance for lower rates of return than entrepreneurs and venture capital. The guidelines from Brussels were a product of intensive and successful lobbying by the big utilities to push this solution to RES support. It has also caused a drop-off in RES investment in the EU, since it sets up barriers to many traditional RES investors and also disqualifies large numbers of ready projects from receiving support. See Mott, "The European Commission's Mismanagement of State Aid Rules for Renewable Energy," Pennwell Publishing 2015.http://pennwell.sds06.websds.net//2015/amsterdam/papers/T1S3O2-paper.pdf

A better solution in Poland where we need the projects would be to set realistic support levels and qualify all projects that met the guidleines below 2 MW. There still is a real-life ceiling on the nu,ber of projects by virtue of the conditions for development. But if the government likes small projects and diverse sponsors this makes sense.
In the form of bid is position for energy selling price and is another position for support. It is not clear how these two positions combined to get single combined price to compete with others bids without support. From competition view of point the submitted selling price of bids having support directly can not be used for competitions purposes with other bids. This price shall be increased but not decrease. I thing that bid with 5,5 Eurocents/kWh has support but unfortunately it not reflected in price. He would be lost of auction if support were combined with selling price. The combined price could be below reference , but too high to win auction. In common case, shall be two prices in consideration: energy selling price and another, for competition purposes - combined price. IF bids win according combined price, the energy purchasing contract shall be concluded with lower, selling price. I thin it was not the case in this first auction?

Popular posts from this blog

Hitting Reality: Polish Energy Policy Meets the Facts

Pushing Electric Cars Will Do Little to Fight Air Pollution in Poland

Republicans Figure It Out! No to big government boondoggle!