Development of the

Polish wind energy sector

Wojciech Cetnarski President

Polish Wind Energy Association

7-8 October 2014, Copenhagen/Aarhus

PWEA is a non-governmental organisation active since 1999, with more than 100 member companies.

PWEA is a member of: • European Wind Energy Association

• Global Wind Energy Council

2

PWEA – key facts

• Current status of the wind energy sector

• Wind energy development forecast

• The draft RES Act

• Summary

3

Agenda

Wind energy development in Poland and worldwide

4 Źródło: GWEC

5

RES-E production by technology in 2012 and 2013 (% share)

Source: PWEA on the basis of the EMA data

3% 13%

30% 11%

42%

biogas hydro wind biomass co-firing

3,45% 14,40%

35,03% 17,37%

29,75%

biogas hydro wind biomass co-firing

2013 2012

6

Wind installed capacity, 2012-2014 (H1 2014)

2 497

3 389

3 727

-

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2012 2013 2014 (H1)

MW

0

20000

40000

60000

80000

100000

120000

140000

160000

2009 2010 2011 2012 2013

GW

h

Wind electricity production Domestic electricity consumption

Source: PWEA on the basis of the ERO and the EMA data 7

Share of wind electricity in electricity consumption in Poland, 2009-2013

0,55% 0,84% 1,77% 2,52% 3,69%

Basic balancing parameters (averaged values for business days during the

autumn-winter season)

Year

2013 2020 2025

Wind farm capacity that could be connected to the National Power System [MW]

6 800 8 900 10 000

Source: PSE-O, WEW 2013 presentation „Technical and economic determinants of RES development in Poland”

Source: Professor Piotr Kacejko, Lublin University of Technology, 2013 „The assessment of the National Power System balancing capacity in the 2020 – 2030 period with regard to offshore and onshore wind farms”

Basic balancing parameters (averaged values for business days during the

autumn-winter season)

Year

2013 2020 2025 2030

Wind farm capacity that could be connected to the National Power System [MW]

6 500 10 000 11 500 12 000

Experts and PSE actually reached a consensus concerning the National Power System’s capacity to operate properly with 10 GW of wind installed capacity by 2020 and 12 GW of installed capacity by 2030.

8

Wind energy connection opportunities

9 Ź Source: PWEA on the basis of Ministry of Economy, the Chancellery of the Prime Minister, the 2050 Energy Policy of Poland

Wind energy development forecasts by 2030/2050 (MW of installed capacity) in accordance with different approaches

2010 2015 2020 2025 2030 2035 2040 2045 2050

KAPE PEP 2050 1800 3050 7050 9800 13500 18000 19000 20000 21000

DAS KPRM 1800 8900 10000 55000

PSEW 1800 7500 11500 15000

0

10000

20000

30000

40000

50000

60000

MW

KAPE PEP 2050 DAS KPRM PSEW

10

The draft RES Act

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The RES Act – the key legal act regulating the sector’s development in Poland

For whom? Existing New (obligatory)

Existing (optional)

For how long? 15 years from first GC date

15 years

Key features: Freezing substitution fee Limiting support for biomass

co-firing Cancelling support for

existing hydro

Adjusting the obligation quota

No support for biomass co-firing

No support for biomass > 50 MW

Until the end of 2035 for onshore and 2040 for offshore

New RES

Support Scheme

Green certificates Auctions

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Contracts for Differences (CfDs)

The draft RES Act introduces CfDs as an auction-based support scheme for installations above 1 MW. In accordance therewith RES installations that won an auction sell energy on the wholesale energy market, where RES producers are refunded the difference between the auction sales price and the arithmetic mean of exchange energy prices (IRDN24 index). Example: A producer offers 380 PLN/MWh of electricity with annual indexation and sells the electricity to a member of the exchange (below 1 MW to an obligated vendor), who settles the price with OREO and gains the difference between the auction price and the ERO price for a particular quarter.

With CfDs the producer is not exposed to the market risk, for it always receives indexed PLN 380.

Source: PwC

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Auctions – general principles

• The auction is won by a producer offering the least expensive energy

• New projects may participate in the support scheme only through the auction scheme

• Existing projects can also participate in separate auctions and convert from the support system of GS into CfD

• The Council of Ministers shall before 30 November specify by way of a regulation the maximum amount and value of energy that may be purchased in the next year (25% of the volume of auction for installations below 1 MW)

• Auctions are organised and held by the President of the ERO (at least once per year, separately for sources up to and above 1 MW)

• The energy price is specified on the basis of a reference price quoted by

Minister for Economy at least 60 days before the auction is held

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The pre-qualification procedure

• A subject intending to participate in an auction shall be subject to a formal assessment procedure, consisting in the obligation to deliver the following documents:

o A confirmation of admissibility of location of a particular RES installation on the area subject to the planned investment

o Grid connection conditions or an interconnection agreement for the RES installation

o A final building permit o Environmental decision o Time and financial schedule of the construction project

• The President of the ERO shall issue a certificate of admission to participation in an

auction or refuse to issue such certificate within 30 days from the day the application is filed

• The refusal to issue a certificate may be complained against • The certificate is valid for 12 months

15

Key PWEA reservations to the auction scheme

The RES Act regulates issues related to the support scheme for RES technologies in Poland – the new draft Act assumes the introduction of an auction scheme to replace the green certificates scheme: • Three-year settlement periods • Provisions discriminating wind energy – 4 000 MWh/MW/year • Not sufficient transitory period

• Short, one-year auction volume and reference price specification horizon

• No substitution fee indexation

• Ineffective provisions dedicated to offshore wind energy

• Binding goals for RES participation in the countries' energy mix resulted to be very efficient way to develop different technologies, so it should be continued also till 2030

• Adoption of the new Act as soon as possible is key for Poland to achieve RES energy production at the level agreed with the EU

• The Polish power system offers connection opportunities for wind energy at a level higher than planned in the current NREAP

• Wind energy as a supplement to coal energy contributes to the increase of energy security of Poland

• In particular the offshore wind may constitute a long term (after 2020) option to satisfy growing demand for electricity and substitute retired coal based generation capacity allowing Poland to meet the 2030 European CO2 emission goals at minimum cost to the economy

16

Summary

Thank you for attention

Polish Wind Energy Association