Cut biomass support to avoid Polish green certificate ‘collapse’

Cutting state support for biomass producers can aid stability while boosting prices on Poland’s struggling green certificates market, according to renewable energy experts.

Polish Economic Chamber of Renewable Energy director Michal Cwil said if the government limits support for biomass, the price on the market would likely go up to Zl 303.03/MWh [€73.00/MWh].

This is the same as the replacement fee, or the amount generators have to pay if they fail to show enough green certificates to the regulator to satisfy quotas at the end of each year. A tradable rate similar to this fee would be a sign of a well-functioning market.

But green certificate prices, published twice weekly on Polish power exchange POLPX, fluctuated in July, never coming close to this price.

On Thursday 25 July, the price was Zl 209.08/MWh [€50.10/MWh] but just two days later fell 6% to Zl 196.62/MWh. Similarly, a week earlier, the value plummeted 12% from Zl 215.80/MWh to Zl 189.85/MWh, again in just two days. The average price this year has been at Zl 207.90/MWh.

Market observers said the volatility was tied to oversupply caused by too many certificates being given away to biomass producers, which co-fire with coal to generate electricity, in return for green certificates.

Some experts previously told ICIS the green certificates market was oversupplied because of fast growth in energy production from biomass ( see EDEM 16 September 2013 ).

Every producer earns a green certificate for every 1MWh of power produced from renewable sources. But from 2016, when a new bill on renewable energy is expected to come into force, those power generators will be offered the choice of either remaining under the existing support system or competing in reverse green power auctions, where generators bid to produce power for the lowest price.

Collapse?

Chief executive of renewable power producer ENERCO, Tomasz Podgajniak, warned only a quick change in legislation to balance supply and demand would ease volatility.

“If support is not cut, the green certificates system will only benefit big utilities [that can use biomass].

“They will also be most likely to win the auctions while smaller green energy producers will have serious financial problems,” he said.

In mid-July, Polish green lobby organisations filed a complaint to the European Commission highlighting hefty support for biomass in the country and urging the Commission to take steps to slash it.

Podgajniak said the green certificates system would vastly improve if the European Commission was to act to limit support for biomass. “Unless the Commission orders some changes, the green certificates market in Poland will collapse,” Podgajniak said.

In August last year green certificate prices went up due to expectations that biomass support would be cut, decreasing supply ( see EDEM 29 August 2013 ).

But despite plans under the new law to reduce the volume of green certificates issued to biomass generators by 50%, the proposals will exempt dedicated installations, which covers units transformed to burn biomass alone without any coal in the mix. Karolina Zagrodna