Caps on market revenues of electricity producers – what’s next for PPAs and cPPAs
The Polish Parliament is currently working on an Emergency Measures Act, which is intended to place limits on electricity prices and to provide support for certain off-takers in 2023. The Act stipulates price limits for the sale of electricity to certain categories of end off-takers. It also obliges electricity producers who use, amongst others, renewable resources, to write-off certain amounts to the Price Difference Payment Fund (Polish: Fundusz Wypłaty Różnicy Ceny). Accordingly, financial resources will be transferred to the Price Difference Payment Fund by electricity producers and energy companies that are licenced to trade in electricity.
The write-off obligation does not apply to electricity producers who use renewable sources of energy:
- in an installation with an installed electrical capacity of 1 MW or less; and
- in an installation which produces electricity from renewable energy sources and benefits from an auction support system – but only to the extent that the electricity is sold on the terms of such support system.
In this regard, an important factor will be the categorisation of possible sales of electricity that are not reported to the Settlements Operator (Polish: Zarządca Rozliczeń SA) as part of the auction volume settlement.
When calculating the write-off amount to be paid to the Price Difference Payment Fund, the paying entity must multiply:
(a) the volume of electricity sold and the positive volume-weighted average difference of the market price of the electricity sold;
(b) the volume-weighted average capped price of electricity sold, where all values are determined on the date of calculating the write-off to the Fund.
Importantly, the current version of the draft legislation states that the Council of Ministers shall, by adopting a regulation, specify detailed criteria for calculating the price cap for different electricity producers, according to the technology used to generate the electricity, taking into account the need to balance the interests of the various participants in the electricity market. At the present time, the content of this regulation is unknown. Accordingly, it is unknown which price limits will apply to particular RES technologies.
The draft Act states that the obligation to make write-offs to the Price Difference Payment Fund shall enter into force on 1 December 2022 and remain binding until 30 June 2023.