EU approves Polish € 22.5 billion offshore wind CfD scheme

The European Commission has approved Polish offshore wind Contracts for Difference (CfD) scheme, through which the country plans to support the realisation of offshore wind projects with € 22.5 billion and reach its renewable energy targets without unduly distorting competition.

The CfD scheme, which the Commission approved under EU State aid rules, will be implemented in two phases.

During the first phase, offshore wind projects will be granted aid using the exception to the auction requirement, due to the existence of a very limited number of projects. The reference price for projects in the first phase will be administratively fixed based on their costs, with a maximum set at 319,60 PLN/MWh (EUR 71,82/MWh).

After obtaining the environmental permit which will fix the final technical characteristics of the project, each project will submit an individual notification with a business plan to the Commission. Based on the respective business plan, the Commission will assess individually the specific level of operating aid.

The second phase of the scheme will see Poland granting aid through open and competitive auctions which will be organised as of 2025, and the reference price of projects will be fixed based on the respective bid.

For its € 22.5 billion CfD scheme, which will run until 2030, Poland has also committed to performing an ex-post evaluation and assessing the features of the scheme in the evaluation.

“This Polish scheme is a very good example of how competition policy can enable Member States to support green energy projects, such as offshore wind farms”, said Executive Vice-President Margrethe Vestager, in charge of competition policy. “It gives the incentive to companies to invest in such green projects where they would otherwise not have invested. We hope that we will see many such initiatives in the future, which contribute to the EU’s Green Deal, without unduly distorting competition in the Single Market”.

In February, Poland signed into law the Offshore Act which regulates the development of offshore wind farms in the Polish Baltic Sea.

The legislation allows for 10.9 GW of offshore wind capacity to be either operational or under development by 2027.

Currently, 5.9 GW of capacity is being offered via CfDs by the end of June 2021 for projects in the most advanced stages of development, some of which could be operational by 2025.

At the beginning of April, the Polish Energy Regulatory Office (ERO) awarded Contracts for Difference to the 1 GW Baltica 3 and 1.5 GW Baltica 2 offshore wind projects, developed by Ørsted and PGE, and to the 350 MW FEW Baltic II offshore wind project, developed by Baltic Trade and Invest Sp. z o. o., a subsidiary of the German energy company RWE.

The second phase of development will include two CfD auctions, the first in 2025 and the second in 2027, each for 2.5 GW of additional capacity.

As part of its offshore wind ambitions, Poland has also recently earmarked a few billions of Euros in its National Reconstruction Plan for offshore wind development and for port upgrades in support of the country’s offshore wind activities. The plan has been submitted to the European Commission through which Poland will tap into the EU Reconstruction Fund, where it has a total of € 58 billion on its disposal.