The Polish government has released draft offshore wind legislation, laying out the route to market for the first wave of projects in the country's Baltic Sea.

Poland is seen as one of Europe's last untapped markets for offshore wind, sitting on the doorsteps of the industry's familiar stomping grounds, and despite the lack of a legislative framework, has already opened its doors to numerous international utilities.

It is hoped that draft legislation, released on Jan. 15, will help kickstart the market and pave the way for the first turbines to enter the water.

Under the proposed bill, developers will be granted subsidies according to the development status of their project, law firm CMS said in a note. Until 2022, up to 4.6 GW of the most advanced capacity will receive a price for their power determined by the energy ministry. Advanced projects are those having acquired a grid connection agreement and a final environmental decision on their wind farm.

Additional capacity will be compensated through a competitive auction process, for which companies need to be able to provide the terms of their grid connection, a final environmental decision and the so-called offshore location license, CMS said. Auctions will take place in 2023, 2025, 2027 and 2028, and the government can decide to hold auctions in subsequent years, too. Poland is aiming for 8 GW of offshore wind capacity by 2040.

Developers receiving contracts for difference, or CfDs, either bilaterally or via auctions, will have seven years to feed first power into the grid, CMS said. The subsidy then applies for 25 years.

Companies will also be obliged to detail the amount of locally manufactured equipment or services used, although no specific minimum requirements were set, CMS added.

Bankable conditions

European offshore wind heavyweights RWE AG, Equinor ASA and Ørsted A/S have all already sealed deals or are in discussions with Polish companies about partnerships in the Baltic Sea.

RWE bought a portfolio developed by Baltic Trade and Invest Sp. z o.o., Equinor acquired a 50% stake in a Polenergia wind farm and Ørsted is in advanced talks with state-owned utility PGE Polska Grupa Energetyczna SA for a planned 50:50 offshore wind partnership.

But the lack of a legislative framework had been seen as a hurdle in moving projects forward, not just for those planning the projects but for banks being asked to finance them. "On the part of the financing community, it is definitely logical to wait for [the legislative framework]," Monika Morawiecka, CEO of PGE's offshore wind business, told S&P Global Market Intelligence in December 2019.

The draft legislation instills certainty in the market, said Bart Dujczynski, partner at advisory firm BBM Offshore Poland and former CFO of Polenergia SA. "It is bankable, long term and a continuation of the generic positive strides towards a logical decarbonization on economically acceptable terms, which still reflect the fact that [offshore wind] is still effectively a new industry in Poland," he said in a Jan. 20 email.

He added that it took the U.K., now seen as a global success story for offshore wind, over 10 years to get to its current place. "Poland needs to be given the same opportunity — which this draft act does."

Indeed, there are parallels between Poland's draft roadmap and the trajectory that the U.K. has taken. Under the U.K.'s Final Investment Decision Enabling for Renewables, or FIDeR, scheme, bilaterally awarded contracts were followed by three rounds of competitive auctions.

"The drivers for this are similar," Dujczynski said, "with FIDeR being used to avoid delaying investments and development of industry — this is critical for Poland." The first phase of bilateral CfDs will also facilitate industry commitments and build up a supply chain "which has a very strong existing potential," he said.