Legal Alert: New rules for direct line

On September 7, new direct line regulations entered into force. What does this mean for power generators and industry?

The institution of direct line is not a new solution in Polish legislation (it was introduced into the Act of 10 April 1997 - Energy Law ("Energy Law") as early as 2005), but due to the shape of the regulations so far, it has not been applied in practice. Until now, an entity interested in constructing a direct line had to apply for a permit from the President of the Energy Regulatory Office (ERO) to locate such a line before obtaining a construction permit. The ERO President, on the other hand, when issuing such a decision, had to take into account the possibility of using the transmission capacity of the existing electricity network.

This is set to change with the amendment to the Energy Law, passed on 28 July 2023 . The new regulations are intended to allow direct delivery of electricity from source to consumer. Although the purpose of these provisions is to ensure that consumers (especially energy-intensive ones, which have been strongly affected by energy price increases in the past few years) have access to cheaper, renewable energy, the use of a direct line is possible for any power generation technology.
 

According to the new definition, there are two types of direct line.

First, it can be a power line that connects a separated generating unit to a separated customer for the direct supply of electricity to that customer.

A separated generating unit is a generating unit from which all electricity generated is included in the direct supply of electricity to the separated customer.

A separated customer is, however, a customer that:

1. is not connected to the grid or
2. is connected to the grid:

a.    in a way that prevents the electricity generated at the separated generating unit from being fed into the grid, or
b.    meets the conditions, technical requirements and obligations for feeding energy supplied by a direct line into the grid as specified in the Law.

The second case is an electric power line that connects a generating unit to an electric power company other than the generating unit, which is engaged in the business of electricity trading, for the direct supply of electricity to their own facilities, including equipment or installations, entities that are their subordinate units within the meaning of the accounting regulations, or to customers connected to the networks, equipment or installations of these companies.

In both of these Options, a consumer using a direct line can simultaneously be connected to the grid (after fulfilling the statutory conditions for grid connection) and draw energy from it on an equitable basis, provided that its equipment or installations prevent electricity supplied by a direct line from being fed into the grid.

If, on the other hand, the consumer plans to feed surplus energy into the grid, then the following conditions must additionally be met:

1. the consumer is connected to the grid;
2. the consumer will have concluded the relevant energy supply contracts (energy transmission/distribution service contract and energy sales contract, or comprehensive contract);
3. the technical requirements stipulated by law and the relevant internal regulations of the operator to whose grid the consumer is connected are met;
4. an electricity trading licence has been granted.
    

The construction of a direct line will be possible after obtaining an entry in the list of direct lines and will not depend on the possibility of connection to the grid.

The applicant notifying the ERO President of its intention to construct a direct line or to continue using a direct line will have to attach to the notification i.a. an expert report on the impact of that direct line (or the equipment, installations or networks connected to it) on the electric power system, prepared by an entity with the qualifications specified in the law.

The scope, terms of execution and main assumptions of the expertise will have to be agreed with the DSO or TSO to which the separated customer will be connected, or the entity engaged in the business of electricity trading, to which electricity will be supplied through the direct line.

The obligation to prepare an expert report does not apply to a direct line:

1. implemented under Option B, if the separated consumer is not connected to the electricity grid, or
2. implemented under Option A or B if the total installed capacity of the generating units is not more than 2 MW and:

a.    insofar as the planned or existing equipment or installations of the customer do not allow electricity supplied by a direct line to be injected into the distribution or transmission grid, or
b.    where the conditions set out in the Act for feeding electricity supplied by direct line into the grid are fulfilled.

A draft notification for the intention to build a direct line or to continue using a direct
line has already been published on the website of the Energy Regulatory Office.

The President of the ERO will be able to refuse entry to the list of direct lines if, inter alia:

1. he finds a negative impact of the direct line (or the equipment, installations or networks connected to it) on the grid in the form of endangering the security of electricity supply, or
2. an expert report indicates a negative impact of the direct line (or the equipment, installations or networks connected to it) on the grid in the form of endangering the security of electricity supply.

In practice, the direct line provisions should allow for an off-grid model in which the energy source does not belong to the consumer. Until now, it was possible to build a source for one's own use without connecting it to the grid, but the consumer of that energy had to hold the legal title to the source. The model in which the energy source belongs to an entity other than the consumer requires the conclusion of a power purchase agreement, which in turn implies the conduct of economic activity in the field of energy production - and this requires a license. In practice, obtaining a power generation license in an RES installation has so far required the presentation of documents confirming the possibility of connection to the grid, as proof of the fulfilment of technical conditions ensuring the proper performance of the economic activity.
 

The Parliament decided to impose an obligation on customers connected to the grid, to which power will be supplied through a direct line to pay to the TSO/DSO:

1. a so-called solidarity fee depending on the amount of power supplied through that direct line, corresponding to the entity's share of fixed costs for the transmission or distribution of power, in the part not covered by other components of the tariff and
2. a fee to cover the costs of maintaining system quality standards and reliability of current power supplies, depending on the amount of power supplied through that direct line.

The method of determining the solidarity fee will be specified in the so-called tariff regulation (the Regulation of the Minister of Energy on the Method of Forming and Calculating Electricity Tariffs and the Method of Settlements in Electricity Trading) after consultation with the ERO President.

The new rules will certainly unlock the possibility of locating direct lines in Poland, by making entry on the direct lines list independent of the possibility of connection to the NES. However, the cost-effectiveness of such a solution for customers planning to connect to the grid at the same time will depend on the amount of the solidarity fee. However, this question will only be answered by the new provisions of the tariff regulation.