Polish Economy Ministry Proposes Cuts To Co-Firing Biomass Subsidy

Date : 07/27/2012 @ 10:06AM
Source : Dow Jones News

Polish Economy Ministry Proposes Cuts To Co-Firing Biomass Subsidy

By Marynia Kruk

WARSAW--Poland's Economy Ministry wants to reallocate government subsidies for renewable energy away from the co-firing of biomass with coal, which have caused imbalances in the economy and haven't fostered a fast-enough build up of new renewable power capacity, ministry officials said Friday.

Polish power utilities such PGE Polska Grupa Energetyczna SA (PGE.WA), Tauron Polska Energia SA (TPE.WA), and Enea SA (ENA.WA) have received in total some 500 million zlotys in 2011 in subsidies from the Polish government for the electricity they generate by mixing the coal they burn in their old plants with biomass, such as wood pellets, said Pawel Puchalski, an analyst at BZ WBK in Warsaw.

The Economy Ministry wants to curtail this government support, in favor of support for what it hopes will be a more diverse mix of renewable power sources, including photovoltaics, and small and scattered renewable installations.

Because co-firing of coal and biomass has been so lucrative, due to the government subsidy which was introduced in 2005, demand for biomass has skyrocketed, said Janusz Pilitowski, Director of the Renewable Energy Department at the Economy Ministry.

Mr. Pilitowski was speaking at a news conference held to explain the rational for the changes being proposed in a draft bill the ministry published Friday and hopes will be passed this year, to go into effect from Jan 1, 2013.

Poland is now importing PLN1 billion worth of biomass a year, Mr. Pilitowski said.

"PLN 1 billion is a lot of money and perfectly healthy trees are being cut down to make pellets," said Mieczyslaw Kasprzak, Secretary of State at the Economy Ministry. "We don't want support for co-firing to stuff someone's coffers."

Average wood prices in Poland have risen 40% since 2009, Mr. Puchalski of BZWBK said.

Mr. Kasprzak added reducing biomass imports will help Poland's trade balance.

The Economy Ministry draft bill also wants to increase subsidies to households and small businesses who build renewable power generation on their properties and to cut red tape to make it easier to install solar panels on the roof of a house, for instance, and hook it up to the grid.

-Write to Marynia Kruk at marynia.kruk@dowjones.com

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