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On June 28th, the Polish president signed the amendment to the Renewable Energy Sources law. The changes will be implementend into the Polish energy market and come into force on July 1st, 2016. The first change that will impact the Polish end consumer is the reduction of the share of the green certificate obligation from 15% to 14,35% for the second half of 2016. This means the energy seller will need to submit less green certificates for electricity sold to the end consumer.
Unfortunately the reduction will be compensated by the introduction of a new type of certificate: the blue certificate. These certificates confirm that the energy is produced from agricultural biogas. The obligation will be set at 0,65% of the volume of purchased energy, exactly the same amount as the reduction on the obligation of green certificates.
At first sight you’d think this change should have a neutral impact on the end consumers. The price of both certificates is calculated in a different way. The price of green certificates is based on a market mechanism and at the moment these certificates are traded at around 70 zł/MWh.
The price of the blue certificates will probably be aligned with the replacement fee. The replacement fee is a maximum price for certificates set by the regulator to increase liquidity. The current replacement fee is at 300,03 zł/MWh which is more than four times more expensive than the current price of the green certificates!
Table 1: Obligation of the Polish Property Rights (source: Grid Fees & Taxes section of E&C Consultants)
Moreover, the percentual obligation of both certificates will rise to 19,35% for green certificates and 0,65% for blue certificates as of 2017. However, this is a maximum and the legislation mentions the minister in charge of energy is allowed to make adaptation until November 30th, 2016. This ability introduces a fairly large uncertainty on the market.
In the offers of suppliers for 2017, 2018 and 2019 we notice different approaches in establishing the final price for end consumers based on the different legislative changes (introduction of new colours such as the blue certificate and the end of others such as the yellow and red ones in 2019). Next to this, sellers apply different calculations to define the price of property rights for the next three years, keeping in mind risks of changes in price and liquidity on the TGE. This makes it even more important to implement a strategy to handle this unstable market environment and limit its impact on the energy cost of the end consumer’s business.
Table 2: Share of the obligation of the Property Rights (source: Grid Fees & Taxes section of E&C Consultants) * Energy Minister change that value by 30/11/2016
Influence on the energy cost of end consumer
This highly unpredictable legislative environment makes it hard to clearly define the energy budget for the next few years. In the table below you can find an estimation of the price of each colour for 2017, 2018 and 2019. An end consumer using 100.000 MWh electricity per year, might lose 1,4 million zloty if there is no prolongation of the existing law to support the yellow, red and violet certificates.
Table 3. Estimated price of particular colour (source: Grid Fees & Taxes section of E&C Consultants)
Other changes to the RES law
As of July 1st, the RES fee will be introduced on the electricity bills. This fee covers distribution services and will be collected by the distribution system operator. For the second half of 2016 this fee is set at 2,51 zł/MWh. The rate for 2017 will be announced before November 30th by the Polish regulatory office. Companies that obtained the status of industrial consumer can be granted a reduction.
As well, transition fees will increase as of January 1st, 2017. This fee is added to the invoice for the distribution services and covers the producers’ cost in case of an early termination of a long-term contract or the sale of capacity and electricity. Below you can find the fees for end-users (other than households) that have installations connected to the grid:
Would you like more information on these regulatory changes in Poland? Feel free to contact us via email@example.com or call Bartosz Palusiński via +48 509 82 00 25.
10 years in energy procurement and risk management. Before E&C Bartek worked as a Regional Buying Manager of Energy for Tesco for 5 Central European countries and as a Project Engineer for Nestlé. He has extensive experience in implementing risk management strategies for buying energy and in the Central and Eastern European gas and electricity markets.