The Energy Regulatory Office (URE) is Poland’s central body of state administration responsible for regulation in the energy sector as well as promotion of competition. It regulates activities of energy enterprises aiming to balance interests of energy companies and consumers.
Can you explain your vision for URE and the key objectives you are pursuing throughout your mandate?
My key objective is to fulfill my duties as set out by the legislator. This includes the creation of sustainable economic growth for Poland, ensuring energy security, development of competition, counteracting negative effects of natural monopolies, and environmental protection.
One of the main objectives moving forward will be the implementation of the Clean Energy Package. We will also have a focus on addressing all the issues related to the already announced European Green Deal, as we are adding climate objectives to our scope of operations.
Reaching climate objectives is a challenge in Poland as the energy market is currently based on fossil fuels. Transition is necessary to reach a low or zero emissions goal. My vision as president is entwined with the state energy policy. My role includes incentivizing power companies to adjust their activities in such a way to be aligned with the transition reality in Poland.
Do you believe that companies are truly open to the idea of energy transition and undertaking the necessary measures?
Some companies in Poland, including both producers and suppliers, are only regulated to some extent through licensing and monitoring. However, infrastructure companies are regulated to the full extent, starting with licensing and ending with tariffs. These companies are obligated to implement changes aligned with energy transition to stay active on the market.
There is a requirement for investment in infrastructure and IT. There are billions of active users on the market which means that there is a significant amount of data that needs to be collected and managed in a proper way.
Companies need to invest significantly to fulfill set goals in due time. Our role is to implement incentives for companies to be more willing to invest in smart infrastructure so that the country can reach its energy transition goals.
At the beginning of 2019, a price freeze for electricity was imposed for households and a few other categories of consumers. Can you explain what were the circumstances that mandated this measure?
This measure was implemented by the government with the main goal to protect customers against the rapid changes in electricity prices. The vision of the government was right, but the question remains if the measures that were applied were most efficient. Approximately 75% of Poland’s electricity production is based on coal, which involves a significant amount of CO2 emissions. The price surge in CO2 emissions naturally impacts energy prices.
Our involvement in the implementation of these measures started in 2019. We have to monitor if energy companies are fulfilling their obligations, and if not, we will have to start proceedings in order to penalize them. Currently, the government is thinking about ex post measures to compensate the customers hurt by the changes of electricity prices.
Does the measure implemented in 2019 relate to everybody or is it targeted towards categories that actually need subsidies?
For the first half of 2019, the measure related to all customers – households and industry. For the second half of 2019, it was limited to households and small business. In 2020 the threshold limits the compensation to households with a low income.
In December, URE hosted the largest auction for renewable energy in Europe. Are you satisfied with how the process unfolded?
We performed 12 auctions between 25th November and 13th December 2019. Most auctions were dedicated to new installations, but number of them was dedicated to already existing ones, providing the option to move from the passing-out support scheme, which bases on green certificates, to the newly introduced scheme.
We auctioned approximately 90 TWh of electricity which will be produced in the new installations during their support period, what corresponds to 2,2 GW of installed capacity in wind power, and about 1 GW in small PV installations.
In terms of efficiency, almost 70% of TWh which was announced for selling for large scale wind installations and PVs was sold. In the PV auction the percentage of sold electricity looks even better – almost 100% of announced electricity was covered by winning bids. The auctions were also dedicated to biogas, biomass and hydropower installations, however they did not received vast interest.
Why do you believe that Poland is not pursuing opportunities in the biogas, biomass and biofuels fields?
The auction system simply does not support them well. Better alternatives are feed in premium or feed in tariffs. Companies have mentioned that the reference price at auctions is too low for them to participate.
TWhs and the amount of money which is dedicated to different fields are set in the regulation. We cannot change regulation but only provide feedback to the government. We might start looking into better incentivizing the industry to participate in support schemes such as feed in premium or feed in tariffs rather than auctions.
With regards to wind power, is there still capacity left which can be actioned throughout 2020?
This will depend on the industry, but we have already reached approximately 70% of the maximum volume TWh in the previous auctions. One can conclude that there are no more projects, as if there where, they would have been auctioned in 2019.
How you expect the virus to impact business this year and in the long term?
The coronavirus outbreak affected the whole economy. Also the energy sector must deal with this difficult and unique situation.
One of the COVID-19 effects is reduced demand for electricity due to the limited production volume and the slowdown of the economy. Increased households’ energy consumption caused by extended school closures and home offices does not balance this reduction.
As a result, electricity prices on the Polish Power Exchange (TGE) are getting lower. The costs of purchasing CO2 emission allowances have also felt down.
Obviously, energy market regulator is one of the public bodies entitled to present its proposals of mitigating negative consequences of economic crisis in energy sector for both: entrepreneurs and consumers. Main goal is to ensure proper market functioning and continuity of electricity and gas supply. Another important issue is protect ongoing and planned RES investment projects against the effects of crisis.
What was the Polish Government's reaction to the crisis?
In order to protect the whole economy and business, Polish government introduced a bill called “anti-crisis shield” – a general solution dedicated to all entrepreneurs and all sectors. We have already passed several provisions to the Energy Law Act so that the processes, despite the unexampled difficulties we face this year, could run smoothly. For example the Shield extends the deadline for the first sale of electric energy contracted under the auction system. Moreover, due to COVID-19, cut-off procedures (in case of non-payment) are postponed.
In my opinion for the time being Polish energy sector reacted very quickly and smoothly to the coronavirus outbreak preparing and applying certain anti-crisis solutions. Nevertheless, the whole economy and each sector may face the need to adopt austerity measures and my role will be to propose and assess those proposals bearing in mind that households and customers cannot be the only ones who suffer the consequences.
