Uncertain future of support for industrial electricity customers
The Energy Law is to permit industrial users to obtain certificates of origin and present them for redemption for only a portion of the electricity they purchase. But the future of this support mechanism has been called into question.
The rule introduced by the 26 July 2013 act amending Poland’s Energy Law limits the obligation imposed on industrial users to support the generation of electricity from renewable energy sources (RES) and high-efficiency cogeneration (CHP). Under the act, industrial users can fulfil their obligation to present certificates of origin from RES and CHP to the President of the Energy Regulatory Office for redemption, or pay a substitute fee, with respect to only a portion of the electricity they purchase for their own needs in a given year, as specified in Energy Law Art. 9a(1a3). With respect to electricity beyond that limit, industrial users will be released from the obligation to support RES and CHP in this manner.
Because of the requirement to notify state aid programmes to the European Commission, application of this exemption from the obligation to redeem certificates of origin by eligible industrial users requires the consent of the Commission, and does not go into effect until a positive decision on this provision is issued by the Commission.
On 11 September 2013, Poland filed an application with the European Commission concerning the reduction of certificate of origin burdens for energy-intensive users. According to the Office of Competition and Consumer Protection, representing Poland in the proceeding before the European Commission, the notified measure does not constitute a state aid programme, among other reasons because no public funds are involved in financing the programme.
But the Commission found that Poland’s application was incomplete and did not contain all of the necessary information. After the application was supplemented, the Commission twice requested additional information. In correspondence from May 2014, the Commission confirmed that the programme proposed by Poland probably does constitute state aid, and thus the Commission requested that Poland provide an assessment of how the programme (as state aid) is or is not consistent with the internal market.
In a filing dated 12 June 2014, Poland argued that even if the Commission regarded the programme relieving energy-intensive users of some of their RES support obligations as state aid, the aid would nonetheless be consistent with the EU’s internal market.
In its most recent letter to Poland (dated 18 July 2014), the Commission stated:
- On the basis of a preliminary evaluation of the information submitted by Poland, it is highly likely that the notified programme of support for energy-intensive industries does include state aid.
- Relieving energy-intensive users of obligations to acquire certificates of origin for energy from cogeneration and present them for redemption probably does constitute state aid that is inconsistent with the internal market.
In light of these preliminary findings, the Commission proposed modifications to the programme so that it would not involve releasing energy-intensive users from the obligation to acquire and redeem CHP certificates.
The Commission also took the view that the criterion for eligibility for the exemption as provided in the Energy Law, in the form of a minimum annual consumption of electricity of 100 GWh, is discriminatory. This means that similar enterprises in the same industry could be treated differently solely due to their size. The Commission suggested that this criterion be replaced.
Moreover, the Commission said that it does not see any objective justification for exempting self-production of electricity from the obligation to finance support for RES (because there is no obligation to purchase certificates of origin in the case of self-production).
The final decision of the European Commission will determine whether the programme of assistance for industrial users will go into effect, and if so, in what form and at what time. According to the President of the Energy Regulatory Office, if a positive decision is not obtained from the Commission by 31 March of the year following performance of the obligation, it will be necessary for the given industrial user to obtain certificates of origin and present them for redemption with respect to the entire volume of electricity purchased for its own use during the year of performance of the obligation.
The Polish side is now preparing a response for the Commission. According to officials from Poland’s competition authority, the proceeding before the European Commission may last for another 2 to 18 months.
- The likelihood that industrial users in Poland will be able to exercise the right to present certificates of origin for only a part of the electricity purchased for their own needs in 2014 should be regarded as low. This would be possible only if the European Commission issues a positive decision upholding the relief for industrial users as permissible state aid, consistent with the internal market, before 31 March 2015 (assuming that the decision does not impose another effective date for the regulations).
- There is only a marginal likelihood that industrial users will be entitled to present certificates of origin with respect to CHP for only a portion of the electricity purchased for their own needs in 2014. Based on the correspondence so far with the European Commission, releasing energy-intensive users from the obligation to acquire and redeem CHP certificates probably constitutes state aid inconsistent with the internal market.
- There is a high risk that the programme of assistance for industrial users will be limited to the partial exemption from the obligation to obtain and present for redemption certificates of origin for RES. It may be another year and a half before a final decision in the matter is issued.
Marek Dolatowski and Karol Czuryszkiewicz, Energy Law Practice, Wardyński & Partners