Completion of the first energy auction in Poland

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​In a nutshell:

The day preceding the last day of 2016 was the date of the first auction for renewable energies. Despite significant difficulties to register at the online auction platform (Polish abbrev. IPA) due to which a lot of bidders could not place their offers, the Polish Energy Regulatory Office declared on 3 January 2017 that the auction was valid and announced individual auction winners. Many auction winners can now look forward to 15 years of feed-in incentives at rates that considerably exceed the tariffs previously applicable under the quota system currently being withdrawn. The next auction is scheduled for the end of April 2017.

​Auctions in 2016

After many years of preparing, the first auction rounds for electricity from renewable sources were held on 30 December 2016 in Poland.

According to the decree on conducting energy auctions, published by the Polish Energy Regulatory Office at the end of November 2016, the auctions were supposed to take place, at least theoretically, from 6 a.m. to 5 p.m. (see below). Bids could be registered only via an online auction platform (IPA) and only one bid could be submitted [by one bidder] per every participating power plant. The start date for registration with IPA was 12 December. Anyone interested in participating in the auction could create an account on IPA and register the power plant for which bids were to be made.

 

Overall, four auction types were held on 30 December:

  1. for existing agricultural biogas plants with an installed capacity of up to 1 MW (max. purchase volume:  2,113,887 MWh, max. value: PLN 1,262,797,422);
  2. for existing agricultural biogas plants with an installed capacity of up to 1 MW (max. purchase volume:  2,309,382 MWh, max. value: PLN 1,365,351,905);
  3. for new power plants – the so-called other power plants – with an installed capacity of up to 1 MW (especially: photovoltaic, wind power, certain hydro power plants) (max. purchase volume: 2,113,887 MWh, max. value: PLN 1,262,797,422);
  4. for existing plants with an installed capacity of up to 1 MW which met the criterion of installed capacity utilisation above 3504 MWh/MW/year and whose emission rates were below 100 kg/MWh (max. purchase volume: 1,306,870 MWh, max. value: PLN 538,297,239). This auction was dedicated in particular to small-scale hydropower plants in order to enable their operators to switch from the green certificate system to the auction system.

In addition to a number of formal requirements that had to be met (as part of the preliminary qualification procedure), the projects put up for auction had to be at the ready-to-build stage and have a grid connection approval, among other prerequisites. When quoting electricity prices for the projects, investors had to take into account the maximum price for a given technology, the so-called reference price as determined in the Regulation of the Ministry of Energy; anyone who quoted a price above the said cap was excluded from the auction.

The reference prices for the selected plant types were as follows:

  1. biogas plants (irrespective of the size of the power plant) – PLN 550 / MWh 12.79 euro cent / kWh
  2. Wind turbines (onshore, of up to 1 MWp) – PLN 300 / MWh 6.97 euro cent / kWh
  3. Hydro power plants (of up to 1 MWp)  –  PLN 470 / MWh 11.16 euro cent / kWh
  4. Photovoltaic power plants (of up to 1 MWp)  – PLN 465 / MWh 10.81 euro cent / kWh

 

Results of individual auction rounds

The two auction rounds held for the existing biogas plants did not enjoy great popularity despite high reference prices. In the auction for smaller-scale biogas plants only 7 valid bids were placed by operators from one corporate group (PBG). Accepted were all of the submitted bids, which hardly differed in terms of the quoted price (the minimum  price offered was PLN 502.23/MWh, whereas the maximum price was PLN 504.57/MWh). The outcome of the auction for biogas plants with a nominal capacity of over 1 MWp was a disappointment. Only one bid was submitted. Since according to law at least 3 valid bids must be submitted for the auction to be valid, the auction was declared void. Thus, the only bidder also left the auction empty-handed.

 

Strange were the results of the fourth auction round (for existing power plants with an installed capacity of up to 1 MW which met the criterion of installed capacity utilisation of over 3504 MWh/MW/year and whose emission rates were below 100 kg/MWh). 49 valid bids were submitted and all of them were accepted. One of the bidders, however, made a grave error. Namely, the bidder submitted an unrealistically low bid – PLN 30 / MWh ≈ 0.7 euro cent / kWh. This was most probably the bidder's typing error.

 

As expected, the only auction round for new power plants was most popular. Judging by the winners, this auction round turned into a pure PV auction. Overall 152 bids were effectively submitted and more than half of them, that is 84 bids (62 bidders) were accepted. Only this auction round could be described as competitive. At the same time, however, a lot of bidders were not able to submit their bids for this auction. Already at 10 a.m. it was not possible to access IPA, probably because the website was overloaded. The disappointed bidders postulated the repetition of the ”unfortunate” auction round. But the Energy Regulatory Office decided to declare that round as valid. From the pragmatic perspective, the Office had no other choice. More than 3 bids were submitted and in 2016 there was no time anymore to repeat the auction. Thus, the bidders may now only hope that the IPA platform will operate smoothly in 2017 and those determined may claim damages from the state, whereas the prospects of success are difficult to estimate.

 

The maximum price at which the energy was purchased was PLN 408.8 / MWh 9.5 euro cent/ kWh, whereas the minimum price was PLN 253.5 / MWh, which translates into ca. 5.8 euro cent/ kWh. The winners have now 24 months to implement their projects. In view of the declining prices for PV modules, similar solar radiation levels in Poland and Germany, but with significantly lower costs of land purchase or lease in Poland, it can be said that the achieved prices are attractive.

 

Auction rounds in 2017

The government is also preparing for a 2017 auction. The auctions held in 2016 rather resembled test auctions in terms of their volume; the 2017 auctions are said to invite bids for significantly larger volumes. This time co-firing technologies should be admitted to the auction for the first time; a higher purchase volume is also expected for variable renewable energy facilities. According to the draft regulation regarding the 2017 auctions, 4,725,000 MWh of energy should be purchased from variable renewable energy facilities. This means that about 300 MW could be generated in PV power plants as a result of this auction (4,725,000 / efficiency – 1050 p.a. / 15 years).

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