1. What changes to the present law does the renewable energy sector expect? 7 th March 2012 Seminar of Clifford Chance “Renewable energy development” Michal Cwil Polish Economic Chamber of Renewable energy ul. Gotarda 9, 02-683 Warszawa Tel. +48 22 548 49 99, Fax +48 22 548 49 00 pigeo@pigeo.plwww.pigeo.org.pl

2. Polish Economic Chamber of Renewable Energy 2

3. Why do we develop renewable sources? 3  growing energy needs  population grows  fossil fuels are reducing  rising costs of energy production from fossil fuels  we want to reduce dependence on energy imports from outside the EU and Poland  we want to realize EU energy policies based on low- or zero emissions.

4. The increase in global energy consumption, 1900-2002 in million tons of oil equivalent, Mtoe 4 source: International Energy Agency (IEA) 1 TWh = 11,63 * 1 Mtoe

5. Global population, 1950 – 2100 in billion persons 5 source: L. David Roper

6. The estimated increase in energy consumption, 1975-2300 10^15 british thermal unit, PBTU 6 source: L. David Roper 1.000 m3 of natural gas = 1 MBtu

7. Current energy consumption per capita in million british termal unit per capita per year, MBTU/per capita/year 7 USA: 350 Industrialized countries: 200 Developing countries: 35 World: 75 UE27: 162 POLAND: 103

8. Non-renewable resources - the peak of yield oil production in thousands. ek barrels / day. The price of oil rose from $ 11 a (1998) to $ 147 (2008) 8 Peak production is over Romania Italy DenmarkNorwayUnited Kingdom

9. Why is the law on renewable energy sources? 9 2009/28/WE Directive => National Renewable Energy Action Plan according to Art. 4 of the Directive each member member prepare a plan. On its basis the target in 2020 is realized. The Polish Government provided to the EC the strategy on 9th of Dec 2010 and announced that the targets for renewable energy sources will be achieved based on the new regulations which are adopted in the new law on renewable energy sources.

10. Timetable for the adoption of the Directive 10  25 June2009: Directive entered into force  30 June2009: Publication by the EC a template for Action plans  Dec. 2009: Commission reports on biomass sustainability criteria and aspects of biofuels sustainability criteria  Dec. 2009:Member States “forecast documents” of scope for making or receiving transfers of renewable energy under the cooperation mechanisms  30 June 2010: Member States present National Action Plans – Poland „filled” just by 9 of Dec. 2010.  5 Dec. 2010: Full implementation of the Directive on a national level with all Acts, regulations

11. The scope of the legal changes requested 11  The regulations of  administrative procedures, regulations and codes (art. 13)  information and training(art. 14)  access to and operation of the grids(art. 16)  sustainability scheme of biofuels (art. 17-21)  Support schemes for renewables in electricity, heating and cooling and transport  Specific measures concerning biomass and its mobilisation  Planned use of cooperation mechanisms – statistical transfers and joint projects  Preparation and follow-up of the implementation of the action plan

12. 12 It is needed to provide proper obligations for the steady increase of RES in energy production in the years 2012 - 2020 to achieve the objectives Responsibilities should be made to ensure the continued growth of the shares of energy from renewable sources in all sectors. At the same time achieving the goals should be based on new and efficient sources. Such an approach would greatly facilitate the implementation of new targets drawn by the EU for 2030 and 2050.  ensuring the development of all technologies  investor interest in new investments to promote the fulfillment of the objectives  lack of ”transfer" of biomass markets across sectors  avoid the phenomenon of saturation of green energy market in the mid-term achievement of the target

13. What is the share of energy from renewable sources in gross final consumption? Source: PIGEO 13 6% 12.0% 7% (ca. 10.6 TWh) electricity heat & cooling transport In Total 9.5% 20102020 10% 17% 19% (ca. 32.4 TWh) In Total 15.5%  investments 23% 57% 20% 21% 50% 29% Final consumtion: ca. 65 000 ktoe (750 TWh), (2700 PJ)

14. Which RES are working for the target? Source: PIGEO 14 6% 12.0% 7% Green certificates supported from biomass off-grid 95% 100% 1st generation of biofuels co-firing large hydro 50% 25% In Total 9.5% 2010 electricity heat & cooling transport

15. 15 dane: PIGEO na podstawie MG, KPD, REN21 % RES EN RES-electr EN The scenarios of RES Poland vs UE 2010 vs 2020 RES (all sectors) vs RES electricity

16. 16 dane: PIGEO na podstawie MG, KPD, REN21 % RES PL RES-electr PL The scenarios of RES Poland vs UE 2010 vs 2020 RES (all sectors) vs RES electricity

17. 17 Source: PIGEO based on MG, NREAP, REN21 %

18. An example of wrong design of obligations in the draft regulation - here are the net values 18 There is a different methodology for calculating the share in comparison to the Directive and NREAP In regulation we have: RES gross / Total net In Directive we have: RES gross / Total gross That is why the 19 from NREAP corresponds to 25% and not to 20% !!! The level of obligation in each year for energy companies, below:

19. 19 Can Poland develop renewables in electricity sector without any significant impact on consumer energy bills?

20. 20 Source: PIGEO based on bill for G11 from PGE company What is the level of subsidizes to the development of RES in Poland at present? What final customer of energy pays for? Typical household, G11 tariff in 2011, annual consumption 3000 kWh Electricity net = 250 PLN/MWh (40.9%) Excise tax = 20 PLN/MWh (3.3%) Qualitative component = 7 PLN/MWh (1.1%) Network fee = 186 PLN / MWh (30.3%) Interim payment fee = 18 PLN/MWh (3%) Fixed fee for the transmission = 12 PLN/MWh (2%) Subscription fee = 4 PLN/MWh (0.7%) VAT = 115 PLN/MWh (18.7%) In total: 153 PLN / month 612 PLN / MWh Green certificates = 28 PLN/MWh (4.5%) 7 PLN/month All fees and taxes 91 PLN/month Product 62 PLN/mo nth

21. 21 Source: PIGEO based on bill for G11 from PGE company What is real impact of new RES for such a consumer? 28 PLN/MWh 4,5% of the bill 7 PLN per month 7 PLN/MWh 1,1% of the bill 1,75 PLN per month if the following RES are excluded form support: biomass cofired large hydro

22. The increase of electricity price in the period of 2005-2010 the maximum possible due to RES vs real average done by energy companies 22 Green certificates do not represent the main reason of increase the electricity prices for end users! source: PIGEO based on ARE & URE gr / kWh 2.8 gr / kWh 10% of energy price in 2010 50% of energy price in 2010

23. 23 Recommendation To introduce in the Law on Renewables a stable support schemes  Green certificates with poorly designed sizes of reference do not provide the level of income replacement fee.  Support should be fixed for a specified period from the day the unit to be used (typically 15-20 years), which for the implementation of the Directive is to support the functioning of at least 2035 to 2040  The introduction of support for all sectors to increase the competitiveness of the renewable energy market.  Any changes to the support system can not change the terms of the generators operating on the market.

24. Is it possible to predict income based on renewable energy draft Act? 24 (Ozj-Oze)*k + Oze Unitary revenue (PLN/MWh) Oze, average annual market price of electricity (PLN/MWh) wind, k=0.75 ‘old’ hydro, k=0 (no support) hydro, k=1.05 PV, k=2 biogas, k=1.4 There should not be certificates with negative prices Source: PIGEO based on draft Act on RES

25. Summary 25 Investors expect the introduction of regulations that reflect the energy strategies that are adopted: Polish Energy Policy National Renewable Energy Action Plan

26. Thank you for your attention 26 Polish Economic Chamber of Renewable Energy ul. Gotarda 9, 02-683 Warszawa Tel. +48 22 548 49 99, Fax +48 22 548 49 00 pigeo@pigeo.pl www.pigeo.org.pl