A milestone for green deal in Poland: Act on the promotion of offshore wind farms is now signed
On January 21, 2021, the President of the Republic of Poland signed the Act on the Promotion of Electricity Generation in Offshore Wind Farms (Offshore Act), which is expected to give momentum to the Polish renewable energy industry and form part of Poland's energy security system.
Currently, offshore wind energy is one of the most important energy industries (next to gas and photovoltaic), which is expected to contribute to Poland's climate neutrality by 2050. According to some of the Polish government’s representatives, the development of offshore wind energy is also the most important strategic goal of Poland's renewable energy policy. For these reasons, in recent years the government has taken action to create a favourable legal and financial environment for this type of investment.
Financial support for offshore wind farms
From the date of its entry into force, the Offshore Act will become the most important piece of legislation regulating in detail the programme of operational support for investments in offshore wind farms. This support will consist in the government covering the negative balance of generated electricity. The negative balance is the difference between the value of energy sales in a given month (calculated on the basis of electricity exchange prices) and the value of this energy calculated by assuming the prices indicated in the decision or the offer that won the auction. The maximum period of support will be 25 years from the introduction of electricity produced in an offshore wind farm into the grid.
Phase I of the support
In phase I of the support system, funding will be granted on the basis of administrative decisions issued by the President of the Energy Regulatory Office (ERO). The application for support must cover the offshore areas indicated in the Offshore Act and be preceded by the establishment of a financial security of 60 PLN for each 1 kW of power. Applications must be submitted by March 31, 2021. Phase I foresees support for offshore wind farms with a total installed capacity of 5.9 GW, and as indicated by the Climate Ministry, offshore wind forms with a capacity of 11 GW are assumed to be built by 2040.
Owing to the adopted timetable, only projects with a significant degree of advancement on the date of entry into force of these regulations will be eligible for support under Phase I. The remaining projects will be able to apply for support under Phase II.
Phase II of the support
Phase II of the support system will be open to generators of electricity from offshore wind farms located in the maritime area indicated in the Offshore Act, who obtain a certificate of admission to the auction and generate electricity for the first time after the closing date of the auction session. The organisation of the auctions will be the responsibility of the President of ERO. The first auctions will be held in 2025 and 2027 and will provide support for a total installed capacity of up to 5 GW.
In order to obtain a certificate of admission to the auction, the generator is obliged to submit to the ERO President an application with the required documentation indicated in the Offshore Act.
Energy injection into the grid
In both phases the basic obligation of the generator, after obtaining a decision on covering the negative balance, is to generate and introduce electricity to the grid within 7 years from the decision of the President of ERO determining the price of energy or from winning the auction. An additional obligation of the generator is to use components and equipment manufactured no earlier than 72 months prior to the date of first energy generation.
The Offshore Act formulates the possibility to extend the deadline for introducing electricity to the grid and to modify the obligation to produce the amount of energy specified in the decision of the President of ERO. It is worth mentioning that the grid connection, i.e. the connection of the offshore wind farm to the onshore substation will be the responsibility of the investor, who retains the right to resell the entire set of devices used for power output from the offshore wind farm. The previously planned granting of the pre-emptive right to the transmission system operator was removed from the final act.
Provisions have also been introduced into the Offshore Act to allow the transfer of the right to cover a negative balance. However, this is only possible together with the acquisition of ownership of the installation to which the right relates. The transfer of this right is also conditional on obtaining the consent of the President of ERO through the submission of an appropriate application by both parties to the sale transaction of the installed turbines or shares in the company to which the turbines belong.
The Offshore Act introduces a new tax on offshore wind farms, which will be based on the power of the farm. The tax rate is the product of the power of the farms in megawatts multiplied by PLN 23,000.
In addition to financial support, the Offshore Act also provides for administrative facilitation. It stipulates that the administrative decisions necessary to be obtained in this process are to be issued within 90 days of the application. In the case of an occupancy permit, the deadline has been shortened to 30 days.
For the most part, the act will enter into force on February 18, 2021. The Energy Regulatory Office will have time until June 30, 2021 to issue preliminary decisions on support, which will then require the approval of the European Commission.
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