The government decided not to follow expectations and suggestions of the RES industry and risk losing credibility among national and foreign investors, insisting on quota obligation at the level of 5%. The regulation has been published despite many calls from key industry organisations intending to stop targeted devastation of the RES market in Poland. Both the quota and the procedure applied to implementation of the regulation demonstrate that the government does not want to enter into a substantive dialogue with the RES industry and does not take into account the grave consequences of its decision.
The Minister for Climate and Environment Regulation of 28 August 2023 adjusting the quantitative share of the volume of electricity stemming from cancelled certificates of origin confirming the production of electricity from renewable energy sources in 2024 has been published on 29 August. The regulation specified the demand for green certificates at only 5%, violating accrued rights granted by the Polish state to entrepreneurs that took the risk and invested in renewable energy sources several years ago.
This is yet another blow to renewable energy producers in the recent months. Despite many announcements on the intention to promote renewable energy sources which provide the least expensive electricity and are needed by the Polish economy, the government is taking numerous actions against it, which may result in bringing future investments to a complete halt. Such a drastic change of rules mid-game may lead to litigations, including at the international level, which will further undermine confidence in the Polish state, hence the volume of necessary investment. Lack thereof will consolidate coal-based energy mix that generates the highest costs, resulting in continuation of high energy prices in the long-term.
Current investors as well as entities intending to enter the Polish RES market are scrutinizing market environment on a current basis. Adverse messages are very effective at discouraging investment. The recent accumulation of such adverse messages will increasingly limit further investments. Following the implementation of one of the most restrictive price limits for renewable sources in the EU, extension of their applicability after 30 June 2023 in breach of the EU law, and destruction of the guarantees of origin market by imposing a tax reaching 97% of revenue on the sale thereof the government now decides to destroy the green certificates market. Is the change to the rules for the settlement of completed auctions another government’s idea to fight RES?
Manual control of the green certificates market has already resulted in its collapse. The situation improved due to previous Ministers for Climate relatively stable policy in that respect — therefore, this year’s shift in approach is the more surprising, with the quota falling so drastically (from 18.5% in 2022 to 12% in 2023). Currently, the trend is continued, with unprecedented and dramatic fall over just two years — from 18.5% to 5%.
The above will once again result in the collapse of the green certificates market and unprecedented oversupply (which we already experienced in 2017). Initial projections demonstrate that the oversupply will increase from approximately 7.5 TWh in 2022 to 11.5 TWh in 2023 and as much as 24 TWh in 2024. Therefore, green certificate prices will most likely fall to historically low levels, discouraging further investors interested in the Polish RES market.
The forecasts are validated by the first exchange session held after the announcement of the draft, where green certificate price fell by almost 50%, from 163.87 PLN/MWh to 82.50 PLN/MWh. This is the largest single fall in green certificate quotations in its history since 2005. Although subsequent sessions saw slight increase in green certificate prices, it seems to be only a natural response to such a deep single fall. Certainly, in the next months we will see further falls, caused by increasing imbalance between demand for and supply of green certificates.
Calls for bringing works on the regulation to a halt were issued by numerous associations of renewable energy producers and customers, which warned the government about tragic consequences of destabilisation of the RES industry.
Experts warned that manual control of the green certificates system will result in irreparable harm for producers and block new RES investments. The reputation of Poland as a country open to investment will be thwarted once again. Potential investors intending to open new plants in Poland will have to be told that they will be incapable of powering their business with renewable energy, as there will be no RES investments projects due to excessively high regulatory risk, representatives of Union of Entrepreneurs and Employers, Renewable Energy Association and Polish Wind Energy Association said.