RES auction – what it is, how it works and when it takes place

Renewable Energy Auction – when does it take place

Pursuant to Article 73 of the aforementioned Act, the President of the Energy Regulatory Office (URE) announces, organises and conducts auctions at least once a year. Information regarding a given auction is published in the URE Public Information Bulletin no later than 30 days before it begins. The auction announcement includes:

• the auction designation;
• the date of the auction session;
• the opening and closing times of the auction session;
• an indication of the maximum quantity and value of electricity from renewable energy sources that may be sold in the auction, including the maximum quantity and value of electricity from renewable energy sources that may be sold in a given auction by producers of electricity from renewable energy sources in a renewable energy installation located outside the territory of the Republic of Poland and outside the exclusive economic zone;
• a list of renewable energy installations covered by the auction.

Renewable Energy Auction – how it works

The purpose of the RES auction is to grant public aid to energy producers through:

• concluding an electricity sales contract with an obligated supplier,
• granting a guarantee to cover the negative balance by the designated settlement operator – Zarządca Rozliczeń S.A.

A renewable energy producer whose installation has won the auction receives a so-called negative balance – this is a monthly payment representing the difference between the price offered by the producer and the market price of energy, with the bid specifying the maximum amount of energy the installation can generate. The auction price awarded to a given installation will be indexed annually in line with the Polish Consumer Price Index for the entire duration of the support granted.

Any negative balance is covered by Zarządca Rozliczeń S.A. – a state-owned company established and dedicated to this purpose, acting as a settlement operator, which makes payments of the negative balance to the generator. Hence, the RES auction is one form of electricity sales.

This support period lasts for 15 years and begins on the first day the energy is fed into the distribution network, but no later than 30 June 2047, with this period being counted from the date on which electricity was first generated from renewable energy sources. However, if the market price exceeds the auction price, a so-called positive balance will arise, which will also be settled with the Settlement Administrator by offsetting it against the next negative balance. In a situation where it is not possible to offset the positive balance against negative balances, it is intended to be returned to the Settlement Administrator after the support period.

If a given installation generates more energy than specified in the auction bid, it will not receive the amount representing the difference between the prices for the surplus energy, but will be entitled to the market price.

Participation in the auction

Auctions are divided into so-called ‘baskets’ and are created for specific types of generators and power ranges of sources. This means that a separate auction is held for each of the renewable energy sources specified in the RES Act, i.e. for each basket. We can therefore speak here of a RES auction organised separately for energy producers from installations such as biogas and biomass combustion plants, geothermal and hydroelectric plants, or the most popular ones – wind and solar farms.

Whether a given entity is eligible to participate in the auction and submit a declaration is determined by the provisions of the RES Act and the auction notice. A generator wishing to take part in the auction should first verify whether they and their installation meet the conditions for participation in the auction, in accordance with the guidelines set out in the notice, and then submit a declaration of participation in the auction.

A bidding generator submits a bid specifying the quantity of electricity in MWh and the price in PLN per 1 MWh at which they agree to sell the energy. As with traditional tenders, the auction is won by the entities offering the lowest price. The auction notice contains information regarding the maximum quantity and value of electricity. The auction will continue until the quantity and value of energy specified in the announcement have been fully exhausted. Therefore, more than one entity may win.

Installations participating in the auction are divided into those planned for commissioning or modernisation and those already commissioned and generating energy from renewable energy sources. Generators must therefore bear in mind that a given auction restricts the winning generator to equipment that may be installed in a renewable energy installation. Equipment forming part of an installation planned for commissioning and used for the generation and conversion of energy must be new and manufactured within a specified period preceding the date on which energy is generated for the first time. A generator whose installation has won the auction must also comply with the deadlines resulting from this win, i.e. the electricity generated must be sold for the first time within a specific timeframe following the close of the auction. This period varies depending on the type of installation. For example, for solar farms, the deadline for the first sale is 33 months, and for offshore wind farms, it is 72 months. The generator must also hold a licence to generate energy.

Author

Zuzanna Bokina-Kielbasa

Radca prawny, Managing Associate

Specializes in corporate services for business entities and personal data protection. Assists the firm's clients in the preparation of all corporate documentation, including the registration of commercial companies and the further registration of changes, and provides ongoing and comprehensive advice on business. Provides advice in carrying out transformation processes of commercial companies, including transformations and mergers. Prepares and gives opinions on contracts, regulations and current documentation…

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