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Integrated report 2020

Regulatory environment

Contents

The regulatory environment has a decisive influence on the energy sector, thus determining its transformation. Supporting certain energy technologies or charging others has a special dimension.

We monitor domestic and foreign regulations on an ongoing basis, and by actively participating in the dialogue with legislative authorities, we present our point of view. Presented below is a summary of the most significant decisions, which took place in 2020 and which could have an impact on PGE’s operations in the coming years

DOMESTIC REGULATORY ENVIRONMENT

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Segments Regulation Regulation objectives Latest
conclusions		 Next stage Impact on PGE Group

Draft act on compensation for the increase in electricity prices in 2020. The draft assumes :
  • Introduction of compensation for the increase in electricity prices in 2020 as compared to prices in 2019.
  • The compensation would be available to end customers in households whose taxable income did not exceed the first tax bracket in 2019 and who will consume at least 63kWh of electricity in 2020.
  • The compensation would be paid in 2021 by trading companies at the request of the customer, through appropriate corrections to the invoices.
  • The act provides for 4 compensation thresholds depending on the amount of energy consumption.
  • The costs of compensation payments (an amount equal to the sum of the compensation paid to end customers) are to be financed with funds from the sale of 25 million CO2 emission allowances which form part of the national auction pool for the new EU ETS trading period starting on January 1, 2021.
  • Trading companies will be reimbursed upon an application submitted to Zarządca Rozliczeń S.A. For applications involving more than 4 million power take-off points, reimbursement would be made within 6 months of the date of application
 Public consultations on the bill were held until March 14, 2020. All work on the bill in the proposed draft was suspended. Currently, the Ministry of Climate and Environment is working on a bill aimed at protecting the most vulnerable household consumers from energy price increases. The bill is expected to be ready by mid-2021 and according to plan will not be a simple continuation of the bill on compensation, but a systemic solution, also taking into account the costs of heat. To the greatest extent, the draft affects the operation of the Supply segment. It entails additional obligations imposed on trading companies, such as: notifying customers of their right to compensation, accepting and verifying requests, payment of compensation, and inspection activities in consultation with the competent head of the tax office.

The draft stipulates that electricity distribution companies qualify end customers to one of the four groups eligible for compensation, and this compensation is to depend on the consumption of electricity at a given power take-off point.

The bill on the amendment to the Energy Law.

Parliamentary document: 808, 865, 1 025

 The amendment to the Energy Law contains a number of changes of systemic importance, including:
  • comprehensive arrangements concerning the energy storage issue,
  • the introduction of the obligation to install remote reading meters,
  • the appointment of an energy market information operator whose role will be to establish and develop a central market information system.
 On  March 16, 2021,  The second reading at the parliament. A revised report will be presented again at the second reading meeting. The bill is scheduled to be adopted in the second quarter of 2021. The proposed solutions will affect all operating segments of the PGE Group, in particular the segments of Trade and Distribution.

The bill on the amendment to the Energy Law and the Renewable Energy Sources Act

GLC list: UD 162

 The bill includes proposals for legislation to abolish the exchange obligation and to tighten liability for electricity market manipulations. The ERO President will have at their disposal appropriate tools to prevent abuses and attempted abuses in the electricity market. The abolition of the obligation is included in the Polish Electricity Market Reform Implementation Plan. The bill was published on the website of the Government Legislation Centre on  January 26, 2021 and was sent for public consultations, assessments and approvals Preparation of a report on public consultations, assessments and approvals The proposed change to abolish the exchange obligation will have no adverse impact on the PGE Group’s operations.
The bill amending the Act on the capacity market. The bill promoter’s intention is to align the Act on the capacity market to the provisions of Regulation (EU) 2019/943 of the European Parliament and of the Council of June 5, 2019 on the internal market for electricity and to improve the capacity mechanism taking into account lessons learned from organisation of capacity auctions to date and the associated processes (promulgation of regulations and rules, definition of auction parameters, certification processes). The Ministry of Climate and Environment withdrew the bill from the Government Legislation Centre due to the inclusion of some of its provisions in the urgently processed bill on the promotion of electricity generated in offshore wind farms.

The modified draft was presented for approval by the Committee for European Affairs of the Council of Ministers

 Submission to the Standing Committee of the Council of Ministers for discussion. The amendment is of key importance for PGE Group, the holder of a significant stake in the capacity market.
Draft act on promoting electricity generation in offshore wind farms The draft act provides for enabling the development of offshore wind power generation. Offshore wind farms are important for the fulfilment of international commitments in the field of renewable energy in the long term. The key to these is to create legal regulations that will stimulate the growth of this sector.

The draft provides for:

  • A support system for the offshore technology, adjusted to its technical and economic conditions, consisting in granting the so-called right to cover the negative balance to be calculated on the basis of the offshore installation’s LCOE.
  • modifications of administrative procedures related to the investment process, taking into account the specificity of the project to construct offshore wind farms.
 On January 22, 2021 the act was signed by the President of Poland. It entered into force on February 18, 2021. The act is of key importance for the development of offshore wind farms and thus for PGE Baltica, a company responsible for the implementation of the Offshore Programme at the PGE Group and coordinating preparations for the construction of three wind farms.
The bill amending the Act on renewable energy sources and certain other acts. The bill envisages in particular:
  • abolishing the concession obligation for facilities below 1MW,
  • extending the life of the discount/FIT (guaranteed tariff scheme)/FIP (surcharge to the market price) support system by 5 years (possibility to enter the system while retaining a 15 years’ period of support),
  • introducing the obligation for the Minister of Climate to publish, in advance, RES energy volumes to be subject to support over the next 4 years,
  • increasing the PV capacity threshold for PV above which it is required to include facilities and protection zones around them in local zoning plans.
 The bill was published on August 5, 2020 on the Government Legislation Centre website.  On  October 22, 2020, the results of the public consultations were published.  The project is at the stage of the Legal Committee. Presentation to the Standing Committee of the Council of Ministers for deliberation. The bill regards mainly the RES segment, extending the period within which new RES projects may apply for support. It also facilitates planning the development of this segment by introducing the obligation for the Minister of Climate to publish the schedule and capacity volumes for RES which may apply for support in the next 4 years.
The bill amending the Act on the greenhouse gas emissions trading scheme and certain other acts. The bill is meant to transpose Directive (EU) 2018/410 of the European Parliament and of the Council of March 14, 2018 amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814 („Directive 2018/410”), which establishes the so-called Modernisation Fund to operate in 2021-2030 and finance the modernisation of large power facilities as well as smaller-scale projects (insulation of single-family dwellings, modernisation of district heating sources and systems, development of low-carbon dispersed generation).

Although the bill does not prejudge what projects will receive financing, it provides that the function of the national operator of the Modernisation Fund will be held by the National Fund for Environmental Protection and Water Management (Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej, NFOŚiGW). In consequence, the Fund will provide project financing within the framework of the NFOŚiGW’s priority programmes.

 On March 3, 2021, the draft was adopted by the Council of Ministers. Works at the parliamentary stage – Sejm print no.1 008, intended for first reading. Depending on the final reading of the regulation, it can open the way to apply for financing for PGE Capital Group projects
The bill on amendments to the Electromobility and Alternative Fuels Act and certain other acts Within the scope of its regulations, the bill transposes into Polish law a number of EU directives, including in particular Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity and amending Directive 2012/27/EU, as regards the construction of charging stations by DSOs. The bill was published on  November 20, 2020. The Ministry of Climate and Environment is preparing a report on public consultations, assessments and approvals.  The project is at the stage of works of the Committee for European Affairs of the Council of Ministers. Submission to the Standing Committee of the Council of Ministers for discussion. The proposed regulations will have no adverse impact on the operations of the PGE Group.
The regulation of the Council of Ministers on the maximum quantity and value of electricity from renewable energy sources that may be sold by auction in 2021 The aim of this regulation is to enable auctions to take place in 2021, thus continuing the upward trend in the use of renewable energy sources, which will contribute to the fulfilment of new EU obligations. The draft regulation was published on December 22, 2020 and, bypassing public consultations, was promulgated on December 28, 2020.

The regulation entered into force on January 12, 2021.

 The regulations will make it possible to place the Group’s photovoltaic projects in auctions scheduled for 2021
Ordinance of the Minister of Climate of April 7, 2020 on detailed rules for the determination and calculation of tariffs and for settlements heat supply. The regulation contains three changes. Two of them are of a clarifying nature. The most important change is the introduction of the obligation to provide customers with the possibility of receiving information on cost calculations in electronic form. This is a consequence of the implementation of EU regulations. On January 25, 2021, the regulation was published in the Official Journal.

The regulation entered into force 14 days after publication.

 The obligation to provide customers with the possibility to receive billing information in electronic form is an additional burden on the District Heating segment.
Draft Act amending the Act on disclosure of information about the environment and its protection, public involvement in environmental protection and environmental impact studies and certain other acts. The draft act aims to transpose the EIA Directive (specifying the principles of environmental impact assessment)  as regards Article 11(1) and (3), i.e. regulations concerning public access to justice in the area of the environment by granting environmental organisations new powers affecting the possibility to use decisions on environmental conditions of projects significantly affecting the environment and to obtain further investment decisions in the investment and construction process. The bill was passed by the Sejm on February 26, 2021 and submitted to the Senate. The Act is in the course of the Senate’s work. The Act affects all business segments of the PGE Group that implement infrastructural investments.
Draft act amending the Energy Efficiency Act and certain other acts. The draft introduces a number of amendments dictated by the need to implement Directive 2018/2002/EU (EED). From the point of view of PGE Group, the most important amendments:
  • introduction of additional (in addition to energy efficiency certificates) measures to achieve the energy saving target. These include programmes and financial instruments for projects aimed at improving energy efficiency on the part of final off-takers,
  • creating opportunities for obligated entities to implement co-financing programmes, in order to finance or co-finance projects aimed at improving energy efficiency. The beneficiaries of such programmes may include final off-takers. Obligated entities holding a license to trade in gaseous fuels, electricity and heat may implement subsidy programmes to finance or co-finance: replacement of furnaces or boilers fired with solid fuels, thermal upgrading of buildings, upgrade of lighting, connection to the heating network.
 On 8 December 2020 the bill was adopted by the Committee for European Affairs. On January 15, 2021 the bill was forwarded to the Law Commission.

Currently, the project is at the stage of parliamentary work. On March 17, 2021, the Sejm passed the act.

 The Act is in the course of the Senate’s work. The proposed amendment will have a neutral impact on companies from the PGE Capital Group. The proposed changes may have a positive impact on the achievement of the goal specified in the EED Directive.
Draft Regulation of the Minister of Climate amending the Regulation on detailed conditions for the operation of the power system. The draft is a part of the so-called balancing market reform divided into two stages – the first from January 1, 2021 and the second from January 1, 2022 Implementation of the balancing market reform requires adjustment of the provisions of the existing regulation on the operation of the power system to the EU regulations; moreover, changes in the scope of connecting facilities to the grid are necessary. The range of amendments proposed includes:
  • enabling active participation of the Demand Side Response (DSR), non-centrally dispatched generation units (the so-called nJWCD units) and energy storage facilities in the balancing market ,
  • enabling updating of the Integrated Scheduling Process bids to the extent possible until the intraday cross-zonal gate closure time, including thorough monitoring of potential market manipulation behaviour of market participants (market power abuse),
  • phase out of some system services ,
  • changing of sign convention at the balancing market (positive or negative signs for energy supply to or energy receipt from the balancing market), in order to adjust the Polish sign convention to the requirements of the European Commission, that aims to enable the smooth exchange of electricity across internal EU borders,
  • changing of imbalance prices and settlement rules to improve balancing incentives on commodity markets, by reducing arbitrage opportunities between those markets (in particular the day-ahead market) and the balancing market,
  • improving pricing and settlement rules for congestion management (redispatching),
  • clarification of formal requirements and procedures for applications for connection terms,
  • elimination of collisions with the Energy Act in terms of deadlines for issuing connection terms and determining these terms for micro-installations,
  • reflecting, to the extent necessary, the relationship between national and EU legislation, in particular the so-called connection grid codes.
 The regulation was promulgated on  November 16, 2020. As a matter of principle, the regulation entered into force 14 days after promulgation, except for some provisions that entered into force as of  January 1, 2021. The amendment to the regulation will have a positive impact on the settlement of electricity supplies with the TSO,  making it realistic to cover the costs incurred by generating units among others.
A draft regulation of the Minister of Infrastructure on the assessment of requests submitted in decisive proceedings. The regulation sets out criteria for assessing requests submitted in decisive proceedings. On December 1, 2020, the regulation was sent out for consultation Presentation of the results of consultations (comments and amended wording of the draft regulation). The regulation is crucial for the success of further development of offshore wind farms in the second phase of support and thus for sustaining the transition of the Polish energy sector.
Draft ordinance of the Minister of Climate amending the ordinance on the detailed principles of shaping and calculating tariffs and settlements in electricity trading. The ordinance introduces the following changes:
  • the possibility of creating a separate tariff group for customers connected to the network, who use electricity only for the operation of a public charging station and the provision of charging services,
  • regulatory account mechanism in tariffs for distribution of electricity – the purpose of this amendment is to create a mechanism that will allow system operators to obtain revenues covering costs deemed justified by the President of the ERO, along with a justified return on capital resulting from approved tariffs, which may not actually be achieved by these operators or are achieved at higher amounts than accepted for the calculation of tariffs, providing end users with the possibility of receiving billing information for the supplied energy and invoices in electronic form.
 On November 13, 2020 the ordinance was signed by the Minister of Climate. The mechanism of the regulatory account introduced by the regulation is positively assessed by the distribution sector. It is expected to contribute to the revenues generated by distribution companies allowing to cover the costs justified along with the return on capital.

It should be expected that the separation of tariff groups dedicated to the charging station in the first years of application will have a negative impact on distribution companies.

A draft bill amending the Act on maintaining cleanliness and order in communes as well as certain other acts. The draft sets out obligations for waste generators. Public consultations on the draft act were completed. Publication of the revised text of the draft and its submission for further government work. The amendment is relevant to activities of Capital Groups falling within the scope of the circular economy.

A draft bill amending the Waste Act and certain other acts. The draft bill implements the provisions of the Waste Directive into the national law and defines obligations for waste generators Public consultations on the draft act were completed. Publication of the revised text of the draft and its submission for further government work. Publication of the revised text of the draft and its submission for further government work.
A draft regulation of the Minister of Climate and Environment on the maximum price for electricity generated at an offshore wind farm and introduced into the grid in PLN per 1 MWh, being the basis for the settlement of the right to cover a negative balance The regulation defines the key parameter of a support system for offshore wind farms in the first phase of support, the maximum price. On March 1, 2021, the results of consultations were published. Publication of the revised wording of the draft regulation and its referral to the Standing Committee of the Council of Ministers. The establishment of the maximum price for OWFs determines the launch of the first phase of support and is the foundation for further development of this sector in Poland
A draft regulation of the Minister of Climate and Environment on the registration, balancing and provision of metering data and billing of renewable energy prosumers. The draft regulation is an implementation of the authorisation set out in Article 4 (14) of the Renewable Energy Sources Act of February 2, 2015, which obliges the minister responsible for climate affairs to specify the following:
  • a specific scope and method of the registration and balancing of metering data;
  • a specific method of settling the accounts of renewable energy prosumers;
  • a specific scope and method of providing access to metering data among energy companies as well as between energy companies and renewable energy prosumers.
 On May 15, 2020, the draft regulation was published and sent out for consultation. On December 18, 2020, the results of consultations were published. Work on the document is underway at the government stage Referral of the draft regulation to the Legal Committee The draft introduces rules for balancing the operation of prosumer micro-installations which are of great importance for distribution networks in connection with the development of the prosumer sector
A draft regulation of the Minister of Climate and Environment on the registration, balancing and provision of metering data and billing of renewable energy cooperatives. The draft regulation is an implementation of the statutory authorisation set out in Article 38c (14) of the Renewable Energy Sources Act of February 02, 2015, which obliges the minister responsible for climate affairs to specify the following:
  • a specific scope and method of the registration of metering data and the balancing energy quantities referred to in Article  38c (5) of the Act;
  • a specific method of accounts settlement referred to in Article 38c (6) of the Act, taking into account the prices and rates of fees in the particular tariff groups applicable to an energy cooperative and its members;
  • a specific scope and method of providing access to metering data among energy companies, as well as between energy companies and an energy cooperative;
 On May 15, 2020 , the draft regulation was published and sent out for consultation. On December 17, 2020, the results of consultations were published. Work on the document is underway at the government stage. Referral of the draft regulation to the Legal Committee The draft introduces rules for balancing the operation of prosumer micro-installations which are of great importance for distribution networks in connection with the development of distributed power generation.

INTERNATIONAL REGULATORY ENVIRONMENT

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Segments Regulations Regulation
objectives		 Latest
conclusion		 Next stage Impact on PGE

 

 Regulation of the European Parliament and of the Council establishing the framework for achieving climate neutrality (European Climate Law). Enshrining the 2050 climate-neutrality objective in EU law, definition of the new 2030 emission reduction target The EC submitted a legislative proposal on March 4, 2020. The key solutions proposed include:

enshrining the legally binding 2050 climate-neutrality objective in EU law,

by June 30, 2021, the EC will present relevant legislative proposals, inter alia, on the revision of the ETS Directive and related legislation, including the Directive on the promotion of the use of energy from renewable sources and the Directive on energy efficiency and Energy Taxation Directive.

On September 17, 2020, the EC issued a working document containing an impact assessment of the EU’s more ambitious climate target for 2030, accompanied by the communication: “Stepping up Europe’s 2030 climate ambition”. Based on the impact assessment, the EC has revised the legislative proposal indicating that the emission reduction target for 2030 should be at least 55%.

On October 8, 2020, the EP adopted, in a plenary vote, its position on the European Commission’s legislative proposal, which contained, inter alia, reduction target for 2030 at 60% compared to 1990 and an obligation for each Member State to achieve net zero greenhouse gas emissions by 2050 at the latest.

On October 9, 2020, the German Presidency of the EU Council presented a proposal for a general approach. This proposal does not provide for the adoption of a climate neutrality target at national level, and assumes a reduction target of 55% by 2030 compared to 1990.

On 10-11 December 2020, the European Council adopted an emission reduction target of at least 55% by 2030 compared to the 1990 level.

 Uzgodnienie treści projektu rozporządzenia powinno zakończyć się w I półroczu 2021 roku.

Do 30 czerwca 2021 roku spodziewana jest publikacja odnośnych wniosków legislacyjnych zapowiedzianych w ramach Europejskiego prawa o klimacie

 Poprawa konkurencyjności źródeł odnawialnych i w krótkiej perspektywie czasu jednostek gazowych, kosztem jednostek wytwórczych wykorzystujących paliwa wysokoemisyjne.

Wzrost kosztów operacyjnych konwencjonalnego wytwarzania energii elektrycznej.
Segments Regulation Regulation objectives Latest conclusions Next stage Impact on PGE

 

 

 Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the EU (ETS Directive) as well as implementing and delegated acts,

Decision (EU) 2015/1814 of the European Parliament and of the Council concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme (MSR Decision).

 Combating climate change and performance of obligations resulting from the Paris Agreement.

Development of investment incentives through a CO2 price signal to develop low-emission sources.

 The legislative proposal presented on March 4, 2020 by the EC, concerning the European Climate Law provides that, among other things, by June 30, 2021 the Commission will assess how the EU legislation implementing the Union’s 2030 target should be amended to achieve new emission reductions target and to achieve the climate neutrality objective.

The European Commission is planning to carry out another revision of the ETS Directive and, potentially, the MSR decision over the next year.

On September 17, 2020, the EC issued a working document containing an impact assessment of the EU’s more ambitious climate target for 2030, accompanied by the communication: “Stepping up Europe’s 2030 climate ambition”. Based on the impact assessment, the EC has revised the legislative proposal indicating that the emission reduction target for 2030 should be at least 55%.

On November 13, 2020, the EC launched consultations on a detailed form for the revision of the ETS Directive and the revision of the MSR decision.

Within the considered directions of revision of the ETS system, apart from raising the emission reduction target itself, it is assumed that the scope of the EU ETS will be extended to the transport and buildings sectors. The future of free allocation of allowances to industry will depend on the final decisions regarding the introduction of the CBAM (Carbon Border Adjustment Mechanism).

The public consultations on the detailes form were finished on February 5, 2021.

 Proposals for the next revision of the EU ETS inter alia the ETS directive and potentially MSR decision are expected in June 2021 Improvement in the competitiveness of renewable sources and – in short-term- gas units to the detriment of generation assets using high-emission fuels.

Increase in operating costs for conventional generation of electricity.

Option to obtain direct investment support from 2021 from the Modernisation Fund.

Another revision of the ETS Directive and MSR decision is likely to cause a further increase in prices of emission allowances.

 

 

 
Segments Regulation Regulation objectives Latest conclusions Next stage Impact on PGE

 

 

 Revision of the Directive on the promotion of the use of energy from renewable sources (RES Directive) and the Energy Efficiency Directive (EED Directive) and the Energy Taxation Directive (ETD Directive). Aligning the legislation related to the promotion of renewable energy, energy efficiency and energy taxation with the new climate target. On March 4, 2020, the EC published an action plan and a preliminary impact assessment for the revision of the ETD Directive. The revision of the ETD Directive is to address, among other things, a review of excise tax rates and the linking of minimum tax rates to greenhouse gas emissions. The EC also advocates moving away from unanimity in the Council to qualified majority voting.

On August 3, 2020, the EC launched a process of consultations on the revision of the RES Directive and the EED Directive to reflect the higher 2030 emissions reduction target. According to the impact assessment of the more ambitious EU climate target for 2030, with regard to the reduction target of 55%, the EU-wide share of renewable energy in gross final energy consumption should reach 38-40% (the current target is 32%), and with regard to energy efficiency, it would translate into a reduction in final and primary energy consumption by 39-41% and 36-37% respectively (the current target for energy efficiency improvement is 32.5%).

On November 17, 2020, the EC launched public consultations on detailed forms for the revision of the RES and EED Directives.

On November 19, 2020, the EC presented the EU offshore strategy. The strategy envisages that in 2030 the total capacity of offshore wind power plants in the EU will reach 60 GW, and in 2050 – 300 GW. The potential for the Baltic Sea area was estimated at 93 GW in 2050.

 The publication of legislative proposals for the revision of the ETD, RES and EED Directives is expected in June 2021 Improving the competitiveness of low-carbon energy sources compared to high-carbon energy sources.

A greater share of renewable energy sources in the Polish energy mix by 2030.
Segments Regulation Regulation objectives Latest conclusions Next stage Impact on PGE
Regulation of the European Parliament and of the Council

on guidelines for trans-European energy infrastructure

and repealing Regulation (EU) No 347/2013 (revision of the TEN-E Regulation)

 Establishing guidelines for the development of trans-European energy infrastructure areas contributing to the achievement of the EU’s climate targets by 2030 and climate neutrality by 2050.

Establishing new criteria for PCI

 On December 15, 2020, the EC presented a legislative proposal to revise the TEN-E Regulation. The aim of the revision is to adapt the infrastructure development rules to the objectives of the European Green Deal, as they do not fully reflect the EU’s objective to achieve climate neutrality in 2050.

The TEN-E Regulation provides a framework for identifying so-called projects of common interests (PCIs) that can receive financial support under the “Connecting Europe” facility; they must demonstrate compliance with the “do no harm” principle included in the Regulation concerning taxonomy. The PCI status will no longer be available for natural gas and oil infrastructure projects.

A stronger role for the European Agency for the Cooperation of Energy Regulators (ACER) and the EC in the process of creating 10-year grid development plans and improvements in the area of obtaining permits for PCIs has been proposed. The project provides for new solutions for offshore infrastructure development:

  • by July 31, 2022, Member States are to determine their offshore potential by 2050, with intermediate targets for 2030 and 2040 for a given sea area
  • establishing priority corridors for offshore networks (including the Baltic Sea area), creating a single contact point for offshore networks,
  • introducing a new criterion for hybrid offshore projects, in line with the EU offshore strategy.

In the area of distribution and with respect to smart energy grids, the project provides, among others, for the implementation of projects ensuring the integration of new forms of energy generation, storage and consumption, the facilitation of obtaining permits by PCIs that are small-scale undertakings in this area, as well as the modification of the eligibility conditions for such projects.

 The legislative proposal has been submitted to the European Parliament and to the Council for the purpose of developing a general approach. Possible trilogues could start in mid-2021 at the earliest.

The new rules would come into force as of January 1, 2022.

 Defining rules for the implementation of projects of common interest (PCIs) – a potential opportunity to obtain support for PGE CG investments.
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Segments Regulation Regulation objectives Latest conclusions Next stage Impact on PGE

Regulation (EU) 2019/943 of the European Parliament and of the Council on the internal market for electricity (EMR regulation). Establishment of legal framework for further integration of internal electricity market. The Regulation entered into force on July 4, 2019, with most of its provisions applying as of January 1, 2020.

On October 2, 2020, the ACER Agency approved the methodologies proposed by ENTSO-E and determining:

  • European resource adequacy assessment (ERAA),
  • cost of new entry (CoNE), reliability standard and value of lost load (VoLL).

On December 22, 2020, the ACER Agency approved the methodologies proposed by ENTSO-E and determining common rules relating to the participation of foreign capacities in capacity mechanisms. The ACER Agency decision stipulates as follows:

  • a methodology for calculating the maximum entry capacity for cross-border participation in capacity mechanisms,
  • a methodology for sharing the TSO revenues,
  • common rules for the carrying out of availability checks,
  • common rules for determining when a non-availability payment is due,
  • terms of the operation of the registry of interested capacity providers,
  • common rules for identifying capacity eligible to participate in the capacity mechanism.
 By July 5, 2021, ENTSO-E is to establish a register of foreign capacity suppliers. Existing units that exceed the emissions standard 550 g CO2/kWh (EPS 550 and emit 350 kg CO2/kW/year (CB 350) will not be entitled to capacity payments from July 1, 2025.

A potential drop in volume of and price for electricity sold on the wholesale market by domestic units due to increased import, gradual replacement of existing generation units by new, ones, which meet emission requirements.
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Regulation Regulation objectives Latest conclusion Next stage Impact on PGE
The Regulation of the European Parliament and of the Council establishing the Just Transition Fund (JTF). Provision of the financial framework for regional transition  towards climate neutrality at the EU level. On January 14, 2020, the European Commission presented a proposal for a regulation establishing the Just Transition Fund.

On 17-21 July 2020, an extraordinary meeting of the European Council was held and agreed that inter alia:

  • the size of the JTF budget would amount to EUR 17.5 billion, of which EUR 7.5 billion would come from the 2021-2027 MFF and EUR 10 billion from the EU’s Next Generation instrument,
  • access to the JTF would be limited to 50% of the allocation for a given Member State if that Member State did not undertake to achieve the target of the EU climate neutrality by 2050. The remaining 50% of the funds will be made available after such undertaking is made.

On September 16, 2020,  the EP adopted its position on the regulation establishing the JTF.

On 9 December 2020, following negotiations, the EP and the Council reached a political agreement on this Regulation. The most important issues of this agreement include:

  • making access to 50% of a Member State’s allocation conditional on the commitment to achieve the EU’s climate neutrality target by 2050 at national level. The fulfilment of this condition will be checked at the end of each year, starting in 2022. In the absence of a target adoption declaration in a given year, 50% of the Member State allocation from the previous year will be annulled in the year following the year in which this condition is checked;
  • possibility of financing from JTF of investments in RES, networks for RES, energy storage, energy efficiency and low-carbon local transport. The JTF can also finance investments in digitisation, digital innovation, digital connectivity and RES-based heat generation;
  • the JTF must not finance investments related to the mining, processing, transport, transmission, storage and combustion of fossil fuels;
  • joint financing from the JTF in the amount of up to 85% for the least developed regions (i.e. regions with GDP per capita below 75% of the EU-27 average), 70% for transition regions (i.e. regions with GDP per capita between 75% and 100% of the EU-27 average) and 50% for developed regions (i.e. regions with GDP per capita above 100% of the EU-27 average);
  • as a condition for receiving funding from the JTF, a Member State, in cooperation with local and regional authorities, should prepare territorial just transition plans covering one or more regions. Such plans should describe the transition towards a climate-neutral economy, including a timeline with milestones for achieving the EU’s climate and energy targets by 2030 and a climate-neutral economy by 2050.
 The legislative process regarding the regulation establishing the Just Transition Fund involving the European Parliament and the Council is to be completed in H1 2021. Potential financing of actions and investments in coal regions eligible for support from the JTF.
Regulation of the European Parliament and of the Council establishing a Recovery and Resilience Facility. Providing a financial framework for recovery of the EU economy after the COVID-19 pandemic and increasing its resilience to economic shocks. On May 28, 2020, the EC presented a proposal for a regulation establishing a Recovery and Resilience Facility.

On July 17-21, 2020, an extraordinary European Council meeting was held, at which it was agreed that:

  • the Facility will amount to EUR 672.5 billion, including EUR 312.5 billion in grants and EUR 360 billion in loans. Poland should receive EUR 57 billion from the Facility, of which about EUR 23 billion in grants,
  • 70% of the Facility should be disbursed in 2021-2022 and the remaining 30% should be disbursed in 2023,
  • the Facility should be disbursed in accordance with the Paris Agreement and should not prejudice the principles of the European Green Deal.

On November 13, 2020, the EP adopted its position on the Regulation establishing the Recovery and Resilience Facility.

On December 18, 2020, following negotiations, the EP and the Council reached a political agreement on this Regulation. The most important points of this agreement concern the following:

  • the need for a given Member State to prepare its National Recovery Plan (NRP) in order to obtain funding from the Facility. This plan must present a plan of reforms and investments for the period 2021-2023. This plan must be submitted to the EC for approval;
  • within a given NRP, a minimum of 37% of the allocation must be earmarked for climate objectives;
  • only actions that respect the “do no harm” principle may receive support from the Facility. The EC is to prepare technical guidelines in this respect;
  • the introduction of a methodology of contributing to the achievement of climate objectives, according to which a coefficient is assigned to particular actions. On its basis, expenditures for a given action are recalculated in order to determine to what extent these expenditures contribute to the achievement of the objective specifying that a minimum of 37% of allocations within a given NRP is to be earmarked for climate objectives;
  • in 2021, the EC will pay out advances amounting to 13% of the allocation per Member State;
  • payments under the Facility will be made by 31 December 2026. They are effected at the request of a given Member State submitted to the EC upon the achievement of the objectives and milestones set out in the NRP and agreed with the EC, and upon the EC’s positive assessment of the fulfilment of those objectives and milestones.

On 12 February 2021, the EC published technical guidelines to this Regulation with respect to the “do no harm” principle. According to these guidelines, support from the Recovery and Resilience Facility may be granted to investments in gas-based generation sources and gas-fired cogeneration in Member States facing significant challenges in moving away from coal, provided that:

  • this support will contribute to the achievement of the EU decarbonisation objectives for the years 2030 and 2050;
  • such sources will emit less than 250 g CO2e/kWh or will be adapted to use renewable or decarbonised gases.

The Regulation was published on February 18, 2021 and entered into force on February 19, 2021.

 In April 2021, the NRP should be submitted to the EC. A chance for co-financing of projects submitted to NRP.
The Regulation of the European Parliament and of the Council (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment, changing the regulaton (EU) 2019/2088 (the Taxonomy Regulation) and delegated acts to this regulation. Facilitation of funding for sustainable economic growth in EU The Taxonomy Regulation was published in the Official Journal of the European Union on June 22, 2020 and entered into force on July 12, 2020.

 

In March 2020 the Technical Expert Group published a final report.

In the report, the Technical Experts Group:

  • did not recommend, at this stage, that nuclear energy should be considered sustainable because it did not meet the criterion of „causing no significant damage”, while recommending further work on this issue in the future by a group with in-depth technical knowledge on this subject,
  • indicates in the case of gas-based generation sources that those activities where life cycle emissions are below 100g CO2e/kWh are considered sustainable, this threshold is to be reduced to 0g CO2e/kWh by 2050.

On October 1, 2020 the European Commission established Platform on Sustainable Finance, which replaced the Technical Experts Group and which is to advise the European Commission on matters related to sustainable financing.

Public consultations on a draft delegated act establishing detailed technical screening criteria on the basis of which economic activities will be assessed to determine whether an activity is environmentally sustainable in relation to climate change prevention and adaptation were concluded on December 18, 2020.

 Preparation by the EC of delegated acts laying down detailed technical and screening criteria for assessing economic activities in order to determine whether a given activity is environmentally sustainable – as regards gas – H1 2021, and as regards nuclear power – by the end of 2021. Possible impact on availability and cost of funding obtained by PGE Group companies for investments. The matter of recognising nuclear power and gas as environmentally sustainable will be resolved under the delegated acts.

The obligation to include information on the share in the trade, CAPEX and OPEX of environmentally sustainable activities in the statement on non-financial information or consolidated statement on non-financial information.

ADDITIONAL INFORMATION WITH REGARD TO INTERNATIONAL REGULATORY ENVIRONMENT

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ACTION BROUGHT AGAINST THE EUROPEAN COMMISSION’S DECISION NOT TO RAISE OBJECTIONS TO THE POLISH CAPACITY MARKET

Segments Proceeding Objective of the action brought Key events Next stage Impact on PGE Group
Proceedings brought by Tempus Energy Germany and T Energy Sweden against the European Commission (case file no. T-167/19). The objective of the action is to annul the European Commission’s Decision not to raise objections to the Polish capacity market (SA. 46100) issued as part of the aid procedure. On March 14, 2019 Tempus Energy Germany and T Energy Sweden brought an action against the EC decision concerning the Polish capacity market (case T-167/19). The summary of main reproaches and arguments brought up in the complaint was published in the EU Official Journal on May 6, 2019. From the published abstract it results, that in their action brought they argue that the EC failed, in particular, to initiate formal investigation proceedings (the second stage of the capacity evaluation mechanism) and that the demand side response (DSR) suffered alleged discriminatory treatment within the Polish capacity market. The proceedings pending before the European Court of Justice concerning the appeal in the case Tempus Energy and Tempus Energy Technology versus the EC (case file no. C-57/19 P) may have an impact on the action brought. Depending on the outcome of the dispute, the case may have an impact on the conditions for the performance of and entering into the capacity contracts within Polish capacity market.
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