Interview

“We are at the beginning of the learning curve”

Interviewed by Andrzej Ancygier, 12 Mar 15
On 20 February the Polish parliament passed the long-awaited act on renewable energy sources. To the surprise of many, the act includes fixed feed-in tariffs for installations below 10 kilowatts (kW) despite opposition on this point from the ruling party Civic Platform (PO). Grzegorz Wiśniewski, chairman of the Renewable Energy Institute (IEO) in Warsaw and one of the initiators of the amendment, explains the impact of the so-called “prosumer amendment” on the Polish power sector and the future of renewables in Poland.

new energy: The prosumer amendment distinguishes between installations below 3 kW and those between 3 and 10 kW. Why is this?

Grzegorz Wiśniewski: Renewable energy installations with an installed capacity of below 3 kW, such as roof-mounted photovoltaic panels or small wind energy installations, provide as much electricity as an average household in Poland annually consumes: around 2,500 kWh. The prosumer amendment covers the costs of such an installation and will also enable less well-off citizens to get a loan to finance the investment. Installations between 3 and 10 kW can power multi-family buildings, farms, hospitals, schools and small industrial premises. We also aim to develop the market for micro biogas power plants in this category.

ne: The prosumer amendment includes a total cap on the installations: only the fist 800 megawatts (MW) will quality for the feed-in tariffs. What is the reason behind this proposed limit?

Wiśniewski: I have to admit that the main reason for introducing this cap was the difficult political situation for renewables in Poland resulting from the government’s initial attempts to block the development of any kind of citizen energy. We also anticipated criticism from the public-owned power utilities that only see the costs of the feed-in tariffs but ignore the windfall profits that state subsidies for biomass cofiring and old hydropower plants will bring. Prosumers constitute a huge challenge for them, endangering their dominant role in the power market. Even though the feed-in tariffs only apply to micro-installations, and despite the cap of 800 MW, some government representatives and all energy companies still fircely opposed the amendment. The feed-in tariffs were only adopted because of almost unanimous support from all opposition parties and the Polish People’s Party, which is in the ruling coalition.

ne: One of the main elements of the prosumer amendment that was criticised was the level of the tariffs: for photovoltaic installations below 3 kW it will be just under 18 eurocents per kilowatt hour (kWh). This is much more than German prosumers currently receive. What is the justification for this?

Wiśniewski: The PV market in Germany is much more developed than in Poland. This means that the initial expense is much higher – especially the costs of small installations to prepare the investment, install the panels and buy the panels themselves. The interest rates on bank loans are also much higher in Poland than they are in Germany. In Poland we are at the beginning of the learning curve. We currently have around 1,200 installations with an installed capacity below 40 kW per unit connected to the grid which is only 6 MW in total. On account of the legal and economic barriers associated with connecting installations to the local grid, the investment risk in Poland is much greater than in Germany. We also feared that if we set the tariffs too low this would trigger investors to use low-quality installations, which would discourage others from becoming prosumers. But the feed-in amendment does give the Ministry of Economics scope to adapt the level of the tariffs as costs decrease. As the market for prosumers is still very young, the amendment does not set a specific level of digression.

ne: One of the major reasons for the government’s opposition was the purportedly high costs of feed-in tariffs for electricity consumers. The Ministry of Economics even presented calculations according to which the adoption of the prosumer amendment would increase energy prices by PLN 3.17 (79 eurocents) per megawatt hour (MWh). Have any tools been introduced to stop such a steep increase in energy costs for the average citizen?

Wiśniewski: According to an indepth analysis carried out by our institute, the government’s calculations are incorrect and significantly inflate the costs of the feed-in tariffs for consumers. Our calculations show that the prosumer amendment will increase the renewables surcharge by a maximum of 8 eurocents per MWh, not 79 eurocents as claimed by the government. There were substantial methodological errors in the government’s calculations of the costs of the amendment. And it was on the basis of these unfounded figures that the government asked the Sen ate, the upper house of the Polish parliament, to reject the prosumer amendment. Just before the vote in the Sejm, the Ministry of Economics presented amended calculations according to which the introduction of feed-in tariffs for micro-installations would increase the renewables surcharge by around 12 eurocents per MWh – much lower than its initial calculations of 79 eurocents, but still higher than our calculations.

ne: Given these relatively low additional costs, what do you think were the main reasons why the government was so strongly opposed to the introduction of feed-in tariffs for small installations?

Wiśniewski: The debate on the prosumer amendment was about more than just supporting micro-installations; it also touched on fundamental aspects of how Poland’s electricity market works. Despite the structural and technological changes taking place in most other countries, especially in Germany, the Polish power sector is still dominated by four public-owned utilities – PGE, Tauron, Enea and Energa – along with RWE as a minor player. These companies not only generate almost all of the electricity consumed in Poland, but due to the current support mechanism which benefits the larger producers, are also responsible for 90 percent of electricity coming from renewables. Their dominance in the latter sector increased particularly after companies such as Vattenfall, Dong Energy and Iberdrola withdrew from Poland due to the legal insecurity, most of them selling their assets to PGE. In this model, which is not common in the EU, there was simply neither the space nor the political will to empower independent power producers, especially citizens, and allow them to produce electricity, as this would threaten the dominant position of the inflential energy companies. Aware of this risk posed by prosumers, energy companies exerted great pressure on the government – especially through the Ministry of the Treasury – to block the planned changes in the feed-in tariffs. On account of the importance of the feed-in tariffs, representatives of the ruling party (PO) began a campaign to discredit the promotion of distributed sources of energy by claiming that it merely boosts imports of solar panels from China. They also completely ignored the potential for job creation and the opportunities brought about by developing this new industry and the associated technologies in Poland. It is interesting to note here that these are exactly the arguments used to justify the government’s plans to build nuclear power stations in Poland. In its fight against the amendment, representatives of the ruling party emphasised that previous versions of the act on renewable energy sources had already included support for prosumers. While the previous versions had guaranteed prosumers a price of initially 80 percent and later 100 percent of the electricity price at the stock exchange, this only corresponds to 4 or 5 eurocents per kWh less than half of the support large installations receive

ne: An increase of the guaranteed price from 4 or 5 to 18 eurocents per kWh produced by consumers is a huge improvement. How was this possible in the face of such strong government opposition?  

Wiśniewski: Support for renewables is growing fast among the Polish population, partly due to the struggling Polish mining industry. Despite decades of huge subsidies the biggest Polish mining company, Kompania We˛ glowa, is on the brink of bankruptcy. At the same time Poles are becoming increasingly aware that citizens in neighbouring countries are becoming independent from the monopoly of the energy companies. This has caused support for renewables in Poland to increase significantly, exceeding 77 percent according to the latest surveys. Civil society associations such as the Climate Coalition of green NGOs and the newly created organisation of RES in dustry associations Citizen’s Energy also played an important role in the debate on feed-in tariffs. In my opinion, the intense debate on feed-in tariffs in the Polish parliament and in our society over recent months marks a turnaround in the attitude towards the power sector. The unprecedented mobilisation of civil society gives me hope that we will see long-term support for distributed and modern renewable sources of energy in Poland.

ne: Do you think the discussion about the role of prosumers in the power sector will play a part in the campaigns for the presidential and parliamentary elections later this year?

Wiśniewski: The results of the vote on the prosumer amendment showed a new division in the Polish parliament. In both chambers the ruling Civic Platform (PO) was united in its opposition to the feed-in tariffs, despite the low cap of 800 MW, due to pressure from the energy companies and the mining lobby. All other parties, despite significant differences between them, unanimously supported the adoption of the feed-in tariffs. Especially interesting is the fact that the prosumer amendment was initiated by a member of the Polish People’s Party (PSL), which is part of the ruling coalition. Despite initial disagreements in the most recent vote, this party, which is especially popular among farmers and thus potential prosumers, was unanimous in its support for the amendment. Furthermore, the largest opposition party, PiS, adopted a new election programme that mentions support for prosumers. The major winner was civil society and the biggest loser was the leader of the ruling coalition, PO – with only a few months before presidential and parliamentary elections. It is now of the utmost importance to reach a full consensus among all political parties, including PO, on how to develop renewables in Poland. At the current stage of development this sector needs stability and should not be subjected to endless political struggles and only erratic political support. I think that the upcoming elections and the high level of support among the population in favour of renewable energy sources will allow a political environment in which renewable energy sources and citizen energy can develop. The chances are good that the president, Mr. Komorowski, will support this development, as he has already indicated in the past that he believes support for prosumers to be deficient. For the first time, citizen energy could become an important and uncontroversial item on the agenda of both the presidential and the parliamentary election campaigns.

ne: How does the German energy transition influence the debate on the future of the energy industry in Poland?

Wiśniewski: Although many Poles are familiar with the German energy transition, only a few realise that the increased share of renewables in the power sector is the consequence of many years of stable support. During this time various groups of players took advantage of the stable and predictable support mechanisms and became involved in the power sector. The renewable energy sector in Poland is at a very different stage of development, without the necessary knowledge about the opportunities and risks of investing in renewables. Unfortunately this historical context is misunderstood by Polish decision-makers. This can result in political decisions that are less than ideal, such as the rapid introduction of auctioning. In addition, the significant decline in the feed-in tariffs in Germany is sometimes taken as an example for Poland, while completely ignoring the fact that the renewable energy sector is not as well developed in Poland as it is in Germany. Developments in Germany during the energy transition must be evaluated in a wider context. Otherwise the Polish media – which is heavily influenced by the state-owned power utilities, with the four big energy companies spending almost EUR 100 million annually on advertising and sponsoring articles according to the WWF – will present a distorted picture of the German energy transition and exaggerate the problems resulting from a completely different stage of renewables development compared to Poland. This could threaten the progress of the energy transition in Poland.

Grzegorz Wiśniewski has been involved in renewables since the mid-1980s. Between 1996 and 2006, he was co-founder and director of the European Centre for Renewable Energy (EC BREC) – the fist government agency responsible for the development of renewable energy sources in Poland, financed by the European Commission. Since 2001 he has been chairman of the Renewable Energy Institute, a leading think tank for the renewable energy sector in Poland.

 

Comments (2)

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  • 4 Apr 2015 - 1:02pm, Norbert Gallagher

    Andrzej

    Good article. While it starts well on the prosumer amendment it seems to end on a negative note. We are interested in identifying specific investment needs and opportunities where there are strong potential returns. Is Grzegorz Wiśniewski the best person to contact in this regard ? if so d you have his contact details ? If you believe there are other contacts can you provide these.
    Thanks

    Norbert
    www.mcomm.ie

  • 26 Aug 2015 - 10:12pm, John Pagel

    Amazing interview! I run a solar-oriented company in the Australia (http://www.sunstainable.com.au/) and I'm always very interested to see what's happening in other parts of the world regarding ecological energy!

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