United States: New RES Regulations

For a few last months we have been observing in Poland a significant change in the approach to supporting the production of energy from renewable sources ("RES"). According to the current Polish authorities, only those projects that can ensure stable and foreseeable energy production deserve special support, while the role of technologies more dependent on weather conditions must be significantly reduced in the Polish renewable energy sources market. Therefore, it seems that entities operating in the windfarm or PV sectors must postpone their ambitious plans of future development until an undefined time in the future. Moreover, analysis of the recently adopted regulations inclines one to conclude that co-firing is back in style, and additionally, biogas is to become one of the main RES technologies.

Below we present a short summary of the most important regulations included in:

  • the amendment to the Act on renewable energy sources and certain other acts ("RES Act Amendment Bill"); and
  • the Act on Investments Concerning Wind Turbines (the "WT Act").

The aforementioned acts will be important for marking out directions of development of energy in Poland in the coming years.

Renewable energy sources Act Amendment Bill

RES Act Amendment Bill was adopted on 22 June 2016, signed by the President on 28 June 2016 and takes effect on July 1, 2016.

The RES Act Amendment Bill was prepared by the Ministry of Energy and submitted to the Sejm as a private members' bill [projekt poselski]. This solution was chosen to avoid time-consuming consultations and, consequently speed up the works on the bill. The private members' bill – the RES Act Amendment Bill was submitted to the Sejm on May 5, 2016 and the works went at full speed.

The presented amendment is the second amendment to the RES Act prepared recently.  The first amendment was submitted in December 2015 and its objective was to postpone the enactment of key regulations under the Act, including, among others, provisions concerning the new auction system.
The RES Act Amendment Bill introduces a number of significant changes in the support system for energy generated from RES.

The RES Act Amendment Bill provides for the greatest support under the auction system for energy from RES to be granted to "stable" and "predictable" technologies. The least support, on the other hand, will be provided to generation of wind and solar energy.

The salient points introduced by the RES Act Amendment Bill include:

  • introduction of separate auction baskets for RES installations:
    • with a degree of utilization of the total installed, electricity generation   capacity, irrespective of the source of origin, of more  than 3504 MWh/MW/year;
    • using, for the generation of electricity, biodegradable industrial waste and municipal solid waste of plant or animal origin, including waste from waste treatment systems and waste from water treatment and waste treatment, including in particular sludge, in accordance with the provisions on waste concerning classification of energy recovered from thermal waste treatment;
    • in which emission of carbon dioxide does not exceed 100 kg/MWh, with a degree of use of the installed electricity generation capacity bigger than 3504 MWh/MW/year;
    • by members of an energy cluster;
    • by members of an energy cooperative;
    • using only agricultural biogas to generate energy; and
    • other than those specified above;
  • The auctions will also be conducted, as part of separate auction baskets, separately for RES installations with a total installed energy generation capacity: (i) of maximum 1MW and (ii) of more than 1 MW;
  • Restriction of obligations imposed on an obliged seller that is required to purchase the offered RES energy only from RES installations of less than 500 kW (other than micro-installations);
  • Lower requirements which a dedicated multi-firing installation must fulfil, by setting a minimum share of calorific value of biomass, bioliquids, biogas or agricultural biogas burnt in this kind of installation at a level exceeding 15% of the total calorific value of all combustible fuel;
  • Separation of a certificate market for agricultural biogas installations through the introduction of separate certificates of origin for electricity generated from agricultural biogas (so-called blue certificates);
  • Changes in performance of the RES obligation: division of RES obligation (i.e. obligation to present certificates of origin for cancellation or payment of the substitution fee) into the obligation fulfilled with green certificates (in the amount of 19.35%) and obligation fulfilled with blue certificates (in the amount of 0.65%). The said values may be changed on an annual basis in accordance with the regulation of the Minister relevant to energy-related matters;
  • Changes in fulfilment of RES obligation: exclusion of the option to pay the substitution fee as part of performance of the RES obligation if the price of the certificates of origin (green or blue certificates) falls below the substitution fee. To date the said obligation was only provided for when the price of certificates of origin fell below 75% of the substitution fee;
  • Introduction of the controversial term "energy wood" (being lumber which due to its quality and size and physical-chemical properties is characterized by lower technical value and value in use, preventing its use  for industrial purposes) which may be used to generate energy from RES;
  • Introduction of the term: local biomass; i.e. biomass which originates from energy crops; as well as waste or residue from agricultural manufacturing and industry processing its products, cereals, other than of full value, sustainably harvested; originally obtained within 300 km of the RES installation;
  • Introduction of regulations which facilitate the establishment of local energy cooperatives, i.e. (i) energy clusters (civil law agreements which are effective within one poviat (local government district) and refer to the generation of, balancing of demand for and distribution or marketing of energy generated from RES), and (ii) energy cooperatives (i.e. cooperatives whose business objective is to generate electricity, biogas and heat in RES installations);
  • Introduction of an option to participate in auctions of existing hydroelectric plants with capacity of not more than 20 MW (contrary to the present regulations under which existing hydroelectric plants of more than 5 MW were not allowed to participate in auctions);
  • Introduction of an option for RES installations located outside of Poland to participate in auctions, but the volume of energy originating from the said installations which may be sold in a given year cannot exceed 5% of the energy sold jointly as part of the auction in the preceding year. In addition, the condition for the said RES installations to participate in auctions is that a relevant international agreement with a state on whose territory the installation is located is executed, ensuring reciprocity in using the support system and ensuring the option of physical transfer of power in Poland;
  • Change of support for prosumers – instead of guaranteed tariffs prosumers will receive so-called rebates, i.e. settlement between the generated and collected energy.

The Act on Investments Concerning Wind Turbines

On June 22, 2016 the President signed the WT Act adopted by the Sejm on May 30, 2016.
The WT Act, from the very beginning of the legislation process, when it was submitted to the Sejm mid-February as a private members' bill, raised much controversy. The WT Act was strongly opposed by the wind power industry, which viewed the WT Act – in its original wording – as potentially hampering the development of the wind power industry in Poland and adversely affecting the wind farms already operating. Eventually, some changes proposed by representatives of the wind power industry were implemented in the content of the WT Act in its wording adopted by the Sejm, but a considerable swathe of regulations remained that were seen as disadvantageous by wind power investors.

Below we present the key provisions of the WT Act concerning the location, development and operation of wind turbines:

  • A wind turbine as an entirety (i.e. a structure comprised of, inter alia, foundations, mast and technical elements) constitutes a building structure within the meaning of construction law; therefore a wind turbine as an entirety is subject to real estate tax. As a result, the tax will be levied taking into consideration the value of the whole building structure (wind turbine) – i.e. on the total value of foundations, mast and technical elements, which may significantly increase property tax;
  • New wind turbines may only be located on the basis of a local master plan;
  • The minimum distance between the wind turbine and households or mixed-use buildings should be at least equal to ten-times the total height of the wind turbine measured from ground level to the top of the structure, including technical elements, in particular the rotor and blades;
  • Currently operational wind turbines which do not meet the distance requirement may only be subject to maintenance works and other activities necessary for due operation of the turbine; any activities intended to increase the operating parameters of the turbine or its environmental impact shall be forbidden;
  • Building permits for wind turbines issued before the effective date of the Act shall retain their validity provided the occupancy permit is obtained within 3 years following the effective date of the WT Act;
  • If an occupancy permit is not obtained by the above deadline, the province building control inspector shall issue an order to demolish the constructed part of the structure at the cost of the investor, unless the investor obtains a new building permit within a year of the expiry date of the previous building permit;
  • Zoning permits for wind turbines issued before the effective date of the WT Act shall expire unless a procedure for the issuance of a building permit was commenced before the effective date of the WT Act;
  • Where existing local master plans allow for the location of wind turbines, the authority competent for architectural and construction matters shall refuse to issue a building permit and the authority in charge of the decision on environmental conditions shall refuse consent to the investment if the minimum distance requirement is not satisfied.

The adopted WT Act includes several watering down amendments compared to the initial bill; for example, the chapter on penal measures has been deleted as well as provisions regarding competences of the Technical Supervision Authority (including the provision authorizing this authority to issue a decision allowing for the operation of a wind turbine).

The WT Act becomes effective within 14 days of the date of its announcement (scheduled for 1 July 2016).

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