In the publication, the results of the audit conducted by the Supreme Audit Office (NIK) regarding the development of offshore wind energy in Poland will be analyzed.
This analysis takes on a completely different dimension in the context of the second-level BRAVO alert introduced by the Prime Minister on October 6, 2022, concerning Polish energy infrastructure located outside the borders of the Republic of Poland. The regulation, introducing the BRAVO alert level, is in effect from October 6, 2022, at 00:00 until November 30, 2022, at 23:59.
Legal Context
In earlier publications, we indicated that according to the provisions of the Anti-Terrorism Act of June 10, 2016, in the event of the declaration of at least a second-level alert, i.e., a situation of increased and predictable threat of a terrorist event without an identified specific target, the Police are obliged to inspect the security of critical infrastructure facilities.
Furthermore, in relation to selected facilities, considering the type of threat, the Head of the Internal Security Agency, in agreement with the Minister of the Interior, may recommend special security measures to the Police.
In the regulation of the Prime Minister on the scope of actions performed at various alert levels and CRP alert levels of July 25, 2016, an executive act to this law, issued under the statutory delegation contained in Article 16, paragraph 5 of the Anti-Terrorism Act, there is a provision authorizing the Chief of Police, the Chief of the Border Guard, or the Chief of the Military Police to introduce the requirement for uniformed officers or soldiers directly performing tasks related to securing sites and facilities that may potentially become targets of a terrorist event, to carry long guns and wear bulletproof vests, in the case of the introduction of at least a second-level alert.
How the aforementioned tasks will be carried out, given the highly fragmented and competence-lacking Polish “marine law enforcement bodies,” remains a significant mystery to the authors of this article.
Purpose and Scope of the NIK Audit
Focusing on the results of the NIK audit on the development of offshore wind energy in our country, it is necessary to present the background and purpose of the audit conducted by the Supreme Audit Office, which covered the period from January 1, 2019, to September 24, 2021. NIK, in its audit report, noted that the potential of Polish marine areas (specifically the Exclusive Economic Zone, EEZ) is approximately 28.0 GW. Simultaneously, information obtained from the Polish Power Grid Company indicated that the maximum average annual and daily demand for energy in Poland, from 1980 to 2020, did not exceed 28.0 GW. Therefore, the conclusion is that the demand for power in Poland corresponds to the generation capacity of offshore wind energy (OWE) in Polish marine areas. This means that offshore wind energy, due to its scale of energy supply, could have a decisive impact on ensuring the country’s energy security, economic security, and overall national security.
Considering the above conclusions, the Supreme Audit Office defined questions outlining the main and specific objectives of the audit:
Are the creation of legal and financial regulations to stimulate the development of the offshore wind energy sector in Poland encountering barriers?
Do the planning and implementation of government strategies and plans for organizing and financing the offshore wind energy sector stimulate its development?
Have government administration bodies properly and reliably carried out administrative procedures related to offshore wind farm projects in Polish marine areas, accurately identified barriers and problems in this area, and taken effective actions to eliminate them, including regulating or improving these procedures concerning offshore wind energy?
What were (or still are) the reasons for the prolonged process of developing the spatial development plan for internal marine waters, the territorial sea, and the exclusive economic zone, and does this plan (its draft) consider the potential development of offshore wind energy in Polish marine areas?
The entities audited by NIK included: the Ministry of State Assets, the Ministry of Infrastructure, the Ministry of Climate and Environment, the Energy Regulatory Office, the Maritime Office in Gdynia, the Maritime Office in Szczecin, and the Regional Directorate for Environmental Protection in Gdańsk.
The Supreme Audit Office found that the absence of Offshore Wind Energy in Poland, and thus the missed opportunity for sustainable economic development it offers, despite the potential of 28.0 GW in Polish marine areas and the risk of energy shortages, was the reason for initiating the audit on the development of offshore wind energy.
The audit was initiated on the Supreme Audit Office’s own initiative. It was preceded by pre-audit analyses conducted for identified areas—problems related to the state of development of OWE in Poland, based on, among other things, analyses of legal regulations, including proposed ones, records of meetings of the Parliamentary Team for Offshore Wind Energy from 2017–2019, and information obtained under Article 29, paragraph 1, point 2, letter f of the NIK Act from 45 stakeholders in the development of OWE in Polish marine areas.
Results of the NIK Audit
The audit report is quite extensive; therefore, this analysis will cover the most critical issues arising from the NIK report.
In the area of planning and implementing government strategies and plans, the Supreme Audit Office found that the imprecise determination of the location for the installation port for offshore wind farms, the lack of an executive program, and the absence of an assessment of the previous program do not provide a clear message to investors about the state's intentions and policies regarding offshore wind energy, which are necessary for making investment decisions.
a) Vague Location of the Installation Port
No offshore wind farm will be built without a port. Its role is crucial both during the construction phase, serving as the installation port, and during their operation (lasting about 25 years), ensuring their service and maintenance. This information is essential for making important investment decisions related to these projects. The location of such ports on the Polish Baltic Sea coast would contribute to the development of the domestic supply and service chain associated with these projects, providing a development impulse for the national economy.
Otherwise, the implementation of these projects will involve the economies of other countries, as ports in Denmark or Germany will be used.
However, the decisions made regarding the location of the installation terminal for offshore wind farms by the state administration did not favor the development of offshore energy as a significant development impulse for the entire Polish economy. Considering investment plans and the fact that the investment process for OWE takes about three years, the installation port for the first OWEs should be ready by 2024 to enable the launch of OWEs from 2026.
Meanwhile, discussions about where the terminal should be located were still ongoing in 2022, and as of the publication date of this article, it is still unknown where this port will be situated. It is not surprising that, given the very ambitious plans for the development of the OWE sector in Poland, the installation port should have already been built in Poland.
b) Excessive Fragmentation of Administrative Procedures
Another issue, critically assessed by the Supreme Audit Office, is the administrative procedures related to OWE. NIK pointed out that there is excessive fragmentation of administrative procedures, as indicated by the fact that at least 11 bodies (nine ministers and the Head of the Internal Security Agency, as well as the relevant village head, mayor, or city president) conduct 23 proceedings requiring at least 40 agreements between the bodies.
Thus, the experiences of countries with developed Offshore Wind Energy were not utilized. The Supreme Audit Office indicated that the Minister of Infrastructure, in proceedings regarding location permits for OWEs that were suspended or processed during the audit period, including the conducted resolution procedure, did not establish clear and unambiguous criteria for assessing applications submitted in the resolution procedure (ensuring information on exactly what and how will be assessed).
Furthermore, by the end of the audit, the Minister had not issued a regulation on the evaluation of applications submitted in the resolution procedure, which should not only have come into force with the offshore law but should have provided essential information for potential investors.
Incidentally, it is worth noting that this regulation was issued on November 27, 2021, and came into force on December 16, 2021, nearly ten months after the offshore law came into force, whereas it should have come into force simultaneously with the law.
c) Maximum Price for Electricity from OWE
Another significant issue addressed in the audit report on the development of OWE is the maximum price for electricity produced in OWE. The Minister of Climate and Environment determined the maximum price for electricity produced in OWE and introduced into the grid in PLN per 1 MWh, which forms the basis for the settlement of the right to cover the negative balance, by regulation of March 30, 2021. However, it did not consider the actual inflation rate at that time, which was 3.1%, not 2.6%, as assumed, resulting in an overly low maximum price. This error can be compounded when considering the current inflation rate, as the price determined based on the wrongly assumed inflation rate will be subject to indexation under Article 38, paragraph 5 of the offshore law.
d) Spatial Development Plan for Polish Marine Areas
The final issue to be addressed in this article is the problem of spatial planning for Polish maritime areas (PZPPOM). The Supreme Audit Office indicated that PZPPOM is consistent with the PEP 2040 regarding the potential for generating 11 GW of power from offshore wind fa rms by 2040 in the Polish Economic Zone (WSE) in the Baltic Sea.
However, its role has been limited due to the introduction of the Offshore Act, which mandates that the location of offshore wind farms corresponds to the areas specified in Annex 2 to this Act and Article 106 thereof. Thus, it is the Offshore Act (in Annex 2) that defines the "areas within which offshore wind farms may be located," rather than the aforementioned plan, as could have been assumed before the Offshore Act came into force. According to the Maritime Areas of the Republic of Poland Act, the plan determines the areas and conditions for obtaining renewable energy.
As a result, based on Article 106 of the Offshore Act, proceedings concerning a total of 63 applications submitted between 2012 and 2020 were terminated. Both the NIK's opinion and the authors of this article suggest that the change in the rules for locating offshore wind farms constitutes a breach of the principle of trust in public authority, including the principle of legal stability.
Conclusions from the NIK's audit:
Considering the need to ensure Poland's energy security and implement EU provisions regarding the participation of renewable energy sources in the energy market, and the fact that it has been about 10 years since the first permits were issued for the construction of artificial islands for areas where offshore wind farms with an installed capacity of several GW could be built, and so far no such installations have been built.
The Supreme Audit Office has pointed out the urgent need to make further executive decisions regarding terminal infrastructure for servicing offshore wind farms in Polish maritime areas by resolving the issue of the location of service ports and clearly defining the deadline, costs, and sources of financing for investments.
Furthermore, emphasis has been placed on the need to provide alternative financial means for both the construction of an installation port and service ports due to the prolonged uncertainty surrounding the approval of the National Recovery and Resilience Plan.
Moreover, a recommendation was made to the Prime Minister to conduct a thorough analysis of further possible simplifications of administrative procedures related to investments in offshore wind energy towards their integration and acceleration, as well as to take appropriate legislative initiatives in this regard.
A notice to the Minister of Climate and Environment concerned updating the inflation rate and verifying the variables dependent on it adopted for calculating the maximum price specified in the regulation of the Minister of Climate and Environment of March 30, 2021, regarding the maximum price for electricity genera ted in an offshore wind farm and fed into the grid in Polish zlotys per 1 MWh, which is the basis for settling the right to cover a negative balance.
Summary:
In summary, neither the results nor the conclusions drawn from the information on the NIK's audits in the sphere of offshore wind energy development are surprising.
For some time now, in a series of our articles, we have pointed out very serious deficiencies and gaps concerning the development of offshore wind energy in Polish maritime areas.
It also remains a mystery from which sources future infrastructure investments in offshore wind energy will be financed.
One could even argue that this is one of the most neglected legislatively "newly created" sectors of the Polish economy. In light of the above, only decisive and concrete actions by the legislature can ensure the actual development of offshore wind farms in the Polish maritime areas; otherwise, the issue will remain in the realm of demagogy and populist political slogans.
This does not mean, of course, that offshore wind farms will not ultimately be built in the Baltic Sea in the Polish economic zone. However, the problem will be that it will be an undertaking built, controlled, managed, and privately protected by foreign capital groups, which rather contradicts the increase in Poland's energy security.
Mateusz Romowicz – Attorney-at-Law
mgr Przemysław Niewiński – Lawyer, Consultant of the Law Firm
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