Poland threatens wind energy producers

In late February of this year, the Polish Government submitted a draft wind energy law to the Polish Parliament, which would significantly threaten existing and new investments in the wind energy production.

The draft law introduces the following elements:

  • a requirement to place wind farms at a distance of at least ten times the turbine height — roughly 1.5 to 2.0 kilometres — away from houses and protected natural areas. This distance requirement is about 3-4 times more than the current situation in Poland which requires wind turbines to be placed at about 0.5 kilometres away from houses. Additionally, the construction of wind farms would only be allowed in areas designated for that purpose in local zoning plans, which are often lacking.
  • an increase of the property tax burden for wind farm investors, applying a 2% annual tax on the investment value of the entire turbine. That tax previously only applied to the investment value of the tower and foundation. In practical terms, this would mean that a single 3MW turbine costing about €4 million could be taxed at around €80,000 a year.
  • a requirement to renew operating permits every two years and to get permission even for repairs and maintenance.
  • an obligation for wind farm developers and operators to pay potentially significant fees to technical authorities for their permitting services. Additionally, the law also foresees fines and even jail sentences of up to two years for failure to get the necessary approvals.

The Polish Government intends to modify the current framework for auctions by which a fixed tariff is set to be assigned to renewable energy projects. That system had been initially scheduled to replace a green certificate mechanism on 1 January 2016, but the Government has postponed the switchover to the middle of this year – a delay which creates legal uncertainty for investors.

On a more general level, if this law would enter force, it would have devastating effects for achieving the climate targets agreed in Paris as well as for investments and jobs in this sector.

It should be noted that Poland had the EU’s second-highest number of wind-power installations in 2015, with developers installing 1.26 gigawatts of new capacity. The country now has 5.1 gigawatts of installed wind capacity. In 2015, investments in the wind energy sector were €26.4 billion, a 40% increase compared to 2014. In other words, Poland is emerging as a leader for wind power in Europe.

But this proposal is even more misguided considering the fact that Poland is obliged by the Paris climate deal and by EU law to produce 15% of its electricity from renewable energy sources by 2020, up from around 11% today.

Moreover, Poland’s wind industry supports more than 8,000 jobs and generates some €140 million in revenue each year – both, which are seriously put into danger.

In sum, this proposed law would have very severe consequences for investors, because it will be very hard to find projects that satisfy the minimum distance requirement. Consequently, wind energy investments will become more difficult and returns will be significantly reduced. Finally, legal certainty and predictability of the regulatory framework would be essentially erased, which will scare off investors.

Poland’s new government has shown repeatedly, that it is eager to push through legislation based not on facts or reason, but on irresponsible subjective opinions. Polish environment minister Jan Szysko said that “wind farms (…) destroy the landscape, are alien to Poland’s cultural heritage and harmful to natural reserves.” His colleague, foreign minister Witold Waszczykowski told the German tabloid Bild, his government “only wants to cure our country of a few illnesses”, such as: “a world made up of cyclists and vegetarians, who only use renewable energy”.

In combination with the government’s pro-coal approach investors should expect more harassing measures against renewable energy investors and foreign investors in general.

Global Investment Protection (GIP) AG is a specialised consultancy firm, which stands ready to advice on how to protect your investments in Poland in the best possible way.