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The Warsaw Voice » Other » September 3, 2008
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Wind Power: Development Without Boundaries?
September 3, 2008   
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The last few years have seen a rapid development of renewable energy sources, wind-power projects in particular. This sector, in the center of continually growing interest in "green" energy sources, should without a doubt look toward the future. Nevertheless there are more and more dark clouds gathering on the horizon and there exists a real risk that even if the clouds are accompanied by hurricane-force winds, their energy will not be harnessed to power new turbines.

Before explaining the reasons for this paradox, it is worth saying a few words about why wind power, once treated as a harmless hobby of a group of enthusiasts, has now become an attractive business. Undoubtedly the key to success was an amendment to the energy law in 2005. The support system for renewable energy was from then on based on separating the trade in electric power from that in "green certificates." A producer can sell electricity at a pre-set regulated price or, should he be able to get a higher price, on the open market. Thus they have a specific and, what is most important, guaranteed income. Independent of this, a producer receives a so-called "green certificate," or proof of power source, for every unit of renewable energy they produce. The certificates, after registration in a special account, are converted into property rights. These property rights can be traded on the Polish Power Exchange. Companies trading in electricity must have a specific number of certificates, and this fuels demand for the property rights. This guarantees the renewable-energy producer another source of income.

The system obviously works well because all the market players are declaring plans to build new power generators. Many companies are frantically searching for an opportunity to enter the market. No doubt, therefore, that some of these declarations will be realized, more so because demand for renewable energy will systematically grow. Regulations are bolstering demand because renewable energy accounts for an increasing share of energy companies' portfolios.

However, despite this seemingly idyllic situation, it may rapidly be the case that putting ambitious plans into practice will be difficult or nigh on impossible. The basic problem is that places where there are strong winds generally lack the infrastructure to transmit generated electricity and also the technical capabilities of existing infrastructure are insufficient to meet requirements. Thus it is the development of transmission and distribution networks that will be the key to the development of the renewable-energy market. The problem lies in the complexity of existing regulations for the realization of new grid projects and the fact that these regulations mandate a method for the financing, or rather co-financing, of transmission connections with the national grid by investors that is totally ineffective.

In this context, it is imperative to urgently introduce regulations that will facilitate the expansion of electric power networks. Hundreds of pages have been written about the necessity to do so but not much can be done without serious changes in this area. It is also necessary to completely reform the system for financing new connections with the national grid. It is essential to eliminate "virtual" projects, those that most probably will never be built and which block places in the line for connection to the grid. The character of connection conditions set by grid companies should also be changed so that it is not the issue of conditions but a signed connection agreement that guarantees project realization on set conditions. The energy law should also address the issue of compensation for the investor who first connects to the grid in a given place and often is solely responsible for the associated high costs, while companies that connect to the grid later on take advantage of the extended and modernized infrastructure at minimal cost to themselves. It is necessary to at last allow investors to jointly build a grid connection and jointly share the costs. Contrary to appearances, such a joint initiative is not simple from a legal point of view.

Work is ongoing to reform the energy law that regulates the principles of grid connection. It will certainly not be easy to accommodate in the reforms the often-conflicting interests of investors and grid companies. Despite this, we should all keep our fingers crossed for the lawmakers. Should the reformed system not work well in practice, then, despite fair wind-power potential and strong desire, we will not see new wind parks emerging in Poland.

Aleksander Stawicki

WKB is one of Poland's leading law firms that offers specialist advice to companies from the energy sector. Aleksander Stawicki is a partner in the firm and supervises renewable-energy projects. Currently WKB is advising Poland's biggest companies as well as companies from Japan, Germany and Scandinavia on this subject.
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