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Onshore wind tender in Poland clears below wholesale power price

Poland's 2019 auction for new onshore wind and solar photovoltaic projects above 1 MW in capacity cleared at an average price of 208 zlotys per MWh, below the country's average wholesale power market price, the country's energy regulator, URE, said Dec. 19.

URE said 77.837 TWh of the 114 TWh of electricity allocated in the Dec. 5 auction was sold at a price of 16.23 billion zlotys. Of that amount, 16.1 billion zlotys will support new onshore wind farms with combined capacity of 2.2 GW, the Polish Wind Energy Association, or PSEW, said.

The minimum winning price was 162.83 zlotys per MWh, 5 zlotys higher than 2018's minimum auction price, URE said, and about the level the market expected. The highest winning price was 233.29 zlotys per MWh, 16 zlotys above 2018's maximum. 2018's average price was 196.17 zlotys per MWh.

"Such a low price in this year's auction indicates the cost advantage of onshore wind over other power generation technologies," PSEW President Janusz Gajowiecki said in a statement.

"For another consecutive year, the average price of bids ... was lower than the wholesale baseload energy price of [220 zlotys per MWh]. This shows that further installed onshore wind capacity is an effective tool to reduce the costs of energy transformation in the direction of low emissions," Gajowiecki added.

Gajowiecki said that according to a PSEW survey, many onshore wind project owners decided to take advantage of state support for just a part of their planned production, with the remainder of the energy to be sold on the market or through power purchase agreements.

PSEW said that following auctions in 2018 and 2019, Poland's total installed onshore wind capacity will exceed 9.1 GW. According to URE, installed capacity at the end of June stood at 5.88 GW, by far the largest share of the total 8.82 GW of installed renewable energy capacity in Poland.

Gajowiecki said there are still many onshore wind projects waiting to be developed, which may yet compete in the 2020 auction, despite the fact the former Ministry of Energy, which was dissolved following October's parliamentary elections, did not present any estimate for supporting onshore wind in the 2020 auctions.

Part of the problem is the "10H" distance regulation from residential buildings and protected areas that onshore wind farms must observe, which took effect in 2016. Only onshore wind projects that had applied for a construction permit by July 2016 are exempt from the distance regulation, and they are the only projects now being developed in Poland.

Rafal Hajduk, an energy lawyer and partner at DZP legal practice, said it was noteworthy that large solar photovoltaic projects won support worth 129 million zlotys in the auction. "If we assume the winning price for PV projects was close to the 233 zlotys per MWh maximum, that price is still very low compared to what many people in the PV industry consider is acceptable for PV projects," Hajduk told S&P Global Platts.

Like in 2018, most PV developers split their projects into small chunks to take part in a separate auction to support new PV installations of up to 1 MW. The results of that auction, earlier this month, have not yet been released, but the clearing price is likely to be considerably higher.

Henry Edwardes-Evans and Adam Easton, who contributed to this article, are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.

As of Dec. 19, US$1 was equivalent to 3.83 Polish zlotys.