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Poland’s rise to European PV heavyweight – Part 2

By Tom Kenning
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The growth of rooftop solar in Poland slowed recently, though demand for large-scale PV is ‘constant’. Image: Green Genius.

Poland’s thriving rooftop solar market is encumbered by the shift to net-billing, while large-scale PV auctions temporarily stutter in a no man’s land of pricing, though PPAs and merchant solar stay promising in flexible combinations under the CfD scheme.

Part 1 of this article looked at Poland’s rise to one of the top solar markets in Europe, its major grid bottleneck as the government prioritises future offshore wind capacity in the North and the thought going into project location. This article will cover both the rooftop and large-scale PV segments in more detail, with the shift from net-metering to net-billing and the stagnancy over pricing in large-scale auctions.

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Rooftop driven by EU goals

Poland had 1.13 million PV micro-installations of under 50kW capacity installed by the end of summer 2022, driven by the original support systems for prosumers, according to SolarPower Europe. Along with no distribution fees for using the grid, prosumers had benefitted from a net-metering scheme. Systems up to 10kW could feed 1kWh into the grid, and receive 0.8kWh back for free, while those above 10kW could feed 1kWh into the grid and receive back 0.7kWh.

Dr Dariusz Mańka, director of legal and regulatory affairs at Poland’s solar association Polskie Stowarzyszenie Fotowaltaiki, says that Poland’s solar growth started in the rooftop segment as a government strategy to avoid internal issues with the grid.

“It was easier to give money to people that install small PV than to invest in the large-scale infrastructure, because the main obstacle for large-scale PV is the lack of infrastructure, lack of grid,” Mańka tells PV Tech Premium.

The government was under pressure from EU renewable energy goals, and the prosumer market was seen as the easiest way to achieve those targets as opposed to large-scale PV. However, rooftop solar’s rapid rise has been checked by recent changes in law.

Rooftop progress checked

In April last year, the net-metering system was replaced by a net-billing system. In this case, prosumers are compensated for energy fed back into the grid but still pay for consuming electricity like normal customers, which has led to a drop in rooftop PV popularity.

In terms of rooftop PV, the original support systems were highly beneficial for prosumers making it very easy to get a connection, says Mańka. However, distribution system operators (DSOs) which are 90% state-owned, saw huge numbers of rooftop solar additions and started to question whether this was destabilising the grid. The DSOs then claimed that they were not able to control the grid because of the peaks and profile of solar production. For this reason, they pushed the government to introduce a new system that would force the prosumers to contribute to the cost of maintaining the grid, making it less financially convenient for prosumers.

On the other hand, there has been a change to the Mój Prąd (My Electricity) scheme which is in favour of prosumers. From mid-December last year to the end of March this year, residential solar subsidies have been increased by 50% from 4,000 PLN (~US$900) to 6,000 PLN (~US$1,350) per system, while the rebates on battery installations were more than doubled to 16,000 PLN (~$3,590).

‘Constant growing need for large-scale PV’

While the government is supporting rooftop PV with new regulations on housing and household communities in the cities, Mańka does not forecast a major change in the development of rooftop growth. On the other hand, there is a “constant growing need for large scale installations” both for industry and state-owned industry. It was unfortunate from the large-scale PV industry’s perspective that rooftop deployment had created an image that there are large capacities of PV in the grid already and the country does not need anymore.

“The majority [of solar] is the prosumers,” he adds. “That really does not change the situation in the case of prices of energy for industry. So now large-scale PV is some kind of a victim of this development of prosumers. There have been more and more difficulties with connections to the grid and the DSOs.”

Nonetheless, power purchase agreements (PPAs) are a promising route for large-scale projects and both the potential and demand is growing for the sector, although there is also a growing list of obstacles. Large-scale growth is still expected to continue for several years at least, particularly as it is seen as a way of quickly growing renewable energy capacity before wind investment can begin again.

Simonas Šileikis, head of solar business at Green Genius, a renewable energy arm of Lithuanian company Modus Group, that builds large and medium scale capacity projects in Poland, says that Poland’s early auctions were an attractive and successful support scheme for several years that brought competition and a wave of developers to prepare greenfield allotments for the auctions. The majority of those projects were sites of up to 1MW and all of Green Genius’ installations from 2019 to 2021 involved the acquisition of baskets of 1MW projects with support lasting for 15 years.

“This looked like a really stable investment, which was easy to finance, easy to attract the final investment or long-term investors,” says Šileikis – adding that unfortunately, there were problems with the pricing in the latest auctions in 2020 and 2021 which combined wind energy with solar projects of above 1MW in size.

Nonetheless, Šileikis believes utility-scale projects will keep catching up as there are a number of huge projects already being constructed in Poland including a 200MW hybrid wind and solar project.

“There are similar projects under construction, which definitely will change the shapes of the growth of those two sectors – prosumers and the utility-scale. However, for the new developments, new installations, it’s a little bit of a challenging time right now, just because of the grid connection.”

Israel-headquartered developer Econergy, which recently constructed the largest PV project in Romania standing at 152MW, has now started work on its first Polish project, the 52MW Resco plant, which is expected to become operational by the end of June.

Econergy CEO Eyal Podhorzer says: In the past, residential and rooftops was mainly the driver for growth, but in the last 12 months, I would argue that most of the growth actually came from large-scale PV. We see the competition, we see the level of interest of new international investors coming in and entering the market and obviously, none of them is looking for small rooftops. The market of large-scale ground-mounted PV projects is the root market at the moment.”

The ground-mount PV sector is also backed by the contracts for difference (CfD) scheme together with the strong PPA market for deals with corporates and utilities.

“We look at the differences between a country like Romania and Poland,” says Podhorzer. “In Romania, there is no CfD. The PPA market is really immature at the moment. So, we’re doing complete merchant [solar] at the moment waiting for the PPA market to mature.

In Poland, it’s a completely different ballgame. We have the CfD, which is very active, and it’s a good possibility for developers. We have a good mature PPA market. So, it is possible to close good long-term PPA agreements and all these obviously contribute to a faster development process and growth of the large-scale PV projects.”

Auctions stutter

Originally, the main incentive for large-scale solar in Poland was the auction system under the CfD scheme, which now separates projects into two categories above and below 1MW in size, with those above 1MW also competing with wind. However, with growing energy prices, more and more companies decided to sell energy on the market rather than go into the auction system, says Mańka. Though a change on price cap regulations did allow the auction system to make a comeback, this year’s auction was a disappointment because the reference price was too low compared to the market price even after the price cap was brought in.

Mańka is not expecting the price to change for the next auction, but nor does he believe that this necessarily spells the end of auctions, because from a bank and financing perspective, large-scale PV projects won through these auctions are seen as a stable source of revenue.

“We see that it might not be an end of this system,” he says. “It has some future.”

Podhorzer, for example, praises the CfD for the flexibility it offers over other kinds of subsidy and the PPA schemes, which involve commitment to rigid agreements for 10 years or more.

“On the CfD side, you can decide how much you commit. If you’re not happy after three years or two years with the agreement, you can stop it, you can renew it later. You have 42 months from the moment you’re granted with a CfD until you can start producing and selling to the grid.”

CfD projects can also be combined with PPA or merchant solar arrangements, for example giving 30% of your capacity to the CfD scheme but going merchant for the remaining capacity or combining with a PPA. Econergy is currently looking at options for a combination of CfD, PPA and merchant for its 52MW Resco project ahead of its completion in June.

Discussing the low uptake of the most recent auction, Podhorzer says “people are greedy” and when the market in Poland in 2022 was at about EUR180-200 on average per megawatt, developers chose to take the merchant path and postpone PPAs and all CfDs to a later stage.

“I suppose what they fail to see is that when the market drops and they go to close a PPA or CfD, then the prices will be lower,” he adds.

Nonetheless, the failure in the latest auction for the reference price to reflect recent market changes is seen as an anomaly and Podhorzer does expect the government to make changes for the next auction. Ideally, the minimum reference price would not be in the range of the unsustainable current market prices and they should be at least in a level that developers and investors feel comfortable to commit to for the next 15 years.

Offering a less flattering view, Šileikis of Green Genius says that combining large projects of wind and solar in the same auction “was not a good idea”, because the pricing of wind and solar have different models.

“Due to the war in Ukraine, the demand for the electricity prices has rocketed in Europe, including Poland,” he adds. “Then the auctions have become absolutely unnecessary. They just don’t work because they were far below the market level of the prices. So, the participation was rather very low in the last auction. We have not been even looking into this.”

He also does not expect the regulator to adjust the ceiling price for the next auction and believes that investors will be looking at the longer term – adding: “It’s not worth going into the auction with the low price because definitely after the [energy] crisis, the market will regulate itself.”

Anywhere in Europe where government bodies try to regulate the market, they end up with investors looking elsewhere to those markets which are not regulated, says Šileikis, noting an outflow of interest from Europe towards the US at present.

“This auction system played its role very well. It absolutely launched the fast development of solar and it helped a lot, but right now, it becomes less and less relevant.”

Future

The Polish market looks set to add 21.8GW of solar over the next four years under the medium scenario, and up to 29.8GW under the high scenario, according to SolarPower Europe’s report ‘EU Market Outlook For Solar Power 2022 – 2026’.

Poland’s national energy regulatory office (URE) also expects 50GW of renewable energy capacity in 2030, half of which is set to be provided by solar.

Despite the auction hiccups and the changes in rooftop subsidy, Poland is seen as a stable PV market going forward, though for large-scale solar to grow, significant investment in the various power grids will be necessary. The country is said to be already facing a shortage in energy production capacity giving solar PV an excellent chance to grow with its unique ability for projects to be commissioned in very short timeframes.

PV Tech publisher Solar Media will be organising the second edition of Large Scale Solar CEE in Warsaw, Poland during 8-9 November 2023. The event will focus on Eastern Europe with a packed programme of panels, presentations and fireside chats from industry leaders responsible for the build out of solar and storage projects in Poland, Bulgaria, Romania, Greece and Hungary.

26 November 2024
Málaga, Spain
Understanding PV module supply to the European market in 2025. PV ModuleTech Europe 2024 is a two-day conference that tackles these challenges directly, with an agenda that addresses all aspects of module supplier selection; product availability, technology offerings, traceability of supply-chain, factory auditing, module testing and reliability, and company bankability.

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