Market - Support systems

There are several different support mechanisms in the Polish legal system, from which one can distinguish:

• Investment support systems (grants)
• Operational support systems (premium, certificates).

The aid is granted for a given renewable energy source installation or a high efficiency cogeneration installation and it is possible to obtain both investment aid and operational subsidies, but its limited. By obtaining investment grants, the investor reduces its capex cost (equity). If ones co-financed investment with the use of public funds is obliged to reduce the unitary (usually to MWh of electricity) premium subsidies granted at the operational stage (exploitation activities).

Investment grants are awarded in the competition and the level of such aid depends on the region, the size of the enterprise and the eligible costs. Its obtaining requires competition based on the criteria of formal and substantive evaluation. Public investment aid is limited to the cash of funds dedicated to a given competition. Typically, the financial resourses of funds in a given competition of a given measure under operational programs is from about 50 to about PLN 200 million. Investment aid occurs in the form of grant and/or a preferential loan.

Operating subsidies are granted to the electricity generated or injected into the electricity grid, respectively. The subsidies are granted if the generating unit qualifies for (it fulfils certain criteria - it concerns respectively the Energy Law, laws on renewable energy sources and executive acts), the generating installation is registered by authority (by KOWR - The Agricultural Property Agency in case of agricultural biogas plants) or by the concession issued by the President of Energy Regulatory Office for other RES installations, CHP-based systems or another conventional systems. The generating installation must be connected to the power grid of the National Power System or to the gas distribution system in case agricultural biogas injection.

So far, operating systems for supporting electricity producers from renewable energy sources or high-efficiency cogeneration in the form of property rights to certificates of origin were known (the so-called certificates system). The certificates mechanism was introduced after Poland's accession to the European Union:
Green certificates

• Green certificates
• Yello, purple and red certificates

1. Yellow certificates - for small cogeneration units with a capacity of up to 1 MW or filled with gaseous fuels (price approx. PLN 110 / MWh)
2. Purple certificates - for units based on methane released from mines or gas obtained from biomass (price approx. PLN 60 / MWh)
3. Red certificates - for other cogeneration units (price around PLN 30 / MWh)

It's worth mentioning that:

• Purple certificates were introduced in 2010.
• From 1 January 2019 it is not possible to obtain transferable (valuable) certificates from cogeneration for electricity generated in cogeneration after this date (the mechanism of certificates for cogeneration has been deactivated)
• In 2010, the possibility of "combining" certificates from renewable energy sources (green certificates) meeting the criterion of high-efficiency cogeneration was introduced
• In 2010, the possibility of obtaining brown certificates (identical to green ones with rules) for equivalent electricity calculated and resulting from the amount of agricultural biogas injected into the distribution network was introduced.
• In 2016, the volume dedicated only to agricultural biogas plants was derived from green and brown certificates - they were called blue certificates.
• It is not possible to obtain certificates from cogeneration (yellow, purple, red) for electricity generated after the date of 31 Dec 2018.
• Green or blue certificates may be obtained from renewable sources appropriately commissioned before 1 July 2016. After this date, it is not possible to include new generating units within the system of support, excluding agricultural biogas plants operating on the principle of producing and injection agricultural biogas into the gas distribution network.

Currently, the support system for renewable energy sources (new entries into the system or transition to the system with operating installations on certificates) is based on:

- For renewable sources:

• Auction subsidies
• Guaranteed prices or premium prices

- For cogeneration sources:

• Guaranteed premium

In the case of cogeneration, for units larger than 1 MW, in order to obtain cogeneration premium support, it is required that the appropriate volume of heat generated is introduced into the heating network, and the electricity needs to be introduced into the grid network and sold. Only small units can be supported on principles similar to those applicable in the extinguished system of yellow certificates (any utility purpose of heat consumption and the possibility of consuming electricity for the company's own purposes).

The new support system for cogeneration is based on:

• cogeneration premium guaranteed for the so-called small units with an electric capacity installed up to 1 MW,
• guaranteed cogeneration premiums for units with a capacity of more than 1 MW, but less than 50 MW, which may be awarded after winning the auction for the sale of energy from high-efficiency cogeneration,
• individual cogeneration premium for units with an electrical power greater than 50 MW.

The amount of premium both for RES and CHP sources is limited by reference prices separately determined for the type and size of the installation.

For agricultural biogas plants, reference prices (maximum limited support with the electric price of the product included) are for installations equipped with high-efficiency cogeneration units:

• PLN 730 / MWh for installations with an installed electricity capacity of up to 0.5 MW
• PLN 680 / MWh for installations with an installed power from 0.5 MW to 1 MW
• PLN 640 / MWh for installations with an installed power of over 1 MW.

Both types of aid (investment and operational) can be "combined" and taken however with limits. In case of grants received the operational premium needs to be reduced respectively.

There are also specific so called white certificates mechanism to support energy efficiency based projects. For example, for replacing lighting with LEDs or substituting old heat generator by cogeneration system (energy efficiency venture). For this type of projects, the level of annual efficiency expressed in toe (one tonne of oil equivalent) is supported by white certificate of energy efficiency. These certificates are granted on a one-off basis based on audit data as quasi-investment grant depending strongly on the annual achieved energy effect (on the amount of energy saved as a result of the investment aimed at improving energy efficiency).

The aid in the form of reduction of excise duty is also admissible, usually with zero level for electricity used for production purposes. But there are more possibilities of excise exemptions.

Market - Production sources in Poland

Both conventional and renewable sources are used to generate energy consumed by recipients. The share of the latter in the total balance in Poland is still small and estimated by various sources from about 10% to 20%. It is not easy to give precise statistics, and different %-shares of statistical data may result from different data ranges:

• Part of the data is obtained based on measurement results (especially electricity from installations connected to the network), and the estimated part (usually heat from dispersed sources, electricity from off-grid sources)
• The share of primary energy from RES or participation in production or participation in final consumption is given
• Gross or net energy consumption is given, with or without import / export on the balance sheet
• Data are limited only to the power sector or collectively for all sectors
• A methodology is applied that promotes, for example, the use of biofuels with a higher rate or renewable sources in transport, as e.g. the methodology of Directive 2009/28 / EC.

For example, in the era of electric car development, electricity production will increase. However, in statistics related to energy consumption, it will not be included in the power sector if this energy is used by vehicles for transport purposes. However, there will be an increase in the use of electricity consumed in transport.

So far, the mechanism of the 5-dimensional system has been known: source, generation, transmission, distribution, recipient. The energy market is changing. So far, the dominant centralized generation system and connected transmission networks will slowly move towards dispersed sources close to the recipients (RES and CHP sources) supplemented with energy-storage (7-dimensional energy system). Industry and individual residents are already investing in their own energy sources. If the development of energy storage technologies leads to low storage costs in the future, energy will only be generated from wind and sun. Such a process will be long-lasting and for decades uncontrolled energy reception from sources strongly dependent with generation on the weather must be supported by systems based on conventional fuels. However stable dispersed sources for the industry's own needs will be acquired based on cogeneration from biogas and cogeneration from natural gas, LNG.

Market - energy consumption and prices

The energy market can be divided into three sectors: electricity, heating and cooling, and transport. In Poland, the average annual electricity consumption is approx. 160 TWh gross (consumption by end consumers annually approx. 125 TWh net) and accounts for approximately 25% of the total energy volume in total gross consumption in all the three sectors combined. Heat is the largest contributor to consumption.

Energy prices, especially electricity, strongly depend on the costs of obtaining energy carriers, production costs and other factors, including (quasi)taxes. The cost of energy is not only the variable cost of obtaining electricity product; its usually accompanied by the variable cost of excise duty (reduced from 20 PLN / MWh to 5 PLN / MWh in the amendment to the Excise Tax Act made in December 2018), but also variable costs of its transport (distribution) along with variable and permanent accompanying costs (qualitative, transitional, RES charges, co-generation charges etc.). Operational support mechanisms are transferred through appropriate regulations to electricity trading companies and companies dealing in its distribution and then to final recipients. As a result, the cost of electricity is represented by not only by the product cost generation, but also so called cost of coloring related to the development of renewable energy sources in the "old" green / blue certificates support system, and also the cost related to the deactivated system of cogeneration certificates, and the costs of white energy efficiency certificates. The production cost, however, includes the emission fee.

Rising prices of obtaining energy for the needs of industry is observed. That is why industrial business decides to become independent from external energy supplies and invests in PV, biogas and CHP gas based systems for own needs. The solution is renewable sources, especially biogas and PV installations (the latter with high variability of production levels during the day and seasons) and cogeneration sources (based on natural gas, LNG, and others), especially with simultaneous heat demand for heating ( greenhouses, dryers) or industrial processes.

In case of prices in variable costs of electricity above PLN 350 / MWh (35 gr / kWh) and simultaneous use of heat generated in cogeneration as an avoided cost, profitable investment in a cogeneration unit can be constructed (gas engine with payback periods of less than 6 years).

In Poland, a total of 16.5 billion m3 of natural gas is consumed annually in various forms used in industry, in power plants and in households. Most of the natural gas is imported:

• From Russia: around 10 billion m3
• Approximately 2 billion m3 from the Czech Republic and Germany (including some as indirectly from Russia)
• From Qatar: around 5 billion m3 per year (in liquefied form).
• The native production is about 4.5 billion m3 of gas per year.

Market - Entry to the market: registrations, concessions

To generate or distribute electricity or to trade it (buy on the wholesale market and sell directly to final recipients) the necessary permits are required:

• Registration by the President of KOWR (The Agricultural Property Agency) for producers of agricultural biogas or electric energy from agricultural biogas
• Concession of the President of the Energy Regulatory Office in the case of other sources, especially in cogeneration and from renewable sources, regardless of whether electricity is generated and introduced into the network or consumed for the own needs of the generating enterprise.
• Registration by the President of KOWR (The Agricultural Property Agency) for producers of agricultural biogas or electric energy from agricultural biogas
• The license concession of the President of URE (Energy Regulatory Office) in the scope of distribution or trade in energy or fuels.

The entry in the register is obtained quite quickly (within a few days). In the case of concessions, it may last several months and requires, along with the preparation of an application for a concession, to attach a number of documentation, including administrative, technical and economic. Before obtaining a concession, you can apply for a promise of a concession (obtaining a promise significantly accelerates and facilitates obtaining a concession). Together with the application for the promise of a concession, the so-called incentive effect in cases when the applicant planning to produce energy (especially in cogeneration) and apply for public subsidies (grants, subsidies, certificates). It is important to check the incentive effect (submitting an application for a promise of concession with the study of the incentive effect) before the investment project becomes irreversible (that is, before contraction the equipments for generating electricity) and before applying for grants/subsidies. Otherwise, you will not be able to get subsidies (this does not apply to subsidies obtained through auction system).