Polish Government Has Systematically Under-Estimated the Difficulty of Switching Support Systems
When the Polish Government began years ago to start the notion of completely changing the support system to an auction and away from Green Certificates, several of us raised issues about the difficulty in making a transition.
The European Commission's movement to auctions was largely sparked by the big utilities - who have huge advantages in this system. See comments of Polish Biogas Association. Smaller projects have disproportionately higher front-end costs and historically do poorly in auction systems wherever they are introduced.
To offset this problem, the Polish law has been amended to provide guarantee support for small biogas projects under 1 MW at a rate that is 90% of the reference price in the auctions. This is an excellent provision, although it is set at a level that is too low to optimize biogas development in Poland across many projects. [We suggested a 2 MW cap]. Most biogas projects selected under the old system were over 1 MW due to improved efficiencies at that scale. Historical numbers on the cost of production of biogas are still pretty much accurate (certainly as to the differentials caused by scale):
Source: "Improvement of the technical, economical and ecological efficiency of biogas
production -future challenges for the agricultural engineering sector" by
Helmut Döhler and Mark Paterson (2009).
So the Polish law still has quotas for green energy that require either actual green energy utilization or a green certificate or a substitution fee. The collapse of the green certificate price due to over-supply and abuses largely dried up new projects for two years. But now there are still existing projects relying on green certificates for their income and in biogas on the new blue certificates with a much higher value. These certificate-based projects were theoretically going to be switched over to the new system.
Two problems have arisen: (1) for wind farms, the government is not anxious to increase their support by opening new auctions for existing plants that would incentivize their transition, and (2) for agricultural biogas, the blue certificates are stable and so attractive that projects do not want to flip to auctions and they are too large to get the 90% guaranteed price. So new auctions for existing projects have been a disaster.
In the meantime, the oversupply of green certificates allows electric utilities to keep in compliance even with the freeze on new projects receiving certificates and the delays in construction of new capacity due to the auctions' ponderous ways.
There seem to be no real solutions on hand and the results of delays in auctions and conflicts in the the incentives present will preclude Poland from meeting the 2020 RES targets and making future goals. While there are "sweet spots" in the system, notably for biogas and new PV, the results generally have provided the worst of both support systems. One is reminded of the difference between an optimist and a pessimist: an optimist believes that we live in the best of all possible worlds, while a pessimist fears this is true.
The European Commission's movement to auctions was largely sparked by the big utilities - who have huge advantages in this system. See comments of Polish Biogas Association. Smaller projects have disproportionately higher front-end costs and historically do poorly in auction systems wherever they are introduced.
To offset this problem, the Polish law has been amended to provide guarantee support for small biogas projects under 1 MW at a rate that is 90% of the reference price in the auctions. This is an excellent provision, although it is set at a level that is too low to optimize biogas development in Poland across many projects. [We suggested a 2 MW cap]. Most biogas projects selected under the old system were over 1 MW due to improved efficiencies at that scale. Historical numbers on the cost of production of biogas are still pretty much accurate (certainly as to the differentials caused by scale):
production -future challenges for the agricultural engineering sector" by
Helmut Döhler and Mark Paterson (2009).
So the Polish law still has quotas for green energy that require either actual green energy utilization or a green certificate or a substitution fee. The collapse of the green certificate price due to over-supply and abuses largely dried up new projects for two years. But now there are still existing projects relying on green certificates for their income and in biogas on the new blue certificates with a much higher value. These certificate-based projects were theoretically going to be switched over to the new system.
Two problems have arisen: (1) for wind farms, the government is not anxious to increase their support by opening new auctions for existing plants that would incentivize their transition, and (2) for agricultural biogas, the blue certificates are stable and so attractive that projects do not want to flip to auctions and they are too large to get the 90% guaranteed price. So new auctions for existing projects have been a disaster.
In the meantime, the oversupply of green certificates allows electric utilities to keep in compliance even with the freeze on new projects receiving certificates and the delays in construction of new capacity due to the auctions' ponderous ways.
There seem to be no real solutions on hand and the results of delays in auctions and conflicts in the the incentives present will preclude Poland from meeting the 2020 RES targets and making future goals. While there are "sweet spots" in the system, notably for biogas and new PV, the results generally have provided the worst of both support systems. One is reminded of the difference between an optimist and a pessimist: an optimist believes that we live in the best of all possible worlds, while a pessimist fears this is true.
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