Renewable Energy Constructions Lags Due to Auction Mechanism
You always hate to say later that your dire prediction was correct. Few folks get credos for being the bearers of bad news.
But when the auction mechanism was introduced in Poland and the EU a few years ago, many of us predicted that it would impact RES investment in a serious manner. And not for the good.
Ther auction requires projects be permitted and approved and have complete designs and building permits (which in Poland are vastly more detailed than in many other countries). The front-end requirements are serious and more serious for smaller projects, where they are a larger percent of the total investment.
Having cleared those hurdles, you are left with waiting for the auction and then going to construction. The period after the auction to build varies with the type of project, but it is considerable. The financial support for the project needs to be obviously closed in this period, it cannot be closed prior to the auction except in general terms.
So we have delays for project development and additional delays for construction. These predominantly fall upon smaller projects and smaller investors. Large utilities can plan around these issues due to their lower cost of capital and their lower administrative burdens.
So we now see that projects winning the auction are not getting built fast enough. Many may lose their support by missing deadlines. The system that was touted as providing a set amount of renewable energy at a fixed price is not delivering the fixed amount of energy at the fixed price.
The slow down in RES investment is happening all over Europe (36% drop in 2018). This was predictable (I predicted it). I also think that it was deliberate as part of the big utility strategy to slow down RES and keep big existing fossil-fuel plants running longer into the future. See R.M. Mott, New State Aid Guidelines for Renewable Energy Discourage Competition, Green Energyand Energy Security, 5(2) Eur. Energy J. 22 (2015) (auctions required by EEAG do not decrease the cost of support schemes and give advantages to utilities over small producers); Client Earth paper (2015).
Most new energy investment remains in renewable energy sources. Poland is being pushed down this road which is inevitable. Unfortunately, the process is proving painful for many.
But when the auction mechanism was introduced in Poland and the EU a few years ago, many of us predicted that it would impact RES investment in a serious manner. And not for the good.
Ther auction requires projects be permitted and approved and have complete designs and building permits (which in Poland are vastly more detailed than in many other countries). The front-end requirements are serious and more serious for smaller projects, where they are a larger percent of the total investment.
Having cleared those hurdles, you are left with waiting for the auction and then going to construction. The period after the auction to build varies with the type of project, but it is considerable. The financial support for the project needs to be obviously closed in this period, it cannot be closed prior to the auction except in general terms.
So we have delays for project development and additional delays for construction. These predominantly fall upon smaller projects and smaller investors. Large utilities can plan around these issues due to their lower cost of capital and their lower administrative burdens.
So we now see that projects winning the auction are not getting built fast enough. Many may lose their support by missing deadlines. The system that was touted as providing a set amount of renewable energy at a fixed price is not delivering the fixed amount of energy at the fixed price.
The slow down in RES investment is happening all over Europe (36% drop in 2018). This was predictable (I predicted it). I also think that it was deliberate as part of the big utility strategy to slow down RES and keep big existing fossil-fuel plants running longer into the future. See R.M. Mott, New State Aid Guidelines for Renewable Energy Discourage Competition, Green Energyand Energy Security, 5(2) Eur. Energy J. 22 (2015) (auctions required by EEAG do not decrease the cost of support schemes and give advantages to utilities over small producers); Client Earth paper (2015).
Most new energy investment remains in renewable energy sources. Poland is being pushed down this road which is inevitable. Unfortunately, the process is proving painful for many.
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