NIK about development of offshore wind energy
Poland’s energy safety may be threatened because the government administration did not take sufficient measures to develop the offshore wind energy. According to NIK the development barriers have been defined, such as the lack of the marshalling port, failure to adjust the law and gaps in the transmission grid in northern Poland. Works were started to enable launching the first offshore wind farm around 2024/2025. But the authorities failed to prepare regulations to simplify and integrate the existing procedures related to issuing permits which would undoubtedly further development of this kind of renewable energy sources (RES). First location permits for offshore wind farms were granted about 10 years ago. Not a single farm has been built until now, though.
Offshore wind energy is the only zero-emission RES technology used on a such a large scale. At the same time, it considerably reduces the risk of power shortages as wind is a common phenomenon on the sea. The potential of offshore energy in the Baltic Sea is estimated at 83 GW, where 28 GW represents the capacity of the Polish sea areas. However, according to the Polish Electricity Transmission System Operator (PSE), the maximum average yearly and daily demand for energy in Poland (in 1980-2020) did not exceed 28 GW. It shows how significant the role of the offshore wind energy is in the state safety.
The risk of energy shortage against the demand in the National Energy System was identified as early as 2016 and confirmed by the President of the Energy Regulatory Office.
The need for offshore wind energy development in the Polish sea areas has been discussed since 2004. Not a single wind farm of this kind has been erected until now, although nearly 180 requests for offshore wind farm location permits were filed with the minister for maritime economy in 2001-2021.
Gradual improvements in offshore wind energy development
In December 2020, the so-called Offshore Act on promoting the production of electric energy in offshore wind farms was adopted. The new law, among other things, vested electricity producers with the right to cover the negative balance when the total energy made in offshore wind farms did not exceed 5.9 GW. On 30 March 2021, the Minister of Climate and Environment in its ordinance set the maximum price for electric energy made in offshore wind farms and brought into the grid. That regulation was to be an incentive for energy producers. But the Minister did not take account of the inflation level at that time and thus the maximum price was established at a too low level.
In line with the agreements signed by the requesters with PSE, the farms are to be connected to the grid by 2025-2028. The Energy Policy of Poland by 2040 assumes that the power specified in the Act will be achieved in 2030. According to NIK the provision on connecting the first farm to the grid system around 2024-2025 is unrealistic. Starting the construction of farms with the earliest connection deadline (2025), depending on whether or not required permits will be obtained, including environmental conditions, is scheduled for 2026/2027, which is to enable delivering the first electricity to the grid in 2027.
Delayed energy policy of the state
The Energy Policy of Poland by 2040 is a strategic document which determines development priorities for the Polish fuel and power sector and sets the energy transformation framework. It has been in force since March 2021. A special role in the document was given to offshore wind farms. It included expansion of the transmission grid in northern Poland, construction of the marshalling port to handle deliveries of components essential for the development of offshore wind farms. It was planned that in 2030 the power installed in wind power stations would reach about 5.9 GW, and in 2040 around 11 GW. The document also highlights threats that could occur in the course of building wind farms on part of unidentified unexploded bombs and war gas containers which can be found on the Baltic floor from the times of the Second World War. The paper on Poland’s energy policy by 2040 was adopted with a 7 year’s delay.
Problems with selecting location for the marshalling port and its financing
For investors who build wind farms locations of the marshalling port and the operation and maintenance port are of special importance. In the resolution of the Council of Ministers of July 2021, the port of Gdynia was indicated as the marshalling port but its location was not precisely specified. After the NIK audit, on 1 March 2022, the port of Gdańsk was mentioned in the amended resolution. It was emphasised in a statement that: “The port of Gdańsk meets all criteria of offshore wind investors and it allows for timely execution of the first stage of the offshore wind energy development in Poland. The port construction is scheduled to be completed in the middle of 2025.” According to NIK the delayed decision creates a risk that investors will use the existing overseas marshalling ports and the share of Polish entrepreneurs in the delivery chain will be limited. Besides, the lack of approval of the National Recovery Plan by the European Commission poses a threat to the investment financing sources.
Dispersion of procedures related to issuing permits
In the course of works on the Offshore Act, a range of barriers to offshore energy development were pointed out. First permits to build artificial islands for wind farms were issued 10 years ago. The farms are still not there, though. That is why, the support mechanism for the offshore wind energy should be remodelled.
According to NIK the Offshore Act did not assume any reduction of the requesters’ administrative burden or integration of the process of issuing investment permits. The lengthiness of administrative proceedings related to offshore wind farms proved that new solutions were needed to simplify them. Administrative procedures were overly dispersed. This is confirmed by the fact that at least 11 organs (9 ministers and the Head of the Internal Security Agency as well as the relevant municipality head, mayor or president) conducts as many as 23 proceedings requiring at least 40 consultations between the organs. Thus, experiences of the countries with developed wind energy were not used. For instance, in Denmark the procedures for issuing permits as part of the so-called “one stop shop” were integrated. That made it possible to considerably limit the risk and costs on part of investors. The coordination of administrative processes, e.g. in the Ministry of Climate and Environment would help the state authorities to obtain information where the procedures could be simplified.
Issues of the transmission grid in northern Poland
Until the Offshore Act came into force, the Marine Spatial Plan about the areas and conditions of obtaining renewable energy was decisive. It was prepared with delay but properly. The Plan defined the projected target power of 11 GW for offshore farms. It varied from the potential capacity of Polish sea areas, estimated at 28 GW. The Offshore Act came into force before works on the Plan were finished. The Act defined potential location of wind farms. But the principles of defining wind farms location were changed under the Offshore Act. As a result, the proceedings on wind farms location started and not finished before the Act became law were discontinued. According to NIK this may violate the principle of trust in public authorities, and thus the principle of legal stability.
Recommendations
To the President of the Council of Ministers:
- ensuring conduct of an in-depth analysis of possible further simplifications of administrative proceedings related to investments in offshore wind energy with a view of integrating and accelerating the proceedings and taking relevant legislative initiatives.
To the Minister of Infrastructure:
- solving the location issues of operation and maintenance ports and clearly specifying the date, costs and sources of the investment financing. Besides, it is essential to provide alternative financing sources to build both the marshalling port and the operation and maintenance port, bearing in mind that the approval of the National Recovery and Resilience Plan is still uncertain.
To the Minister of Climate and Environment:
- updating the inflation level and verifying variables adopted to calculate the maximum price set out in the Ordinance of the Minister of Climate and Environment of 2021 on the maximum price of electric energy produced in an offshore wind farm;
- analyse the adequacy of assumptions specified in the Energy Policy of Poland by 2040 concerning an impact of the offshore wind energy development on meeting the RES target in 2025-2040, and the forecasted 28 GW to be potentially generated in the sea areas of Poland.
To the Energy Regulatory Office:
- consulting the ratings of the electricity transmission system in terms of the share of renewable energy sources in Poland’s energy balance, in the context of plans defined in the state’s energy policy;
- monitoring the functioning of the electricity transmission system in relation to information on the offshore wind farms.
