Renewable energy sources are being developed in Poland at an impressive rate. Published data shows that last year, the total installed capacity of renewable energy sources increased by 5.3 GW, approaching 30 GW, which represents 44% of the installed capacity of all electricity sources in Poland. Of course, installed capacity does not mean such a large share of renewable energy sources in energy production, but on the other hand, last year there were days when production from renewable energy sources covered almost the entire domestic demand for electricity. Importantly, the energy transition has changed price relations on the energy market – while a few or several years ago, RES sources could only be created and operate thanks to support mechanisms, currently the costs of green energy production are lower than those of energy produced from conventional sources.
In order to meet EU targets (the current target is a 42.5% share of energy from renewable sources by 2030), the national legislator has been using regulatory mechanisms for many years to encourage investment incentives for investors in renewable energy sources. Investment incentives for investors take various forms, ranging from direct subsidies for the construction costs of the source, through the creation of quasi-securities in the form of independently traded certificates, to various types of relief reducing the cost of production and marketing of energy. However, the regulatory environment for renewable energy sources can be volatile. This was painfully demonstrated many years ago to owners of renewable energy power plants who were counting on an endless rise in the price of green certificates – regulatory changes caused their prices to collapse. Recently, we have seen protests by prosumers who disagree with changes in the rules for settling surpluses of energy fed into the grid. It is also increasingly common for owners of renewable energy installations (in particular wind and photovoltaic power plants) to be unable to feed the energy they produce into the grid due to the inability of the DSO to collect it. investment in renewable energy.
So is it worth investing in the preparation and construction of RES sources in Poland only in the short term, with a view to reselling the project? Is it possible to deal with the instability of the regulatory environment when the state does not guarantee the stability of settlement rules over the lifetime of a generation source, and if so, how? The solution to the problem seems to be to reduce the dependence of the generation source on mechanisms related to the functioning of the regulated energy market. In short, the key may be to seek solutions that increase the consumption of self-generated energy and thus reduce the volume of surplus energy fed into the DSO grid (for storage or sale) and reduce the volume of energy purchased from the obligated seller.
In addition to systemic (physical) solutions, such as investing in own energy storage facilities (which remains quite costly) or building direct lines and concluding PPA/CPPA contracts, there is also an interesting organisational and legal solution reserved for lower-capacity generation sources (maximum 10 MW for electricity and 30 MW for heat), namely energy cooperatives.
Energy cooperatives
The idea behind energy cooperatives is for project participants (cooperative members) to jointly develop RES projects and reap the benefits. The assumption is that the cooperation will be local in nature and that energy will be generated exclusively for own use. The idea of combining the potential of generation sources in this type of organisational and legal formula is not new. The first cooperatives began to emerge in Denmark as early as the 1970s. Currently, energy cooperatives can be found in many European countries, with their total number approaching two thousand.
The Polish Renewable Energy Sources Act introduced the definition of an energy cooperative in 2016. However, incomplete regulation (lack of implementing provisions) and a poor catalogue of regulatory incentives did not favour the spread of this organisational form. The first two cooperatives were not established until 2021. The breakthrough came with the 2023 amendment to the RES Act, which introduced provisions that significantly facilitated the operation of energy cooperatives. The amendment introduced, among other things, the possibility of trading energy generated from renewable sources as part of the cooperative’s activities for the benefit of its members, granted the cooperative certain guarantees in terms of concluding agreements with DSO operators, simplified the required reporting and clarified the rules for settlements between the cooperative and the trading company (obligated seller). The changes introduced were met with a quick response from the market of RES installation owners – within three quarters of the amendment coming into force, approximately thirty new energy cooperatives were registered in the register kept by the National Agricultural Support Centre.
The Renewable Energy Sources Act defines an energy cooperative as a cooperative within the meaning of cooperative law or a farmers’ cooperative within the meaning of the Farmers’ Cooperatives Act, “whose business is the production of electricity or biogas, or agricultural biogas, or biomethane, or heat in renewable energy installations, their trade or storage, carried out as part of activities conducted exclusively for these cooperatives and their members;”[1] In accordance with the requirements of the RES Act, energy cooperatives may operate only in an area of no more than three neighbouring rural or urban-rural municipalities. An energy cooperative is an organisational and legal form addressed to owners of lower-capacity generation sources – the total installed electrical capacity of all RES installations grouped within a cooperative may not exceed 10 MW (in the case of heat generation, it is 30 MW, in the case of biogas or agricultural biogas production, the annual capacity of all installations may not exceed 40 million m(3) ,and in the case of biomethane – 20 million m(3) ). However, the provisions of the Act do not specify minimum sizes for generation sources, which allows micro-installations to also be covered by the scope of the cooperative’s activities. An additional limit, this time resulting from the Cooperative Law, is the maximum number of cooperative members, which may not exceed one thousand.
Why is it worth considering setting up an energy cooperative?
Greater self-consumption of cheaper energy and independence from the DSO
The main advantage, not explicitly stated in the regulations, is the potential to increase the level of self-consumption of energy produced from RES sources “connected” within the cooperative. The appropriate selection of generation sources and their capacity, as well as the planning of the energy consumption schedule for individual members of the cooperative, allows for a reduction in the amount of energy fed into the DSO network and consumed from that network. Increasing the level of current own consumption not only allows for the use of cheaper energy (additionally unburdened by many surcharges to cover the costs of operating the distribution network), but also allows for a reduction in the volume of energy produced, which is first fed into the grid and then recovered at a ratio of 1 to 0.6. This ensures a high degree of energy independence for cooperative members, while maintaining the possibility of storing surplus energy in the DSO grid and continuing to purchase energy from the obligated seller during periods when production from own sources is insufficient.
Increasing the level of own consumption and thus reducing the degree of dependence on energy supplied via the DSO network has another significant advantage, which is minimising the risk of losses associated with the periodic inability of the DSO to collect surplus energy produced from RES sources. This problem is becoming increasingly relevant in practice, as it is increasingly common for DSOs to limit the capacity of RES sources during the periods when these sources operate most efficiently. This leads to losses (lost profits) for RES owners who are unable to feed the generated energy into the grid and resell it. In addition, claims for compensation from DSOs for lost profits are not always legally justified.
Freedom to configure the business model
The establishment of an energy cooperative, which is an independent entity with rights and obligations, requires the application of the legal framework provided for in the Cooperative Law or the Farmers’ Cooperatives Act, but the cooperative members have complete freedom to determine the ownership model of the RES installation, the rules of operation and the privileges and obligations of individual members of the cooperative.
The Renewable Energy Sources Act provides for two ownership models. In the first model, RES installations are the joint property of the cooperative, which supports business initiatives aimed at raising capital by shareholders wishing to join forces to build RES installations. In the second model, the installations may be owned by individual members of the cooperative, as there is no obligation to “contribute” them to the cooperative’s assets. In addition, an energy cooperative may simultaneously bring together energy producers (who own RES sources), entities that are only energy consumers, and entities that perform both roles.
In order for a cooperative to commence operations, a number of contractual relationships must be established. The basic agreements concluded by the cooperative are a distribution agreement with the DSO, a comprehensive agreement with the obligated seller, and sales/settlement agreements between the cooperative and its members. The content of the latter agreements is determined by a resolution of the cooperative’s members specifying the rules for internal settlements. Among the accompanying agreements that support the functioning of an energy cooperative, an accounting service agreement should also be mentioned.
Importantly, direct network connections (direct distribution lines) may also operate within an energy cooperative, enabling energy supplies to be provided on the basis of PPAs (Power Purchase Agreements). This is therefore another type of agreement that may be concluded within a cooperative.
Regulatory incentives
The picture of the benefits of combining RES sources in an energy cooperative is complemented by regulatory incentives contained in the Renewable Energy Sources Act. The main focus here is on the obligations imposed by the legislator on the trading company (obligated seller) and the distribution system operator in whose area the energy cooperative intends to start operating. The DSO is obliged, among other things, to conclude a distribution service agreement with the obligated seller (within 21 days of the cooperative submitting its application) and to install a remote reading meter for each member of the cooperative (within 4 months of the cooperative submitting its application). The statutory obligation of the obligated seller remains to present an offer and conclude a comprehensive agreement and an agreement for the provision of commercial balancing services with a producer indicated by the energy cooperative who is a member of that cooperative. The Act imposes a number of accompanying obligations on the obligated seller, including the obligation to provide the energy cooperative and its individual members with measurement data. The Renewable Energy Sources Act specifies in detail the rules and deadlines for the fulfilment of the obligations of the DSO and the obligated seller, which strengthens the position of the cooperative in establishing the terms of cooperation necessary to start and conduct business.
Regulatory incentives related to the granting of specific financial relief remain no less important. First of all, no tax is levied on electricity generated in all renewable energy installations of an energy cooperative and then consumed by all electricity consumers of the energy cooperative, including the amount of electricity fed into or withdrawn from the distribution network, no settlement fee (to the obligated seller) or distribution service fee (to the DSO) is payable. No RES fee, capacity fee or cogeneration fee shall be calculated or charged on the volume of energy referred to in the previous sentence. In addition, with regard to RES sources with a total installed electrical capacity of less than 400 kW, the costs of commercial balancing of electricity shall be covered in full by the obligated seller. Furthermore, electricity generated in all RES installations of an energy cooperative and then consumed by energy consumers is exempt from excise duty, provided that the total installed electrical capacity of all renewable energy installations of the energy cooperative does not exceed 1 MW. Settlements for electricity fed into the electricity distribution network by generation sources grouped within the energy cooperative are made on a 12-month basis.
How is an energy cooperative established?
Energy cooperatives are established with the participation of two groups of entities: consumers and producers of electricity from renewable energy sources. These may be natural persons running households, entrepreneurs or local government units.
The process of establishing an energy cooperative is divided into the following stages:
1. Preparatory stage
Preparations for establishing an energy cooperative should begin with drawing up an energy balance sheet. This document contains information on the annual energy consumption of potential members of the cooperative in the facilities that are to be included in the cooperative. In addition, this document specifies the amount of production from renewable energy sources to be included in the cooperative. The data in the energy balance should cover a period of 12 months. Preparing an energy balance is an extremely complex and labour-intensive task, requiring the collection and processing of large amounts of data. To do this independently, at least a basic knowledge of the electricity market is required. Such a balance sheet can also be prepared by an external entity specialising in this type of work.
Additionally, as part of the preparatory stage of electricity generation, it is worth considering conducting a detailed legal audit to verify whether all potential members of the energy cooperative meet the formal criteria required to join the energy cooperative. The legal audit should, in particular, cover the analysis of the internal documents of potential members (e.g. articles of association, regulations, partnership agreements, etc.) in terms of their compliance with the provisions of the Energy Law, the Renewable Energy Sources Act or the Cooperative Law.
2. Registration in the National Court Register
The next step in establishing an energy cooperative is to register it in the National Court Register. To this end, a number of documents must be prepared (including the cooperative’s statutes and draft resolutions) and a founding meeting must be held at which the statutes are adopted and the cooperative’s authorities are elected. This will ultimately enable the submission of an application for entry in the National Court Register.
3. Registration with the National Agricultural Support Centre
The next step in establishing an energy cooperative is to register it in the list of energy cooperatives maintained by the Director General of the National Agricultural Support Centre. The application for inclusion in the list of energy cooperatives contains information on, among other things, the name and address of the cooperative’s registered office, the number in the register of entrepreneurs in the National Court Register and the tax identification number, the area and subject of activity, the number of members of the cooperative, the annual demand for specific types of energy covered by the activity, the installed electrical or thermal capacity, or the annual biogas production capacity of individual renewable energy installations.
4. Internal agreements, agreements with the DSO and the obligated seller
An equally important step in the process of establishing an energy cooperative is to agree on the rules for settlements between the members of the energy cooperative. Therefore, a set of internal agreements should be prepared in this regard. In addition, the energy cooperative is required to conclude a distribution agreement with the DSO and a comprehensive agreement with the obligated seller.
Summary
The 2023 amendment to the RES Act finally shaped the legal regulations concerning the establishment and operation of energy cooperatives. The register of cooperatives maintained by KOWR shows that the new regulations have been assessed as attractive by many investors – within less than a year of the amendment coming into force, approximately 30 new cooperatives appeared in the register. However, this is still a small number in relation to the number of sources that operate independently, but unfortunately remain heavily dependent on the technical condition of the local energy infrastructure and the ability of the DSO to receive the energy generated. As the experience of recent years shows, the regulatory environment can be volatile, and amendments to regulations often limit the privileges previously granted by the legislator, which encouraged investment in RES sources. This is where the lasting and long-term benefits of organisational forms such as energy clusters and energy cooperatives lie, which offer a high degree of self-sufficiency in energy production and multi-faceted independence from DSOs, while maintaining the security of being able to use the public grid in the event of energy shortages or overproduction.
[1] Article 2(33a) of the Act of 20 February 2015 on renewable energy sources
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