Renewable energy support system: renewable energy prices and volumes at auction in 2022-2027

The first draft regulation on the maximum quantity and value of electricity generated from renewable energy sources that can be auctioned in calendar years 2022 to 2027 in Poland was published on July 5, 2022. It is the first time that such a settlement covers six consecutive years. This stems from the change in the Renewable Energy Sources Act encouraged by voices in the industry saying that announcing these values ​​further in advance would allow developers to better prepare for the auction and therefore to to offer more competitive prices.

Under the regulation, the planned volume of energy offered at auction will total 394,650,000 MWh, which can be sold for a total of almost PLN 153 billion. The drafters do not foresee any change in the prices of the energy offered at auction in the following years. This will most likely involve keeping reference prices unchanged, which in a context of significant inflation could reduce the interest in participating in auctions. This could also lead to the effective abandonment of energy sales under the auction system, since at the current electricity prices on the Polish electricity exchange it is more advantageous for producers to pay a penalty for failing to report energy sales to the compensation manager (the state-owned company Zarządca Rozliczeń SA) only to return a positive balance at the end of the aid period.

According to the plans of the Ministry of Climate and Environment, the proposed volumes should result in the construction of new facilities with the following capacities:

  • 3,000 MW of onshore wind farms (250 MW/year from the 2023-2024 auction, 500 MW from the 2025 auction and 1,000 MW/year from the 2026-2027 auction)
  • 9,000 MW of photovoltaic parks — 4,500 MW of photovoltaic parks with a capacity of up to 1 MW and 4,500 MW of photovoltaic parks with a capacity greater than 1 MW (750 MW each of the two capacity baskets per year in 2022-2027)
  • 120 MW of hydropower plants with a capacity of more than 1 MW (20 MW per year) and 60 MW of hydropower plants with a capacity of up to 1 MW (10 MW per year)
  • 660 MW of power plants powered by non-agricultural biogas, biomass and waste with a capacity greater than 1 MW (15 MW/year in 2022, 2024 and 2026-2027, 400 MW/year in 2023 and 200 MW/year in 2025) and 60 MW of power plants fueled by non-agricultural biogas, biomass and waste with a capacity of up to 1 MW (10 MW per year)
  • 300 MW of agricultural biogas plants with a capacity greater than 1 MW (50 MW per year).

Under the auction system, the drafters would withdraw support for small biogas plants with a capacity of 1 MW or less. However, experience to date indicates that the use of feed-in tariff and feed-in premium systems is much more popular among producers using this technology. In addition, the drafters have not chosen to support hybrid RES installations, despite intensive work modifying the definition of this type of installation.

Will investors participate in the next auction?

The current situation of the European energy market, characterized by a shortage of energy, calls into question the presence of investors wishing to participate in the auction system at the maximum prices offered. Energy prices on the open market are several times higher than the prices offered at auction two or three years ago. Therefore, many investors who have won auctions in previous years are analyzing the options of not entering the support system, being excluded from the system, officially leaving the system if they are already in it after building a power plant or minimize their energy sales. products under the aid system. It should be noted that a producer who derives more income from the sale of energy than the prices offered at the auction is obliged to return the surplus to Zarządca Rozliczeń SA.

Some investors may participate in the system to sell a small portion of their volume under the support system, guaranteeing themselves a fixed income stream, while continuing to sell the rest of their volume in the open market outside the system. Support.

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