Poland Seeks 40% Cut in Renewable Energy Costs by 2014

Poland aims to cut the cost of renewable energy suppliers 40 percent by 2014 by auctioning fixed-price contracts for generators and by cutting subsidies, the nation’s deputy economy minister said.

Jerzy Pietrewicz told lawmakers that the government plans to issue its final draft of legislation on renewables by the middle of this month and that the rules may enter into force at the start of next year. The energy regulator will organize auctions to buy electricity from new installations for 15 years and also reduce the number of green certificates granted.

Poland, which produces almost 90 percent of its electricity from coal, had been working on new renewable energy regulations since 2011. It’s seeking to balance a European Union demand that it clean up fossil fuel emissions with Prime Minister Donald Tusk’s ambition to limit consumer power bills.

“Auctions are a more efficient system that allows us to choose the projects with lowest production prices from competing ones,” Pietrewicz said at the Senate’s joint Public Finance and Economy committee in Warsaw today. “Additionally, investors will get predictability for their projects for a long period as they will be settling a price level they offer.”

EU requirements call for Poland to expand the amount of energy it gets from cleaner sources to 20 percent in 2020 from 11.5 percent in 2012. The government is also attempting to cut support for renewable power generators, which guarantees above-market prices for power from clean sources. The tariffs cost consumers about 4 billion zloty a year ($1.3 billion), according to estimates from the Economy Ministry.

Technology Neutral

Poland won’t have any preferences for different renewable energy technologies, Pietrewicz said. The Economy Ministry wants to auction contracts to buy energy from installations with capacities not larger than 50 megawatts.

The government also wants to exclude hydroelectric power plants exceeding 1 megawatt of capacity from the new system.

The rules would cut in half the subsidies for biomass co-firing, the major source of renewable energy now in Poland.

“Sudden, uncontrolled development of such technology caused oversupply of green certificates and led to the collapse of their market price in recent years, when the economy slowed down,” Pietrewicz said.

The price of certificates granted for using clean technologies has dropped 65 percent since the start of 2012 to 100.48 zloty a megawatt-hour, reaching a record-low on Feb. 14 this year, according to data compiled by Bloomberg. They rebounded to 199.92 zloty a megawatt-hour as of today.

The new rules will apply to new installations only. The deputy economy minister said support for existing facilities will be kept unchanged. The government plans to run “dedicated” energy auctions for “stable sources of power,” to avoid possible wind and solar energy shortages due to weather conditions.

Poland estimates that keeping the existing support system will boost the cost of renewables by 123 percent to 8.9 billion zloty ($3.4 billion) in 2020, according to a presentation published on the Economy Ministry’s website.

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