Warsaw, 29 July (Argus) — Poland and the European Commission are nearing an agreement that will allow all planned Polish power plants built in 2013-19 to receive free EU emissions trading scheme (ETS) allowances, the Polish environment ministry said today.

The ministry is hopeful that the commission will accept its request that power plants built after 2013 with a maximum generating capacity of 15,000MW will be excluded from full allowance auctioning and will be eligible for the same concessions as existing generators, Polish environment minister Andrzej Kraszewski said.

EU commissioner for climate action Connie Hedegaard sent a letter to Poland in which she “in principle agreed” with the country's request, the Polish ministry said. But the ministry added that the EU Climate Change Committee will make the final decision by November this year. “15,000MW is a lot. It means that all those investors that started to work on the generation projects would get free allowances,” Kraszewski said.

Poland has lobbied intensively in favour of free allowances for new power plants after it won concessions in the EU's post-2012 climate package. In the package, the EU agreed that all existing Polish generators will continue to receive free carbon allowances post-2012, although the pool of free allowances will decline every year until full auctioning is implemented from 2020.

Poland was concerned that the climate package would negatively impact the planned development of new coal and lignite-fired plants and called for these projects to be treated as “physically initiated by the end of 2008”. This is a condition for the exemption from full auctioning post-2012.

Poland is particularly keen to maximise the amount of free allowances it gets for new projects as it needs to decommission most of its ageing coal and lignite-fired plants by 2023. Since the EU climate package was agreed in 2008, the Polish grid operator has received preliminary applications for grid connections for 37 new plants with a total capacity of 23,162MW. The majority of these are coal or lignite fired. But several of these projects may not be built as the combination of the financial crisis and the EU's climate requirements could make them less viable.

Investors planning to go ahead with projects are awaiting clarity on free allowances before finalising the investment. If generators need to buy allowances for their new plants, they will be forced to pass on the cost and thereby be uncompetitive in comparison with older plants. “There is a risk that by 2020 suppliers will buy power from existing generators instead of newly built ones,” a source from one Polish utility said.

Send comments to feedback@argusmedia.com
ts/gb 2.1

If you would like to review other ArgusMedia.com content options, request more information about Argus' energy news, data and analysis services.

Copyright © 2010 Argus Media Ltd - www.ArgusMedia.com - All rights reserved.