Poland Backs Onshore Wind Again – Investors Should Exercise Caution

From promising market to pariah – and back? That’s the journey that Poland is trying to take when it comes to wind energy.

This month, the country’s energy minister Krzysztof Tchorzewski told Reuters that he wanted to cut the proportion of coal in Poland’s energy mix from 80% now to 50% by 2050. In the short-term, he said that natural gas would fill much of this gap, and also that renewable energy would play a part – although admittedly not a big part.

The Polish government, which has been hostile to renewables in the last three years, is now bending to pressure from the European Union to meet its renewables targets. It is aiming to boost the share of Poland's energy provided by renewable energy projects from its current 12% to 15% by 2020.

We've written about the Polish onshore wind market a few times in recent years, and made no secret of our anger at the way investors in the industry have been treated by President Andrzej Duda and his ruling Law & Justice Party.

Following its win election in 2015, after a campaign focused on strong support for the coal industry, Duda's government introduced a number of wind-hostile policies in the Polish Renewable Energy Act (July 2016), quadrupling tax on turbines and imposing restrictions on wind farm sites.

This caused a nose-dive in investment: 1.3GW of wind farms completed in Poland in 2015, but this fell sharply to 682MW in 2016 and again to 41MW in 2017. Poland has 6.4GW of installed onshore wind capacity but, whereas it was once one of the most active markets by annual installations, wind farms have been made uninvestable.

Furthermore, Polish state-controlled utilities have reneged on deals with international developers, prompting US utility Invenergy LLC to lodge a claim for 700m USD against the Polish government for actions 'tantamount to an expropriation'. We wrote about why this should dissuade investors from the country's wind market, at the time.

But now the Law & Justice Party is softening its stance on wind farms, and this July, the government passed an amendment to the Polish Renewable Energy Act. This removed obstacles to development, for example by altering the prohibitively high taxes on wind farms. That is a reason to be cheerful.

However, certain restrictions on wind developments remain, such as the requirement for wind farms to be located far from homes, at a distance equal to ten times the height of its turbines from the nearest residence.

The government has also introduced an auction system, with the Polish Wind Energy Association (PWEA) expecting onshore wind projects totalling almost 1GW to receive support. A mock auction has just taken place, and PWEA expects the real thing, which will offer winning projects guaranteed subsidies for 15 years, to follow in the coming months.

This has some important ramifications for international investors, and is positive in a way. However, we think they these companies should still tread carefully.

In our opinion, and particularly for companies struggling with contracting markets on their home turf - Germany springs to mind here - Poland could provide an attractive investment option, providing that caution is exercised. The country is still led by the party that did so much damage just three years ago, and could do so again.

For investors keen to enter the market but wary of fickle political support, corporate PPAs could provide some stability. In August, Mercedes-Benz signed Poland's first corporate PPA agreement, agreeing to buy energy from a 45MW wind farm run by VSB Energie Odnawialne Polska. As PPAs grow in popularity across Europe, the Polish market offers opportunities for corporate buyers and wind firms alike.

If the Polish government is serious about winning back investor trust, it must offer investors more security, by providing longer-term forecasts for development. Firms will look warily at the last few years, and continuing battles for developers including Invenergy. They will need solid guarantees that the situation will not be repeated.

Our outlook? Cautiously optimistic, but with more emphasis on the caution.

From promising market to pariah – and back? That’s the journey that Poland is trying to take when it comes to wind energy.

This month, the country’s energy minister Krzysztof Tchorzewski told Reuters that he wanted to cut the proportion of coal in Poland’s energy mix from 80% now to 50% by 2050. In the short-term, he said that natural gas would fill much of this gap, and also that renewable energy would play a part – although admittedly not a big part.

The Polish government, which has been hostile to renewables in the last three years, is now bending to pressure from the European Union to meet its renewables targets. It is aiming to boost the share of Poland's energy provided by renewable energy projects from its current 12% to 15% by 2020.

We've written about the Polish onshore wind market a few times in recent years, and made no secret of our anger at the way investors in the industry have been treated by President Andrzej Duda and his ruling Law & Justice Party.

Following its win election in 2015, after a campaign focused on strong support for the coal industry, Duda's government introduced a number of wind-hostile policies in the Polish Renewable Energy Act (July 2016), quadrupling tax on turbines and imposing restrictions on wind farm sites.

This caused a nose-dive in investment: 1.3GW of wind farms completed in Poland in 2015, but this fell sharply to 682MW in 2016 and again to 41MW in 2017. Poland has 6.4GW of installed onshore wind capacity but, whereas it was once one of the most active markets by annual installations, wind farms have been made uninvestable.

Furthermore, Polish state-controlled utilities have reneged on deals with international developers, prompting US utility Invenergy LLC to lodge a claim for 700m USD against the Polish government for actions 'tantamount to an expropriation'. We wrote about why this should dissuade investors from the country's wind market, at the time.

But now the Law & Justice Party is softening its stance on wind farms, and this July, the government passed an amendment to the Polish Renewable Energy Act. This removed obstacles to development, for example by altering the prohibitively high taxes on wind farms. That is a reason to be cheerful.

However, certain restrictions on wind developments remain, such as the requirement for wind farms to be located far from homes, at a distance equal to ten times the height of its turbines from the nearest residence.

The government has also introduced an auction system, with the Polish Wind Energy Association (PWEA) expecting onshore wind projects totalling almost 1GW to receive support. A mock auction has just taken place, and PWEA expects the real thing, which will offer winning projects guaranteed subsidies for 15 years, to follow in the coming months.

This has some important ramifications for international investors, and is positive in a way. However, we think they these companies should still tread carefully.

In our opinion, and particularly for companies struggling with contracting markets on their home turf - Germany springs to mind here - Poland could provide an attractive investment option, providing that caution is exercised. The country is still led by the party that did so much damage just three years ago, and could do so again.

For investors keen to enter the market but wary of fickle political support, corporate PPAs could provide some stability. In August, Mercedes-Benz signed Poland's first corporate PPA agreement, agreeing to buy energy from a 45MW wind farm run by VSB Energie Odnawialne Polska. As PPAs grow in popularity across Europe, the Polish market offers opportunities for corporate buyers and wind firms alike.

If the Polish government is serious about winning back investor trust, it must offer investors more security, by providing longer-term forecasts for development. Firms will look warily at the last few years, and continuing battles for developers including Invenergy. They will need solid guarantees that the situation will not be repeated.

Our outlook? Cautiously optimistic, but with more emphasis on the caution.

From promising market to pariah – and back? That’s the journey that Poland is trying to take when it comes to wind energy.

This month, the country’s energy minister Krzysztof Tchorzewski told Reuters that he wanted to cut the proportion of coal in Poland’s energy mix from 80% now to 50% by 2050. In the short-term, he said that natural gas would fill much of this gap, and also that renewable energy would play a part – although admittedly not a big part.

The Polish government, which has been hostile to renewables in the last three years, is now bending to pressure from the European Union to meet its renewables targets. It is aiming to boost the share of Poland's energy provided by renewable energy projects from its current 12% to 15% by 2020.

We've written about the Polish onshore wind market a few times in recent years, and made no secret of our anger at the way investors in the industry have been treated by President Andrzej Duda and his ruling Law & Justice Party.

Following its win election in 2015, after a campaign focused on strong support for the coal industry, Duda's government introduced a number of wind-hostile policies in the Polish Renewable Energy Act (July 2016), quadrupling tax on turbines and imposing restrictions on wind farm sites.

This caused a nose-dive in investment: 1.3GW of wind farms completed in Poland in 2015, but this fell sharply to 682MW in 2016 and again to 41MW in 2017. Poland has 6.4GW of installed onshore wind capacity but, whereas it was once one of the most active markets by annual installations, wind farms have been made uninvestable.

Furthermore, Polish state-controlled utilities have reneged on deals with international developers, prompting US utility Invenergy LLC to lodge a claim for 700m USD against the Polish government for actions 'tantamount to an expropriation'. We wrote about why this should dissuade investors from the country's wind market, at the time.

But now the Law & Justice Party is softening its stance on wind farms, and this July, the government passed an amendment to the Polish Renewable Energy Act. This removed obstacles to development, for example by altering the prohibitively high taxes on wind farms. That is a reason to be cheerful.

However, certain restrictions on wind developments remain, such as the requirement for wind farms to be located far from homes, at a distance equal to ten times the height of its turbines from the nearest residence.

The government has also introduced an auction system, with the Polish Wind Energy Association (PWEA) expecting onshore wind projects totalling almost 1GW to receive support. A mock auction has just taken place, and PWEA expects the real thing, which will offer winning projects guaranteed subsidies for 15 years, to follow in the coming months.

This has some important ramifications for international investors, and is positive in a way. However, we think they these companies should still tread carefully.

In our opinion, and particularly for companies struggling with contracting markets on their home turf - Germany springs to mind here - Poland could provide an attractive investment option, providing that caution is exercised. The country is still led by the party that did so much damage just three years ago, and could do so again.

For investors keen to enter the market but wary of fickle political support, corporate PPAs could provide some stability. In August, Mercedes-Benz signed Poland's first corporate PPA agreement, agreeing to buy energy from a 45MW wind farm run by VSB Energie Odnawialne Polska. As PPAs grow in popularity across Europe, the Polish market offers opportunities for corporate buyers and wind firms alike.

If the Polish government is serious about winning back investor trust, it must offer investors more security, by providing longer-term forecasts for development. Firms will look warily at the last few years, and continuing battles for developers including Invenergy. They will need solid guarantees that the situation will not be repeated.

Our outlook? Cautiously optimistic, but with more emphasis on the caution.