Poland's new renewables bill - who won?

With the new law on prosumers, Poles will be given ample incentives to start producing their own sustainable energy. While green energy enthusiasts toast, the coal industry and big energy producers are left grinding their teeth

By Beata Socha

On February 20, the Sejm rejected the Senate’s amendments to the renewable energy sources legislation by a slim majority of seven votes. It did so against the government’s recommendations and above party divisions. Thus a long-awaited bill regulating the Polish energy market finally took shape.

Feed-in tariffs have been the most widely discussed aspect of the new law for energy prosumers (houses, businesses, farms, etc.), who are both producing and consuming energy from renewables, usually by installing wind turbines or photovoltaic cells. The new law guarantees the purchase of all green energy surpluses from small energy producers (with energy installations of up to 10 kW generating capacity). The prosumers will receive fixed feed-in tariffs of 210 percent of the average market price from the previous year. Tariffs will be guaranteed for 15 years starting in 2016.

So who will gain the most from the new law and who has the most to lose thanks to its implementation?

Going green

Green energy supporters have ample reasons to cheer. The new generous support system will likely encourage Poles to install more renewable energy micro-installations, curbing air pollution for example, a problem that has been long neglected and increasingly acute. According to a recent report (published just a few weeks before the vote), the level of air pollution in some of Poland’s major cities exceeds EU norms more than tenfold. Poland is considered one of the dirtiest countries in Europe, largely due to increased automobile traffic and poor quality of furnace fuel used in private homes (an extreme example being old wooden railroad crossties – an overload of toxic and cancerous substances sold en masse on Polish auction sites). Incentivizing people to invest in solar panels could at least partially solve the problem.

But the energy industry is thoroughly unconvinced by the green arguments. “The purpose of the law was to meet EU obligations in terms of renewable energy sources while keeping the costs borne by end-consumers as low as possible,” read a recent statement by the Polish Electricity Association (PKEE), which unites all the major energy producers on the Polish market. In fact, Poland managed to negotiate a lot of leeway compared to other EU members as to the pace of going green: while the entire union is set to reach a level of 20 percent of renewable energy by 2020, Poland has to meet only 15 percent.

Now, despite the government’s best intentions of going green “harmoniously” instead of in a sudden surge, the feed-in tariffs may put the coal industry in further jeopardy. “At a time of particular difficulty on the coal market and given the mining sector restructurization program, it is difficult to understand why an amendment that will make this situation dramatically worse is being implemented,” the association said. The industry fears that the sudden expansion of the prosumer market will inevitably put conventional coal-powered plants at risk of bankruptcy.

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According to the PKEE, each gigawatt of renewable energy “costs” the industry some 500,000 tons of coal a year. The association fears “a sudden and uncontrollable increase in power from renewable energy micro installations” of up to 10 GW in the next few years. That would lead to “drastic reduction of demand for coal, causing a drop of its consumption by up to 5 million tons annually.” The picture isn’t rosy to begin with. The price of coal earmarked for energy generation has dropped by 15 percent between 2012 and 2014, while reserves have piled up and grown by more than 30 percent in 2014 alone! Last year, the industry sold 40.65 million tons of coal for energy generation in total, 13.1 percent less than in 2013.

Undue profits

But the coal industry is not the only one to suffer, as we are lead to believe. The Economy Ministry and the energy sector are convinced the provision will incentivize production of renewable energy for profit, instead of personal use.

“Polish small energy producers with installations of up to 10 kW will receive excessive and undue benefits, creating a burden for other energy consumers,” the PKEE said. It emphasized that only a handful of prosumers will see support while the rest of the society will be forced to pay for it.

The size of the group of potential prosumers is difficult to determine. Some estimates put it at 200,000-300,000 of people. However, other experts, including Ewaryst Hille from the Institute for Sustainable Development, believe that the new law may lead some 2-4 million Poles to become prosumers. One thing is certain, they are the ones who will gain the most on the new law. Meanwhile, the cost of expanding the energy grid to encompass large extra volumes of energy and the high feed-in tariffs will create additional costs for the entire society, the PKEE claims.

Greed Energy

Unsurprisingly, Poles are as divided on the matter as the government and the parliament. There are those who praise the new law claiming that, “We have finally shed this energy indentured servitude and we are finally all equals,” as prosumer Adam Ulbrych said on radio TOK FM. There are also those who call the new law “Greed Energy” and draw comparisons to the (in)famous rural social security system (KRUS), which exists in parallel to the regular social security system (ZUS), but is far cheaper and reserved for those who have some arable land in their possession. “In both cases, [the Polish People’s Party] makes us all cough up money for a privileged group,” a comment on a forum devoted to energy issues wysokienapiecie.pl read.

Prices for green energy remain the biggest bone of contention: will the feed-in tariffs, set significantly above market price, push them up or will the growing popularity of microinstallations force energy providers to compete?

President of the Renewable Energy Institute Grzegorz Wiśniewski admitted that prices for green energy could increase slightly over the short term. However, “by consuming and selling, energy prosumers will participate in the market game which will eventually lead to a decline in prices for green energy,” he told the Polish Press Agency. He also stressed that the current system promotes large and inefficient energy sources which also generate higher costs due to “poor network quality, high costs of connection to the power grid and energy losses in transmission. For the past 10 years, the system has shown major inefficiencies.”

A PV boom?

The new law will likely increase the market for microinstallations, predominantly photovoltaic cells. However, the energy industry seems bent on painting a gloomy picture. It claims the bulk of the installations will be imported from China, which is the world’s top supplier of cheap PV systems (it is home to five of ten of the world’s largest manufacturers of PV panels).

“The recent experience of other EU members, particularly Germany, where domestic producers of photovoltaic panels lost against their Chinese competitors, make these concerns fully justified,” the PKEE said.

All is not lost, though. If not on price, Polish producers could easily compete on quality with their counterparts. Edyta Stanek from ML System, a company specializing in research and implemention of innovations in photovoltaic panels said that the standard efficiency of Chinese solar panels usually oscillates between 13 and 16 percent in the case of first generation modules. Meanwhile, the top-of-the-line models her firm offers can reach up to 23 percent. Apart from first and second generation panels (the latter being more aesthetically pleasing but less efficient), the company also continues to develop third generation panels, which can be used even inside rooms. “These panels can operate from as little as 2 lux of illuminance, while the first generation requires some 200 lux,” Stanek explained. “The difference is enormous, particularly at our latitude,” she added.

Whether the new law actually triggers a green energy boom remains to be seen. The more Poles decide to become prosumers, the more influence they will exert on the energy market and the more say they will have in shaping the country’s energy landscape.