Polish legislation threatens to curb wind industry growth

A law that goes into effect in early July will limit where wind farms can be built to around 1% of the country, Moody’s estimates.

A law in Poland that goes into effect next week will stifle its wind industry and support state-owned energy companies dependent on coal, according to a report published by credit ratings agency Moody’s.

When the Act on Investment in Wind Farms goes into effect on 6 July, the nation that installed the second-highest wind capacity in Europe last year at 5.6GW will be levying a “tax burden” on its emerging industry to provide “indirect, albeit limited” support for state-owned energy companies dependent on coal. Moody’s said Poland’s energy legislation is “negative for the renewable energy developers as it will significantly curb investments in the sector and affect their profitability”.

The new law limits the construction of wind farms within a distance equal to 10 times the height of a turbine and its blades, or around 1.5 to 2km from homes, built-up areas or national parks. This restricts construction to around 1 percent of Poland’s territory, Moody’s said.

Existing wind farms that don’t meet the new criteria can continue to operate but cannot expand, and building permits issued before this law are still valid.

Poland is Europe’s top coal producer, and coal accounts for 84 percent of the nation’s electricity generation. However, favorable regulations recently led to a rush of new wind developments. Between January 2015 and March 2016, Poland installed 1.6GW of wind capacity, the second-highest in Europe. Its overall installed capacity now totals 5.6GW.
The majority of this wind capacity has been developed by companies other than Poland’s four state-owned energy companies, which mainly invest in and operate coal plants. These companies would likely benefit from a spike in electricity prices, which Moody’s said is possible as new sources coming online start to dwindle.

Poland will also find it difficult to meet its European Union obligation to generate 15 percent of its energy from renewables by 2020 due to this legislation, according to Moody’s. It currently generates 13 percent of its energy from renewables.