Poland: October elections should temper excitement


April 3, 2015

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Today may be Good Friday but, for those in the Polish wind sector, even better days are in prospect. In the coming weeks, Poland’s new renewable energy sources act is due to come into force.

It has been four years in the making and, even three months ago, we couldn’t be certain whether it was going to happen. But it won support from the parliament in January, was adopted in February, and got the sign-off from president Bronislaw Komorowski on 11th March. It is due to come into force 30 days after it is published in Poland’s Official Journal of Laws, which has not yet happened.

On the face of it Poland hasn’t been doing a bad job when it comes to wind. It has capacity of 3.8GW, which puts it in the ten largest markets in Europe, and 444MW of this was installed in 2014.

But these figures conceal the fact that around 90% of Poland’s electricity generation comes from coal; and that the eastern European nation is facing big fines for missing European Union targets on promoting renewable energy in Polish law.

Now the Polish government has acted and the country has an act designed to support the use of renewable energy, including wind. But wind investors would be wise to hold back from piling into this market. There is a long way to go before Poland looks a good bet.

As yet, we just don’t know how wind would benefit from the new renewable energy laws.

The main pillar of this act is an auction scheme for feed-in tariffs for renewables projects of over 1MW. All new renewable energy installations set to produce energy from January will have to bid in these auctions, including wind, solar, biomass, biogas and hydro.

These auctions should have a positive effect in that they will place tough demands on project backers to improve the efficiency and quality of their projects, and this should help to drive improvements. But winning projects will not simply be chosen on price, and so our concern is that any sector could lose out simply if it is out-of-favour with public decision-makers. Wind could easily be hit.

Poland’s adoption of feed-in tariffs certainly represents a U-turn in Polish energy policy, but it does not provide a stable basis on which investors can make their investment decisions.

In particular, wind could suffer if Poland’s main opposition party, the Law & Justice Party, wins power in the general election in October. The party generally opposes renewables including wind energy, and has previously proposed policies to specifically hit wind.

For example, it has proposed policies such as dismantling wind farms located within 3km of residential areas, and has also called for a moratorium on construction of wind farms.

In other words, it is not a party that wind investors would want to see running a renewables subsidy auction where the decision-making process leaves a lot to individual opinions. It doesn’t like wind, and that opinion would surely filter into the auction process.

So the watchword is: caution. The renewable energy sources act may look like a good step, but investors should hold back on making major investment decisions until those October elections.

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