Energy Transformation in Poland – Rapidly Progressing Legislative Changes

Poland faces a great challenge to keep up with the energy transformation in Europe, which requires countries in the EU to achieve zero emissions by 2050. The Polish energy mix still includes a high proportion of fossil fuels and a rapid switch to renewable energy sources (RES) is necessary. Over the last year alone, Poland has introduced many new regulations that encourage investment in RES. This article discusses the key changes that have occurred in recent months in the Polish energy sector, creating new opportunities for the RES sector.

The main obstacle to the development of onshore wind farms in Poland has so far been the infamous “10H” rule which, to put it simply, prevented the construction of wind farms anywhere near residential buildings. The distance between a wind farm and a residential building had to be at least ten times the height of such power plant. In practice, this blocked the possibility of building new wind farms in Poland due to the exhaustion of investment areas.

After several years of the above rule being in force, the Polish legislator decided to compromise by limiting the distance to 700 metres. This was contrary to the expectations of the market, which had demanded a distance of 500 metres, thereby allowing for far more investment. The fact that the construction of a wind farm requires a change to the local spatial development plan has not changed, however, so the first investments resulting from the new regulations are expected to start only within the next few years.

At the same time, the Polish legislator has invested heavily in offshore wind – a special act has been passed and auctions are regularly held for the parts of the Baltic Sea allowing the construction of offshore wind farms. It is predicted that the power of offshore wind farms may ultimately constitute an important source of energy in Poland, as they may reach up to 30 GW of power.

Until recently, Poland had not fully implemented the provisions of the EU’s Renewable Energy Directive Recast (“RED II”) as a result of which, a definition of biomethane was not included in Polish legislation. Unclear regulations and lack of support also resulted in the failure to fully exploit the potential of biogas in Poland. According to estimates, there are about 300 biogas plants in Poland, but not a single biomethane plant was operational, while in neighboring Germany, for example, there are about 10,000 biogas plants and several hundred biomethane plants.

After many proposals and changes, biomethane has finally been defined in Polish regulations, and has also been included in other definitions of the Polish RES Act, including the definition of a renewable energy source and an RES installation. In practice, this makes it possible to recognise biomethane directly as an RES and may help to develop business related to the construction of biomethane plants in Poland. At the same time, biomethane will have to be produced, among other things, from biogas, so the biogas potential will still have to increase.

Business activity in the field of producing biomethane from biogas, and biogas for the production of biomethane has become a regulated (not concessioned) activity, requiring entry in the register of producers – which should also create clear rules and thus simplify the formal procedures for starting such a business.

Biomethane is also covered by the guarantee-of-origin system and the possibility of support in the form of sales of biomethane at a fixed purchase price. However, biogas itself will no longer benefit from the support system, which may consequently lead to an increase in the number of biomethane plants, where the technology may be changed.

Independently, the Polish authorities have passed an act which is intended to simplify administrative procedures related to the production of agricultural biogas and biomethane. Among other things, the regulations provide for simplifications in the location of biomethane plants and introduce the possibility of simplified management of post-fermentation products from agricultural biogas production, in addition to placing them on the market or using them for own needs.

Regulations related to the promotion of distributed energy are being introduced independently, as part of the development strategy for dispersed energy production and local energy communities. In the light of overloaded distribution networks, local sources will increasingly play a key role in the energy security of end users and energy producers themselves.

Recently introduced regulations increase the attractiveness of energy clusters, which are civil law agreements (at least with local governments) that allow for energy settlement within the cluster. The new regulations allow for partial exemption from energy fees related to transmission over the network, which will increase the attractiveness of energy production within the cluster. The benefits of participating in a cluster may therefore be tangible for the local community in the form of lower fees. Energy co-operatives regulations have also been amended – they can now also operate in the production of biomethane, and their membership limit is as many as 1,000 people.

So far, a direct supply line basically has not existed in the Polish energy market – its definition was regulated but in practice, it was not possible to obtain the consent of the president of the Energy Regulatory Office to build such a line and, consequently, to implement an on-site power purchase agreement (PPA).

The new regulations stipulate that a direct line no longer requires the consent of the Polish regulator, but requires notification of the intention to build a direct line and meet the conditions specified in the regulations. In practice, the Energy Regulatory Office may oppose the construction of a direct line, especially if it could have a negative impact on the power system. The president of the Energy Regulatory Office will also maintain a list of direct lines. Finally, it is worth pointing out that, unfortunately, a direct line will not result in complete exemption from network fees, because the legislature decided to introduce an additional solidarity fee and a fee to compensate for the cost of maintaining system standards of quality and reliability of current electricity supplies, depending on the amount of energy transmitted. Time will tell whether these fees will discourage potential investors.

Cable pooling, that is, connecting more than one installation of more than one owner within one connection to the network, was also introduced into Polish energy law. This regulation is particularly important for combined energy sources, such as onshore wind and photovoltaics, which can operate at different times and fully use the available power of one connection.

The energy transformation in Poland is gaining momentum and this is visible in the significant changes introduced in just the last year. There have been so many changes, for example, in the field of community energy, aggregation and demand-side response (DSR), that it is difficult to discuss them all in such a short article. The war in Ukraine has additionally accelerated the plan to abandon fossil fuels in Poland, which only a few years ago, were basically the only source of energy.

It appears that now is a good time to invest in renewable energy in Poland, especially considering the wide range of available measures encouraging investment, and the recent legislative changes, not yet fully utilised by investors. The RES market in Poland is still in its initial growth stage and there is plenty of room for further development in this branch of business.