Katarzyna Michałowska-KnapInstitute for Renewable Energy

(EC BREC IEO)Warsaw, Poland

kmichalowska@ieo.pl

Wind energy development inPoland: history, main influencing

factors and future prospects

�124 MW of installed capacity, including 3 wind farms over 10 MW

�Approx. 0.08% of technical potential of wind energy already used

�In 2005 4% of RES electricity generation

The current status of wind energy inPoland

12%

3%

4%

58%

23%

Biomass

Biogas

Wind

Hydro

Co-firing

The history - technology

�First installations of „Megawatt Class” wind turbines�No significant manufacturing of wind turbines (some small-size)�Equipment imported mostly from Denmark(most projects designed for Vestas WT’s)�Production of components (nacelles, towerelements), i.e. for GE Wind

2000

�160 kW wind turbine designed by NOWOMAG, installed in 11 locations mostly inSouthern Poland.�Some turbines this range of capacity offoreign producers installed (mostly for technology promotion)

1990

�Several small wind turbines rated at 16 kW, 20 kW, 30 kW and 40 kW designed in IBMER, recommended for use on rural areas

1980

The history – strategy and policy

Expected new amendment of Energy Law, and regulation ofMinistry of Economy, change of quota obligation and balancingissues for wind energy

2006

Amendment of Energy Law and related regulations, improvement of market mechanisms for trade of certificates oforigin; Adopting of National Energy Policy till 2025; Report on Goals on RES share in Poland energy supply by 2010

2005

Joining the EU; national target negotiated with EU as 7.5% ofgross electricity consumptionAmendment of Energy Law and related regulations, according to directive EC/77/2001

2004

2003

Quota mechanism defined on the level of the regulation of theMinistry of Economy,Lack of implementation programmes for specific RES technologies; Several changes in regulations

2002

Polish National Renewable Energy Strategy adopted by parliament; the national target for 2010 defined as 7.5% ofprimary energy consumption

2001

The history – support schemes

Increase of the quota obligation from 9% in 2010 to 10,4% (compliance with 2001/77/EC directive).

2007

Obligation to achieve quota (7,5%) and to prove it (CoO) for electricity suppliers and producers (TPA) , introduction of CoO (TGC) trade; penalty followed by voluntary charge for non-compliance (240 PL/MWh); biomass co-firing as eligible RET-E but demand for increasing of biomass use from energy crops and wastes by 2014; increased quota (from 7,5 do 9% in 2010), distribution companies obliged to buy “physical” green electricity by the marketprice of “black” electricity

20052006

Obligation to achieve quota (7,5%) and to prove it (CoO) for electricity suppliers and producers (TPA) , penalty defined 30%, introduction of biomass co-firing as eligible RET-E

20032004

Obligation to achieve quota (7,5%) and to prove origin of electricity for suppliers and distribution companies, no strict penalty defined

2002

Quota obligation (7,5% in final sale balance) for electricity suppliers and distribution companies, no strict penalty

2001

Feed in tariffs, obligation for utilities to buy green electricity from sources <5MW, price same as for final consumers

2000

Quo

tao

blig

atio

n+TG

CQ

uota

ob

liga

tion

Fee

d-

inta

riff

INV

ESTMEN

T SUPPO

RT

The TGC system in Poland, 2006

0,00

50,00

100,00

150,00

200,00

250,00

300,00

350,00

400,00

Electricity price (yearlymean balancing market

price, in 2006 117.49PL/MWh)

CoO price - marketrelated

Total income of RESowner

Pric

e [P

L/M

Wh]

Substitute fee, in 2006 240 PL/MWh

Penalty, 130% of substitute fee

+ =

Development of regulation of the Ministry of Economy 2001-2004 on obligation of purchase of energy from RES up to 2014

2,4% 2,5%3,1%

7,5% 7,5% 7,5% 7,5% 7,5%

5,5%

7,0%

2,85%2,65%

6,0%

5,0%4,2%

3,6%

9,0%9,0%9,0%9,0%9,0%

4,5%3,7%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Req

uire

d %

RE

S-E

in e

lect

rict

y su

pply

Strengthening of the original Decree 2000-2004

Introduction of biomass co-firing with coal since ‘2004

Underfulfillment ‘2003 (1,3%)

.

Overfulfillment ‘2005

�Growing role of co-firing, competition between different RES technologies

�Over-production of green certificates in 2005/2006

�From 2007 plans of change of yearly quota levels (5.1% in 2007)

Installed capacity of wind energy, MW

0,25

0,73

0,86

2,91

2,94

3,60

4,74

27,74

28,34

58,34

69,19

72,00

124,00

190,00

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

May 2006

Expected 2006

Wind farms in Barzowice (5MW) and Cisowo (18 MW)

Wind farm in Zagórze, 30 MW

Wind farm in Tymie�, 50 MW

Wind farm in Lisewo (8.4MW)

Under construction: wind farmsin Gnie�d�ewo (22 MW) andKisielice (40.5MW)

�Most of currently installed capacitycumulated in 5 wind farms

�2001-2003 several problemsoccured for existing wind farms(balancing and forecasting request)

�From 2004 development of market for used wind turbines fromrepowering

�2003-2004 the refuse of many foreign developers from the Polishmarket, careful return from 2006

Location of main wind turbines

Wind projects in Poland, 2004Source: Institute of Power Engineering, Gdansk

� 2004 9.5 GW of projectsin different stages ofpreparation, 4.1 GW beingconcerned as feasible

� 2005 11 GW of projectsreported by DSO’s

� 2006 intensive activitiesof investors, developersand brokers on the Polishenergy market

� Most of projects on veryearly stage of permittingprocedure with many problems to solve beforecompleting

The opportunity - wind resourcesSource: Institute of Meteorology and Water Management

Resourcesconcentraded on Baltic Sea coast

and North-EasternPoland, somepotential on

complex terrain on the South

Problems – economic feasibility

� Until 2006 all major projects were completed with preferential financialsuport (grants, loans), available preferential sources limited

� Requirements of the financial institutions to reduce the financial risk, no acceptance of TGC system by banks, request of long term contracts for TGC (possible, but prices to 30%-40% lower than stock exchange results)

� Growing prices of equipment on the EU market, long delivery times

� Location of the projects on areas with not favourable wind conditions, low production forecast

� Local tax (yearly to 2% of investment value)

� Difficulties in reaching the payback level requested by equity capital

� Lack of financial resources for project preparation phase

The economic feasibility is now main factor blocking theimplementation of completed projects

Problems – grid interconnection

0

250

500

750

1000

1250

1500

1750

2000

operating in construction with issuedinterconnection

conditions

with defined scopeof interconnection

expertise

� Weak grids on some areas with significant wind resources, controversy aboutfinancing of necessary investment required for wind farms interconnection

� By current level of installed capacity no technical problems for TSO, but somelocal problems for DSO’s, no more interconnection possibilities on some areas

� Some specific technical problems, i.e. location of most projects in the northernPoland causes the turning of usual electricity flow

� Limited possibiliities for transfer of electricity across the borders

� Requirements for individual investors

to prepare the grid impact

assessment on very early stage

of project

� Unclear transmission issues, lack of

regulations concerning balancing

Problems – planning andenvironment

� Main wind resources concentrated on areas with high environmentalvalue, with goals to dvelop tourism

� Lack of local building and development plans in most municipalities(long procedure of change)

� Public acceptance problems („black PR” cases) stoping permittingprocedure

� Overlapping areas with the concentration

of wind projects with Nature2000 areas

� Lack of public available

information about wind resources and

exclusion zones

The opportunities - National Energy Policy until 2025 and the 2010 target

9,2

7,3

-20

0

20

40

60

80

100

120

140

160

2005 2010 2015 2020 2025

Export-import

Others

Renewables

Nuclear

Naural gas

Crude oil

Brown coal

Hard coal

7%7,5%

� 2005 – 3750 GWh of electricity from RES, where 12000 GWh is necessary to meet the target

�In report on Goals on RES share in Poland energy supply by 2010 Ministry ofEconomy expects in 2010 the 2.3% of gross electricity consuption will be generated by wind (corresponds to 2000 MW installed capacity)

Wind energy in Poland – potentialspeed-up factors from 2007

� Access to financial resources for the investment directly, as well as for griddevelopment and strategic studies (structural funds - specific priorities inoperational programmes 2007-2013; incomes from penalties and substitute feesdedicated for RES development)

� Development of TGC market and related financial services, growing interestof banks and equity capital

� Limiting of competition between different RES technologies (lack of biomassresources for large co-firing development)

� Growing interest in Polish market by experienced investors (foreign and Polishenergy companies, utilities)

� New quota obligation and development of TPA market – growing demand for green certificates, more entities interested in the market

� Limitation of wind energy balancing problems – specific balancing for wind energy allowed

� Growing experiences from wind farms operation, good practices to implement to avoid planning mistakes and environmental, grid and socialproblems

Wind energy in Poland – summary

� Up to now the development of wind energy in Poland was slow and belowexpectations

� 2006 is a year of intensive activities of developers, but wind energy will not yetbecome business as usual, and there is very small amout of well preparedprojects ready to implement

� For the moment wind energy is not able to compete with other technologies(especially large co-firing)

� Current support system generates problems for wind farm owners, financialclosure of investment is a primary problem

� The market will change significantly in short-term perspective (refuse of weakdevelopers, reduction of number of non-fesible projects, growing importance ofstrong developers supported with capital and collecting strong project portfolio)

� The significant increase of installed capacity may start from 2008-2009

� The significant influencing factor will be the national policy and attitude to thewind energy (stability of law conditions, public support to the investment, declaration of will to meet the national target)

Thank you for your attention

More information on Polish RES market data on new EC BREC IEO website

www.ieo.pl(since December ’2006)