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19 octubre 2020

A new wind starts to blow – my predictions after the amendment of the Distance Act

Previously I have described my doubts about the information on planned amendment to the Distance Act ➡️here⬅️. Despite the reconstruction of the government and the change in the position of the Minister of Economic Development, responsible for the preparation of the amendment, the entry into force of the relaxed law seems inevitable, though so far there has been silence. Poland must be a part of the global green energy transformation. This is evidenced by another draft amendment to the RES Act, which extends the auction system by 5 years, and advanced work on the act on the implementation of offshore wind farms.

Will there be a motivation to install the latest technologies?

We do not know what the final shape of the new version of the Distance Act will be. It should unfreeze projects that have approved local plans that meet the criterion of the new minimum distance (minimum 500m between planned turbines and residential buildings). Investors, however, will face a dilemma whether to try to change local plans to adapt them to the current technical standards – greater overall height of the structure, rotor size and turbine power, but definitely much more efficient, or to implement projects based on the existing provisions of the plan. The new, extended procedure of public consultations for the adoption or change of the plan, provided in the amendment, may effectively discourage changes to the plan in force. Due to unrealistic provisions regarding the change of the plan, we are in danger of repeating the situation with the Distance Act in the version of 2016, which allowed the implementation of projects with building permits, but at the same time limited the use of the latest turbine technologies due to irrational provisions. There is a legitimate concern that the effect may be similar again. Instead of installing, like the rest of the world, more efficient and modern power turbines with a capacity of 3MW to even 5MW, we will build outdated turbines with a capacity of 2 to 3 MW.

Blockage at RDEP?

A large part of the projects that will be unfrozen, have invalid environmental decisions or their provisions are so conservative in terms of the permitted turbine parameters, that it will be necessary to change them. The entities responsible for this will be the Regional Directors for Environmental Protection. Everyone in the industry is aware of the problems with the endlessly lengthening procedures for project arrangements by RDEP. This problem already occurred when it was the commune head / mayor / president who conducted the procedure of issuing the Environmental Decision, and RDEP was only a reconciling body. Due to the shortage of staff, the procedure of reconciliation and exchange of correspondence took even several months! Now, in addition, RDEP will be conducting the entire procedure and the number of applications for the issuance or change of the Environmental Decision may accumulate practically within a few months after the amendment enters into force.

In my opinion, it will slow down the process of obtaining a decision by at least a few months in relation to the current, already long terms. This may resemble the case of obtaining water-legal permits after centralizing the process in the hands of newly created Polish Waters.

Turbines availability?

We undoubtedly have an investment gap in Poland. Over the last years, we have built a few wind projects, the development of new ones was suspended. Currently the world is technologically far ahead of us. Looking at the websites of turbine manufacturers, we can see that they mainly present platforms with a capacity of 4MW and larger. Will an investor who would like to complete the development of the project on the basis of the current provisions of the plan and the Environmental Decision allowing a maximum of e.g. 2,3 MW of power, will be able to use such turbines in a year or two? Will the choice be very limited and the price of these older, outdated turbines will not go up significantly due to the shift of production to larger platforms?

Construction of new projects – the yo-yo effect

In Poland, hardly anyone builds new wind farms (lean years) or everyone at once (fat years). This specific yo-yo effect will occur again after the expected amendment to the Distance Act. The situation after the first auction will repeat. High demand and insufficient supply will cause construction contractors to push up the prices. Helpful here may be … the COVID-19. Part of the planned infrastructure investments (roads, networks) due to budget shortages, will be moved to the next years, which will release some of the processing capacity of construction companies that will be able to complete more wind projects.

There are interesting months and years ahead of the industry for us to observe. There will certainly be plenty of work and problems, but the most important thing is that we will be on the right «green» track again.

Kamil Koczara
Development Manager
Tundra Advisory