Proposed changes for biomethane and biogas producers

On September 25, 2024, a draft amendment to the Act of May 20, 2016 on investments in wind farms and certain other acts was introduced. The proposal also includes significant changes in other energy sectors, including for biomethane producers. In this newsletter, we present the key changes for biomethane and biogas projects.

Support scheme for biomethane producers in installations above 1 MW

The draft proposes the introduction of a support system for biomethane producers in installations above 1 MW. Until now, the dedicated support system has only covered biomethane producers in installations up to 1 MW under the feed in premium formula, while after the changes, the own dedicated system in the form of auctions and negative balance coverage will also cover larger installations.

The auction support system will cover installations with a capacity of more than 1 MW in which biomethane is produced from (i) biomass biogas, (ii) agricultural biogas in a mixture with biogas, or (iii) only biogas or a mixture of biogas and agricultural biogas. The maximum support period will be 20 years from the date of the first sale in the auction system, and the sale price obtained in the auction will be subject to annual adjustments based on the average annual index of consumer goods and services prices from the previous year.

The draft provides an auction system for biomethane, based on regulations concerning, inter alia: eligibility criteria to participate in the support scheme, rules for obtaining support, the period in which the support scheme is available, the course of the auction process, obligations of the generator who has won the relevant auction and obligations of the President of Energy Regulatory Office in connection with the support system.

An installation will only be admitted to the auction if it is at a stage of development that allows it to submit for pre-qualification procedure of (i) the gas grid connection conditions or the gas grid connection agreement and (ii) a valid building permit, if required under the provisions of the construction law.

The auctions are to take place at least once a year and the entity responsible for holding the auction will be the President of Energy Regulatory Office. The requirements to participate in the auction are to pass a pre-qualification procedure confirmed by the relevant certificate, to produce biomethane and feed it into the gas grid for the first time after the auction session closes and to have separate facilities for feeding biomethane into the gas grid. In contrast, biomethane must be produced in installation that is no more than 48 months old and not previously depreciated.

Separate auctions (including a separate reference price set by Council of Ministers regulation) are envisaged for biomethane produced from biogas and biomethane produced from agricultural biogas taking into account the installed capacity of RES with an electrical efficiency of the cogeneration unit of 41%, i.e. (i) less than 2 MW, (ii) 2 MW-less than 6 MW, and (iii) 6MW and above.

Biomethane from RES installations located outside Poland will be allowed to participate in the planned auctions, but will be subject to a number of restrictions. These include, among others, a limit of 5% of the volume and value of biomethane produced and to be sold in auctions in the previous year, the requirement for an intergovernmental agreement between Poland and the country where the installation is located, guaranteeing reciprocity in the use of the RES biomethane production support system, and the possibility of physically transferring the biomethane to the gas grid in Poland.

Biogas direct pipeline

The draft also proposes to regulate the provisions of the Energy Law delivery of biogas via a direct pipeline from the generator to the end user.

It is planned to abolish the obligation to obtain the consent of the President of Energy Regulatory Office for the construction of a direct gas pipeline to supply biogas. Owners of such pipelines will, however, be obliged to ensure proper operation, incorporation of emergency procedures and to maintain the quality parameters of transported biogas, analogously to the entity introducing biogas into the grid.

Owners will be obliged to report direct gas pipelines to the relevant register maintained by the President of Energy Regulatory Office within 30 days of the start of biogas supply, as well as to report within 14 days on the discontinuation of operation and decommissioning of that pipeline.

Transitional provisions

The entry into force of the auction system for biomethane is subject to a positive decision of the European Commission on the compatibility of the public aid with the internal market or the recognition by the European Commission that the provisions indicated do not constitute public aid. This means that the provisions regulating the auction system will become effective after the issuance of the relevant decision, and only after that date will the first auctions be held.

The direct gas pipeline regulations covered by the amendment would enter into force on the first day of the month following the date of announcement of the proposal in the Journal of Laws. Under the proposed regulations, owners of direct gas pipelines for the supply of biogas built before the amendment comes into force must notify them to the President of Energy Regulatory Office within 30 days from the date of entry into force of the proposed amendments.