Problems with new connections to the power system are now apparently a slowing factor for the development of solar power in Poland. More than 13GW of photovoltaic capacity is currently connected in the country, and another 11GW of connections are reserved for offshore wind power.
In recent years, there have been an increasing number of connection refusals issued by grid operators due to years of investment neglect and the need to reconfigure the grid for higher RES use and to include new consumption points, such as EV charging stations.
Changes in the regulation of maximum energy prices, freezing energy prices for households introduces uncertainty in the industry regarding the payback period for RES investments and makes it more difficult to obtain financing for projects. Last year, the EC introduced a maximum electricity sale price of EUR 180/MW for RES sources. Some countries, such as Romania, have opted for even more drastic limits on energy prices for RES. In Poland, the government froze energy prices in the G tariff (households) in 2023 at the 2022 price level.It is worth noting that in the case of installing energy storage, the DNO (distribution network operator) must agree to an additional connection corresponding to the capacity of the source (i.e. PV installation of 20MW + storage of 2MW = connection for 22MW).
The situation in the coming months may be improved by the amendment to the law being processed in the Sejm and Senate (after the first reading, without amendments in the Senate) giving the possibility to apply a direct connection to the consumer (industrial plant) bypassing the DNO.
Changes in the regulation of maximum energy prices, freezing energy prices for households introduces uncertainty in the industry regarding the payback period for RES investments and makes it more difficult to obtain financing for projects. Last year, the EC introduced a maximum electricity sale price of EUR 180/MW for RES sources. Some countries, such as Romania, have opted for even more drastic limits on energy prices for RES. In Poland, the government froze energy prices in the G tariff (households) in 2023 at the 2022 price level.
Rising interest rates negatively affect the investment attractiveness of RES and make it more difficult to raise capital for construction. Our calculations show that, on a contract with an industrial consumer (PPA), currently at prices of PLN 500- 600/MWh, PV projects pay off in 5-6 years, which still gives an attractive rate of return. On the other hand, higher interest rates and bank interest rates are increasing competition for funds to build new RES projects
Availability of components to build PV farms could be a problem for the industry in the future. In 2021-22, due to fractured supply chains from Asia and galloping deep-sea freight prices, the price of components (inverters, PV panels) became noticeably more expensive and their availability was hampered. China currently supplies more than 70% of the world's PV modules. Recently, China has also threatened to impose tariff barriers on the export of semiconductors, which are also used in PV farms
The delay in transferring coal power assets to NABE is prolonging the energy transition process in Poland. Currently, the authorities are supporting the mining sector and coal-fired power generation reluctantly, considering the shutdown of troublesome units such as Turów. Despite clear decarbonization trends in the EU, a number of investments in power units like Opole and Jaworzno have been made in Poland in recent years. Azoty Group is probably building the last new coal-fired unit in Pulawy. A more favourable view of renewable energy in Poland would likely accelerate the sector's transition.
Prolonged land preparation processes for farms next to grid connection conditions are the biggest brake on the industry's development. In order to prepare a photovoltaic farm project, construction permits and development conditions are necessary. It is becoming practically impossible in Poland to erect farms on agricultural land. It seems promising to erect farms on postindustrial land, which, on the one hand, often already has a connection to the grid, but on the other hand, requires additional expenditures on reclamation (there are sources talking about 1mn hectares of post-industrial land in Poland that can be developed by solar and wind power).
Risk of losing a key customer. Novavis is currently developing farms with a capacity of more than 400MW for Iberdrola under a payment-per-project-phase formula. The loss of a key customer could result in the need to look for an alternative buyer in the market, or a form of financing for the development. The market is currently more on the side of project sellers than buyers.
Liquidity risk. At the current scale of operations, Novavis has to pay a deposit to the DSO in the process of obtaining a grid connection (PLN 30,000/MW; which roughly translates to a freeze of PLN 17mn for more than 570MW of farm capacity). The deposit is not interest-bearing. Significant increases in operations may require significant spare funds.
