NIK about the use of biomass by leading electricity producers
The support systems available for producers did not ensure stable development of electricity production from biomass. The main supporting instrument were certificates of origin. They were assumed to represent a market mechanism, fostering optimum development of the RES sector (renewable energy sources). However, since the origin certificate market, and thus the prices of property rights were highly unpredictable in the given period, that system only deepened imbalance on the RES market. The largest energy producers practically did not use other forms, including the auction system. Unfortunately, the Minister of Climate and Environment failed to take effective measures to make the auction system more attractive for RES installations characterised by stable energy production and availability of the sources (also from biomass).
Strategic objectives and documents
The key strategic document defining the policy and direction of the development of renewable energy sources in Poland for 2010-2020 was the National Renewable Energy Action Plan (NREAP). It specified among others the main national objective in terms of the RES share in the final gross energy consumption – at the level of 15% and the RES share in the final energy consumption in individual sectors, also in power engineering – at the level of 19.13%. A significant assumption of NREAP was that the said objectives would be achieved mainly based on wind-driven energy sources and with the use of biomass (biomass is a biodegradable part of products, waste or remains of biological origin from agriculture, forestry and related industries).
It should be noted that the achievement of these goals in 2020 was key in the light of the new EU target: minimum 32% share of RES energy in the final gross energy consumption for the whole EU, as specified in the RED II Directive. In line with that Directive, the EU Member States had time to transpose its provisions to their domestic legislation by 30 June 2021. The Minister of Climate and Environment failed to implement provisions of the RED II Directive in the domestic law.
How much energy comes from RES?
The share of energy from renewable sources in the final gross energy consumption increased in 2018–2020 by 1.16 percentage point – from about 15% to over 16%. In the same period the share of RES in power engineering went up by 3.21 percentage points and was lower than forecasted in NREAP where the share of RES in the power engineering sector was assumed at over 19%.
In line with the data published by the Central Statistical Office (GUS) the share of energy from renewable sources in the final gross energy consumption in 2020 exceeded 16%. Thus, the national objective set in the RED I Directive was met.
Certificates of origin – key instrument of support for energy producers
In the audited period, the number of companies producing electricity from biomass increased slightly: from 55 entities in 2018 to 62 in 2020.
The key instrument supporting producers of energy from biomass were certificates of origin (about ⅔ of the producers benefited from that form of support). The producers practically failed to use other forms of assistance, including the auction system. That did not foster stable or predictable development of electricity production from biomass.
The certificates of origin were assumed to foster optimum development of the RES sector. However, since the C/O market, and thus the prices of property rights were highly unpredictable in the given period, that system only deepened imbalance on the RES market. This led to oversupply of C/Os for RES electricity and gradual reduction in their prices. Thus, the significance of this form of support plummeted.
Despite a decrease in the volume of electricity produced in 2018-2020, the volume of energy made from biomass (so-called “green energy”) was growing systematically in the audited period. It was lower as compared with previous years, though.
One of the reasons why the volumes went down was a change in the RES Act. As a consequence, a correcting coefficient was introduced for certificates of origin for RES electricity produced in multi-fuel plants. That had a huge impact on limiting the use of technologies where biomass is burnt simultaneously with other fossil fuels.
President of URE (Energy Regulatory Office) played a vital role in both supporting systems. Among other things, he was responsible for issuing and cancelling certificates of origin. He also arranged auctions to sell electricity and issued certificates of admission to auctions. In 2018–2021, URE received 938 requests for certificates of origin of electricity made from biomass. The certificates were issued in 937 cases and one request was declined as it was filed after the deadline. An analysis of 67 requests showed that in case of 90% of proceedings, the certificates of origin were issued with delay, i.e. 45 days after the deadline (in an extreme case it was 10 months after placing the request).
NIK positively evaluated efforts to gain support, taken by four audited power companies. The evaluation was mainly justified by the following findings:
- concession fees paid annually to the state budget were calculated and regulated in line with relevant laws;
- technological processes applied in individual companies fulfilled conditions set out in the concessions;
- requests for certificates of origin contained complete information required by the law and the data included there complied with the documentation gathered by each company;
- data on calorific values of biomass used were based on test results provided by accredited and certified research laboratories;
- volume of electric energy produced was measured in line with the requirement defined in the RES Act.
The President of URE did not verify certificates, mentioned in the RES Act and submitted by individual energy producers because the applicable laws did not provide him with the basis to do so. At the same time, the audit findings indicate a risk that the biomass used to make energy may not meet the requirements specified in the concessions.
Auctions – unused instrument of support for stable sources of energy
The auction system was introduced with the RES Act as a new system of support for the producers of electricity from renewable energy sources. That mechanism was to help generate new RES production capacity in the national power system. Besides, the auction system was to ensure competitiveness of entities entering an auction which was to translate into the most attractive electricity prices.
In the audited period, the President of URE organised nine auctions to sell electricity made from biomass, six of which remained unsettled. Nine energy producers took part in the said auctions but no entity was willing to buy energy offered in that way.
Until 31 December 2020, plants with a total capacity of minimum 7667 MW were contracted, whereas over 98% was related to wind or solar plants (biomass plants with a capacity of 26.4 MW made up only 0.3% of the entire contracted power). These sources are characterised by short investment periods but these technologies do not ensure stable energy production in different periods (day, month, year) or availability of the source. Technologies based on biomass, biogas and hydropower are stable sources.
The auction results reveal that the effectiveness of the auction system varies depending on the technology. On the one hand, auctions effectively promote the development of wind and photovoltaic technologies. On the other hand, they are much less popular in biogas-, hydropower- and biomass sectors. The supply of offers was too low and so auctions remained unsettled.
None of the audited energy producers envisaged – as part of their activity - participating in auctions to sell electricity they made from biomass, mainly for economic reasons. The biomass market was unpredictable due to significant price fluctuations or the lack of a coherent policy in terms of development of biomass fuels. As a consequence, contracts with providers for a period of producing energy sold as a result of auctions could not be guaranteed.
According to NIK, the minister responsible for the development and use of renewable energy sources did not take effective measures in 2018-2020 to boost attractiveness of the auction system for RES plants, characterised by stable energy production and availability of the source (also from biomass). On the other hand, the President of URE stands in a position that in order to boost interest in making energy from biomass, auction parameters need to be set to maximise the number of offers. That requires considering market conditions.
Guarantees of origin
Another instrument to promote renewable energy sources are the so-called guarantees of origin issued by the President of Energy Regulatory Office upon request of electricity producers. In the audited period, the President of URE issued 305 guarantees of origin of electricity made from biomass, totalling 12 744 707 MWh. However, URE failed to gather data on the number of submitted requests for guarantees of origin of biomass energy and the volume of biomass energy covered by those requests.
Minister of Climate and Environment – discharge of statutory obligations
In the audited period, the Minister discharged his duties under the RES Act. He monitored the functioning of instruments supporting the extraction and production of electricity from renewable sources (biomass in particular). The Minister also monitored the implementation of national objectives related to the share of RES in the final energy consumption. At the same time, NIK points out that the functioning of mechanisms and instruments supporting the production of electricity or heat from renewable energy sources and agricultural biogas was reviewed with a three-year delay.
Besides, the Minister of Climate and Environment failed to implement the provisions of RED II Directive by 30 June 2021. Among other things, it was about implementing solutions to confirm that biomass fuels comply with the sustainable development criteria. As a result, the criteria could remain unfulfilled and thus the biomass could not be qualified as zero-emission fuel. It needs to be stressed that the Ministry worked on a regulatory package related to the criteria for sustainable development. It was included in the draft act amending the act on biocomponents and liquid biofuels and some other acts. The changes proposed in the draft act implement the system of verifying compliance with the criteria for sustainable development.
Recommendations
To the Minister of Climate and Environment
- to boost effectiveness of available mechanisms and instruments of support for RES plants characterised by stable energy production and availability of the source;
- to step up efforts to reduce delays in implementing provisions of the RED II Directive into the national legal order.
To the President of Energy Regulatory Office
- to take measures to ensure adequate management control, particularly in terms of documenting correspondence as part of conducted proceedings and meeting applicable deadlines for issuing guarantees of electricity origin and certificates of admission to auction, in line with the Act on RES.
