Waiting to charge up

Solar power installations are now popping up everywhere across Poland. The intensive rate of solar power development is to some extent being driven by the government’s ‘My Electricity’ programme; but unfortunately, investors still face a series of barriers on the road to low emissions and implementing green solutions, and, as a result, there is still only a small number of commercial high-power installations. The main problems include the lack of provision for these in local spatial plans, over-complicated legal regulations, the inability to connect to overloaded power grids, and the still prohibitively high cost of the technology.

Confused regulations

The first problem investors face is the lack of local spatial plans (MPZP). “Until 2010, the situation was simple, but changes to the zoning laws later on started making it more complicated for energy producers and businesses to build large-scale solar power installations. It could be said that the legislation regarding this has become more complicated and this has reduced the incentive to build such installations. Added to that, the regulations often change, to the extent that even the authorities have problems interpreting some of the legal provisions. There is certainly room for simplification, which would only help in the development of renewable energy sources,” argues Marcin Bania, the senior investment specialist for the City of Zabrze.

A law passed in 2016 put the brakes on wind power development in Poland by introducing one of the most restrictive distancing regulations in Europe – the 10H rule, which set the minimum distance between a wind turbine and the nearest building at ten times the height of the turbine. This regulation was apparently prompted by public dissatisfaction over the rapid development of wind farms, especially after projects had gone ahead without prior public consultation. When the act came into force, it drastically slowed down the development of the wind power sector in Poland, as the number of sites that met the new requirements was suddenly in short supply. An amendment to the act came into force in April this year, under which wind farms can be built at a distance of 700m from buildings. This might seem like an improvement, but it is estimated that only 7 pct of land in Poland meets these new requirements.

When it comes to solar farms, spatial plans also often impose restrictions on their construction, because one tax rate is paid for the installations while a higher one is paid for buildings. Local authorities prefer projects with buildings, since they can earn more from them. Whether it is possible to have installations on roofs when tax is already being paid for the building, is a question that many district authorities are unable to answer – and this means that developers and investors then have to request an interpretation of the local plan.

Panattoni has been building reinforced roofs on all of its developments for more than two years in preparation for changes to the regulations, which must come sooner or later if Poland is to meet its EU obligations. As Emilia Dębowska, the sustainability director at Panattoni points out, the company already has up to 1.5 mln sqm of such reinforced roofs. Such a scale would make it possible to install around 80 MWp of solar panelling in the future and with all the other projects it has already planned this could be increased by another 20 MWp.

The construction of reinforced structures makes economic sense – the cost of reinforcing the roofs of greenfield projects amounts to around EUR 10 per sqm, while reinforcing those of existing buildings comes to about EUR 60–70 per sqm. Therefore, all of Panattoni’s new buildings come with reinforced roofs as standard. And this only forms part of the warehouse developer’s decarbonisation strategy, as Panattoni has already installed 54 MWp of power generation capacity across Europe.

A grid in need of modernisation

Local plans can also prohibit the construction of solar installations due to the fear of overloading the electricity grid, which in Poland is completely unsuited to any rapid expansion of renewable energy. Electricity distributors are tasked with ensuring the stability of the grid, which is why investors are increasingly often being refused such connections even after months of waiting, thus ruling out the development of renewable energy sources in many locations. According to wysokienapiecie.pl, electricity distributors issued more than 7,000 refusals to connect a total capacity of 51,059 MW last year – more than in the entire preceding decade. It would be huge improvement, therefore, if network operators were more flexible and transparent in their operations, as they all currently process and issue connection conditions differently. “Any simplification of the regulations has to be followed by a massive investment in the electricity grid. Unfortunately, this is going to be a lengthy and expensive process, as it is currently estimated that around PLN 100 bln is required to modernise the Polish grid. All stakeholders agree that the grid has to be brought up to meet current needs and that the funds for its modernisation have to be found. But when this actually happens, only time will tell,” admits Emilia Dębowska.

Formalities

When it comes to the formal requirements, there are two power thresholds and different rules for each. With installations of up to 50 kWp, neither planning permission nor permission to connect to the grid is required – but this is a rather insufficient capacity for a large development. For the sake of comparison, installations of 7–10 kWp are often installed in medium-sized family homes. Large companies are also setting up such installations, but only to show how much they care about the environment and that they use green energy, even though the power generated is only a drop in the ocean when it comes to their needs. A recent amendment raised the threshold from 50 to 150 kWp, but in practice not much has changed, as the difference is only for construction permits – installations of above 50 MWp still require a permit to connect to the grid, the waiting time for which is very long (about a year). Installations of between 50 kWp and 1 MWp require a building and a grid connection permit, while installations of above 1 MWp require a licence to generate and sell electricity – and it is these that developers are most interested in.

Non-market pricing

The ideal situation would be if investors could generate electricity for their own needs and sell off the surplus, but in Poland this has yet to pay off. “The problem is that right now surplus electricity is not purchased at the market rate. When a project is balanced and a farm generates more or less as much energy as a building uses, everything’s ok. You have to take into account that such a balance needs to be maintained over periods of 15 minutes, which when you look at the power used by a building and generated by a farm, is only part of the production time. So, an investor is not going to make any money out of selling their surplus electricity,” admits Jarosław Fiutowski, the member of the board responsible for ESG and sustainable construction at Ghelamco. “The price ceiling for which you can sell electricity has been set at such a level that you cannot make money by selling this product. Among other reasons, this is why investing in a solar farm for a large building like the Warsaw Unit is not going to pay off for six or seven years. Despite this, we are still aiming for all of our projects – including those still under development, such as The Bridge and the Vibe – to be powered by our own renewable energy sources,” he adds.

Ghelamco currently supplies the Warsaw Unit with 100 pct renewable electricity, which requires a 15 ha solar power farm. Such a development could obviously not be built in the city centre, nor even within the city limits. For this reason, Ghelamco has built a number of solar farms in different parts of Poland. In theory, they should all now be running, but starting up their operations has taken more time than expected, so the developer has had to buy green electricity. “For the Warsaw Unit, which will be exclusively powered by green energy, we have secured a buffer of purchased electricity that is guaranteed to come from renewable sources, that is, energy that did not create a carbon footprint during its generation. We will continue to operate in this way until our own sources fully meet the needs of the development. We can estimate how much energy our building uses in a year and we have built solar farms with the capacity to generate that and some extra power to ensure enough electricity,” explains Jarosław Fiutowski.

Profbud has adopted a similar approach, but for the residential sector. In Konstancin-Jeziorna just outside Warsaw, it is building the Gaia Park residential estate, which is to be entirely supplied from the developer’s renewable energy sources. Each of the homes, including the terraced houses as well as the apartment blocks, is to be powered by green energy, while the construction of a wind farm is to be completed by the end of this year to provide residents with free electricity for the next twenty years.

The power generation for both wind and solar farms is seasonal. Wind turbines operate more effectively over the autumn/winter period, while solar farms work best in the spring and summer. A combination of both sources is to be used to generate enough electricity for the Gaia Park development throughout the year. “We estimate that the wind farm by itself will generate enough electricity for 16,000 homes. This is a significant amount that will also allow us to use wind energy in other new residential projects,” explains Przemysław Szramowski, a purchaser for Profbud’s subsidiary Green On Energy.

Wasting energy

One popular model used by investors is the autoconsumption model, in which green energy is generated where it is consumed and the surplus is not sold back to the grid. Power outflow guards are installed to block the flow of power to the grid. This is what happens at the Amazon warehouse in Świebodzin built by Panattoni, where 4,000 solar panels with a 1.8 MWp capacity have been mounted over a 200,000 sqm area. Such systems can be improved with power storage facilities, which are particularly effective for manufacturing plants that operate with three shifts and for refrigerated storage units. Batteries that store the electricity generated during the day can then be used to power the plant’s machinery at night. “Theoretically, we can store energy, but this technology is very expensive. We already use such a solution in our Western European parks. In Poland, we have been analysing the costs for our tenants who want to use a lot of power and would like to use the surplus at night. Such systems could soon be coming to Poland,” reveals Emilia Dębowska. She highlights as, an example, Panattoni’s project in Heerenberg in The Netherlands, which features an innovative system that connects solar panels to batteries allowing for surplus solar power to be stored and to be used later when the demand is greater than the supply. Tenants do not require a connection to the grid and the building puts no pressure on an overloaded network. Profbud also intends to build energy storage facilities for its wind farm.

Autoconsumption works well with BTS and BTO developments, because the energy demand can be estimated for these types of projects, whereas this is far more difficult for speculative developments. In Germany, the maximum number of roof solar panels can be installed because the surplus electricity can be sold; but in Poland, the simplest solution is to make a more modest investment and rely on autoconsumption. A building needs to operate for at least a year to work out its annual balance and then estimate its electricity requirements.

Panelling stays expensive

The costs of renewable energy installations remain high. A 50 kWp installation requires an investment of about PLN 190,000, but for 1 MWp you have to pay out around PLN 3 mln to which you also have to add administrative and design costs of around PLN 65,000. A 2 MWp installation comes at a cost of PLN 5.8 mln with administration costs of PLN 100,000. The equipment has an estimated lifespan of 15 years, but investing in solar panels pays off in around six to seven years. It is estimated that you need solar panelling to cover around 20–30 pct of the roofing to meet the needs of a logistics centre and 50–70 pct for manufacturing plants and refrigeration centres.

Piotr Kapuściński, the vice-president of Ciech Soda Polska – a chemicals company that is active in Europe and also distributes electricity – is another who points to the high costs as a factor. “Until now, we haven’t used solar panelling for three reasons. Firstly, the long investment return period. Solar panelling only pays off after seven or sometimes even after ten years. The second is the availability of renewable energy. Our factory operates 24/7. Solar energy is not continuous and energy storage is very expensive and often not particularly effective. The third reason is the fact that our factories require a lot of steam, which has to meet particular parameters – and we are not able to produce it with solar energy,” he explains.

How others do it

Emilia Dębowska points out that in the West a much simpler solution is used. “Business models in Germany are much more flexible, so investors know what the risks are and what the rate of return will be from an installation. You can feed limitless energy to the grid. It’s true you have to wait for permission to connect it, but these requests are usually granted. More importantly, you only need to declare a month in advance how much power you will make available. This is extremely important when you build speculatively. The developer covers the entire roof with solar panels and when a contract is signed with a tenant the declaration is reduced by the amount the tenant is going to use, for a period of – let’s say – five years. When the tenant leaves the building, the owner again declares that the power will be sold back to the grid,” she explains. In Panattoni Park Heerlen in The Netherlands another model is employed. The roof installations of the distribution centre generate power for both the tenant as well as external consumers, including the Ikazia hospital in Rotterdam, 2,000 homes and frozen food transportation company Froster, which is based in Waalwijk about 140 km to the north.

Of course, the Germans and the Dutch have better distribution networks that are able to cope with surplus power, but it seems that they are also more open to renewable energy. In Poland, there is the widespread belief that an investor who builds their own power plant is basically committing an act of rebellion by refusing to use state-provided electricity as this reduces the government’s control of the market.

Profit isn’t everything

At the moment, it is still difficult to gauge the profitability of renewable energy, but investing in it is not just all about profits. “With the EU’s Green Deal, Poland has no choice but to shift its energy mix to green energy. There’s no way around this, because decarbonising construction is an EU priority and ever greater sums are being allocated for energy transformation. Moreover, it is quite possible that by 2028 all new buildings in the EU will have to be carbon neutral,” predicts Emilia Dębowska of Panattoni. Jarosław Fiutowski of Ghelamco is of a similar opinion: “The importance of renewably powered real estate is growing. What does this mean? Our solar farms are not an investment product that provide a rate of return and increase the value of our projects, but they are more to do with the investor’s conscience and preparing for the future. However, buildings supplied by their own sources of renewable energy will become more competitive and are sure to win out in the future.”