A new beginning for energy cooperatives

According to the amendment of the Renewable Energy Sources Act of 19 July 2019, an energy cooperative is a cooperative within the meaning of the Cooperative Law or the Farmers’ Cooperatives Act, the object of which is the generation of electricity, biogas or heat in RES installations, exclusively for the energy cooperative’s own needs and those of its members. According to the adopted legislation, an energy cooperative operates in the area of a single distribution system operator to whose grid the generators and consumers who are members of the cooperative are connected.

In addition to the locational condition of operating on the territory of one DSO, the Act also introduced the requirement that the members of the cooperative be dispersed in a maximum of three neighbouring rural or urban-rural municipalities. Significantly, the Act did not provide for the possibility for cooperatives to be located in exclusively urban municipalities, which seems to be a major oversight. As it seems, however, the intention of the legislator at the time of the adoption of the legislation was that energy cooperatives should primarily involve rural areas.

A cooperative may have a maximum of 1,000 members – either consumers or generators connected to the grid in a given area. The number of founders of a cooperative may not be less than ten if the founders are natural persons and three if the founders are legal persons.

The law also provided for maximum installed capacities of the generating installations participating in the cooperative. These installations must be owned by the energy cooperative or its members. Thus, as far as electricity generation is concerned, the total installed electrical capacity of all renewable energy source installations must not exceed 10 MW. This is the installed capacity after adding up the capacity of individual installations, including micro or small installations. For heat generating installations, on the other hand, the total thermal output must not exceed 30 MW. And for biogas, the annual capacity of all installations must not exceed 40 million m3. At the same time, the cooperative must make it possible to cover no less than 70% of the energy needs of all cooperative members during the year.

From a formal point of view, it was assumed that energy cooperatives would be registered in a special register kept by the National Agricultural Support Centre (NEB), after the cooperative had been registered in the National Court Register.

The July 2019 amendment regulated the conditions for the operation of energy cooperatives in quite some detail, but a key element was essentially missing – detailed rules on how such cooperatives will account for themselves.

Without a regulation, the provisions of the July 2019 amendment thus scored a kind of false start. Despite the great interest in energy cooperatives and the fundamentally correct assumptions in the law, no such cooperative has so far been established. Although there are entities called energy cooperatives in Poland, they function more along the lines of energy clusters. In contrast, there is no energy cooperative in Poland within the meaning of the RES Act.

The RES Act adopts the general principle that cooperatives will be billed similarly to prosumers at present (on the basis of the so-called discounts), with the difference that, in the case of cooperatives, the settlement of the amount of energy injected into the grid against the amount of electricity taken from the grid for its own consumption by the energy cooperative and its members, will take place in the quantity ratio of 1 : 0.6 (currently, for prosumers, this ratio is 1 : 0.7 or 1 : 0.8). In other words, for 1 MWh of energy not used in a given billing period and injected as surplus into the distribution grid, the cooperative (and its members) will be able to take 0.6 MWh of energy from the grid in situations where the generating sources do not cover the electricity demand at any given time. The amount of unused energy can also ‘carry over’ to the next billing period, but in total this period cannot be longer than 12 months from the last day of the month in which such excess energy was fed into the grid.

But how do you do the settlements in the case of several, dozens or even hundreds of cooperative members? How to balance the cooperative and its members? – These questions are to be answered by a decree implementing the Act, which is currently being drafted. The proposed ordinance primarily details the statutory provisions and introduces rules for settlement and balancing of cooperatives. Let us look at its key points.

Firstly, the principle will be that metering data covering the amounts of energy fed into and taken from the distribution network by all generators and consumers who are members of a cooperative will be recorded by remote reading meters. Each member of the cooperative will therefore be required to have such metering, which is essential for the cooperative’s billing to be based solely on actual consumption.

Secondly, the remote reading meters will record separately the amount of electricity that has physically been fed into the grid and taken from the grid by individual members of the cooperative during a given hour, and will count the amount of electricity fed into the grid and taken from the grid by adding up the energy fed in on all phases. The data will therefore be summed balancing, also within the cooperative as a whole. This will be carried out using the so-called vector method of inter-phase balancing (detailed formulae can be found in the draft regulation).

Thirdly, electricity with the oldest date of introduction to the grid will be settled first, taking into account that, pursuant to the RES Act, unused electricity in a given settlement period will be carried forward to subsequent settlement periods, but no longer than for the next 12 months from the date of its introduction to the grid.

Fourthly, the rules for incurring charges and settlements by members of the cooperative towards the trading company are also set out. These charges will be calculated on the basis of the amount of electricity billed under a ratio of 1 : 0.6, in proportion to the amount of electricity consumed by individual consumers during the billing period. These charges will be in accordance with the prices or charge rates set in the tariffs in force for individual consumers in a given settlement period.

The regulation also provides, among other things, for billing rules in the case of multi-zone tariffs, the scope and manner of making metering data available, and issues relating to the personal scope of cooperatives.

In doing so, it should be noted that energy cooperatives by virtue of the Act benefit from significant exemptions under energy billed as described above. First of all, neither the cooperative nor its members pay distribution charges, the amount of which depends on the volume of electricity consumed (which in practice applies to most of the distribution rates). This is an important convenience – it should be noted that the cooperative’s energy is transmitted through the public distribution network, which would normally make it necessary to bear all distribution rates. In addition, the RES fee, the co-generation fee and the power fee are not charged and collected on the amount of energy generated and directly consumed by the members of the cooperative, and there are no obligations to redeem certificates of energy origin.

As estimated by the Ministry of the Economy, as a result of the proposed regulations, around 100 energy cooperatives may be established in Poland. It may therefore be a new opening for such a distributed energy formula. It is worth noting that, apart from the cooperative’s accounting rules under the law, the cooperative is by nature characterised by a rather liberal form of cooperation between members, based mainly on the cooperative’s statutes. Thus, it is the cooperative members themselves who have a great deal of freedom in shaping the way they cooperate, settle or finance.

The regulation will enter into force six months after its publication in the Journal of Laws. The draft is currently at the opinion stage. You can read the draft regulation by clicking on the link.