Legal Alert: Cable pooling - summary for the first six months under the new regulations

According to data published by the Energy Market Agency, in October 2023, photovoltaic installations with a total installed capacity of more than 16 GW were operating in Poland. PV installation operators are becoming increasingly affected by the rapid increase in installed capacity on the one hand and the underinvestment in transmission and distribution systems on the other. It must be noted that, since the beginning of this year, Polskie Sieci Elektroenergetyczne S.A., acting as the transmission system operator (‘TSO’), has already issued several orders to underestimate power generation (non-market-based redispatching) pursuant to Article 9c(7a) of the Act of 10 April 1997 - Energy Law (‘Energy Law’).

From one side, considering the ambitious climate targets set by the European Union (most recently in the ‘Fit for 55’ package), it is in Poland's vested interest to further increase the installed capacity of RES installations. However, on the other side, a further increase in installed capacity (especially in one type of RES installation) will intensify the already existing problems related to the lack of possibility to control the amount of energy generation from renewable sources according to the current demand for power in the system. Increased non-market-based redispatching orders issued by the TSO should be expected, especially on sunny days that coincide with public holidays, when the demand for power in the system is at its lowest. 

Further growth of installed capacity in PV installations, without adequate encouragement to invest in energy storage systems (and streamlining the procedure for connecting storage systems to the grid), will only compound the above problems. It also seems that security of power supply will require an expansion of installed capacity from wind power.

The sustainable growth of the capacity installed across a variety of RES installations should be facilitated by cable pooling, a mechanism allowing two or more RES installations to share a single connection to the grid. On 1 October 2023, regulations enabling cable pooling came into force. They were introduced into the Energy Law by the Act of 17 August 2023 amending the Renewable Energy Sources Act and certain other acts. Thus, 1 April marked the half-year anniversary of the cable pooling provisions. Admittedly, it is still too early to speak about the development of any practice with regard to the connection of RES installations under cable pooling (pursuant to Article 7(8g) point 5 of the Energy Law, in the case of applicants classified in connection group I or II, the time limit for the examination of the application for the issuance of connection conditions is 150 days), however, certain practical problems that both investors and operators will be facing can already be pointed out.

As an introduction, it is worth to note the report of the Supreme Audit Office, resulting from an audit of distribution system operators, published on 20 March 2024. The report highlights underinvestment in the grids and underdevelopment of the power system, in particular the distribution system, which results in refusals to connect to the grid, as well as a reduction in the quality of power supply indicators.

Cable pooling, direct line and so-called 'commercial connection' have the potential to be a remedy for at least one of these problems, that is, a slowdown in the growth of installed capacity in RES installations due to lack of grid connection possibilities. On the other hand, an increase in the installed capacity of non-PV installations and improvements in the connection of energy storage facilities to the grid, as well as the aforementioned cable pooling, could have a positive impact on the management of grid operations, reducing losses associated with non-market redispatch and facilitating the balancing of power supply and demand in the grid. Moreover, from this point of view, it would be beneficial to liberalise the provisions of the Wind Power Investment Act of 20 May 2016 further with regard to the minimum required distance of wind power plants from residential buildings, by reducing it to 500 m as postulated by the industry. This would enable an increase in the installed capacity of non-PV RES installations and boost the generation from renewable sources during periods of low solar insolation.

Some concerns about the cable pooling connection procedure emerging from the industry include:

• the issue of requiring the advance payment of the grid connection fee by operators, even though the use of cable pooling does not imply an increase in connection capacity and does not generate significant grid connection costs;
• the potential need to adapt an already existing and connected installation to the requirements of Commission Regulation 2016/631 of 14 April 2016 laying down the Grid Code on requirements for the connection of generating units to the grid (‘NC RfG’);
• One operator's position that connecting a renewable energy installation to the grid via cable pooling utilizing an existing installation is only possible if the first installation was connected to the grid or received its grid connection conditions after October 1, 2023;
• Lack of transparency in verifying the existence of technical conditions for grid connection (which applies to the general procedure of connecting sources to the grid, not only within cable pooling) - lack of publication of the document prepared by the transmission system operator entitled "Scope and conditions for performing an expert analysis of the impact of connecting installation or grid devices on the power system" (the so-called "ZIWWE"), as well as not providing applicants with the expert analyses commissioned by the operators.

However, there is some reason for optimism in the Information No. 15/2024 of March 25, 2024 from the President of the Energy Regulatory Office (‘ERO’), in which the President of ERO addressed numerous issues raising the most frequent doubts in the area of grid connections, including cable pooling.

The ERO President, in referring to the issue of cable pooling, indicated, in particular, that:

• In accordance with the current Energy Law regulations, the institution of sharing connection infrastructure (the connection) can be applied when the application for connection conditions:
  • covers the first connection to the grid of two or more renewable energy installations,
  • is submitted in a situation where connection conditions have been previously issued for the "first" renewable energy installation and a connection agreement has been concluded, and the entity being connected is applying for the connection of a second or subsequent renewable energy installation,
  • is submitted in a situation where a renewable energy installation is already connected to the grid (an existing installation and a constructed connection), and the connected entity is applying for the connection of a second or subsequent renewable energy installation,

and this solution can be applied in relation to a renewable energy installation that was connected to the grid before October 1, 2023, as well as where connection conditions were issued and a connection agreement was concluded before that date;

• As part of the connection sharing, installations of the same type of energy source may be connected, such as two photovoltaic installations, as well as installations of different types, for example, a wind installation, a photovoltaic installation, a hydroelectric power plant, or a biogas plant;
• In the event that at the connection point to the grid, where an installation of a renewable energy source referred to in Article 4 (2) of the NC RfG is connected, another RES installation is being connected, the requirements specified in this regulation apply exclusively to the newly connected installation, unless the previously connected installation underwent modernization as defined in this regulation. This means that within the framework of connection sharing, if the previously connected installation has not undergone modernization, then the requirements of the regulation apply exclusively to the "new or additional," including subsequent RES installations. Therefore, there are no legal grounds to expect any intervention in the existing installation, including its adaptation to the requirements of the NC RfG regulation.

The above position may be seen as an expression of the ERO President's support for the institution of shared connection. It remains a matter of hope that in the near future, clear rules will emerge among operators on how to connect installations via cable pooling and that the industry's postulates will be taken into account by the legislator and introduced into the current law.

Another major issue related to the cable pooling provisions is the impossibility of connecting independent (i.e. not part of a RES installation) power storage systems belonging to one or more entities may be connected to the power grid with a rated voltage higher than 1 kV at a single connection site. Meanwhile, a renewable energy source installation according to Article 3(20h) of the Energy Law in relation to Article 2(13) of the Act of 20 February 2015 on Renewable Energy Sources (‘RES Act’), is an installation constituting a separate unit:

a)  facilities for the generation of power or heating or cooling as specified by technical and commercial data, in which power or heating or cooling is produced from renewable energy sources, or

b)  buildings and equipment forming a technical and functional unit for the production of biogas, agricultural biogas, biomethane or renewable hydrogen

- as well as an power storage system, biogas storage system or storage facility, as defined in Article 3(10a) of the Energy Law, connected to that unit, used for the storage of agricultural biogas, biomethane or renewable hydrogen.

Therefore, power storage can only be part of a RES installation if it is connected to power generation equipment. On the other hand, cable poolling is only possible for the purpose of connecting a RES installation to the power grid. An energy storage system that is not part of a RES installation cannot therefore be connected to the grid under the connection sharing model.

In view of the increasing frequency of DSO orders to underestimate power generation, energy storage may be a condition for the viability of investment in RES installations. Allowing cable pooling for energy storages that are not part of an RES installation would allow new storage to be connected in addition to existing RES installations, which may be owned by an entity other than the operator of the RES installation. In this respect, a reasonable de lege ferenda proposal would be to amend the provisions of the Energy Law to allow such a possibility.

On a side issue, it should be mentioned that a possible amendment allowing the connection of energy storage facilities within the framework of cable pooling - should also clearly determine the issue of the participation of storage facilities connected in this way in power auctions within the meaning of the Power Market Act of 8 December 2017.

Another aspect of the cable pooling rules that may have a negative impact on the attractiveness of this solution in practice is the inability to obtain support under the RES Act schemes for the second and subsequent installations connected to a given connection point. This is due to the fact that the investment costs for the second and subsequent installations connected via cable pooling are lower than for the first installation, as they do not take into account the costs associated with the construction of the connection and other costs related to the grid connection. The inability to obtain support under existing schemes (although interest in support schemes has been declining in recent years) may result in less interest in connecting to the grid through cable pooling and consequently make it more difficult to optimise the use of existing connection capacity. Hopefully, the legislator will accede to the industry's demands in this regard and allow further installations connected at a given connection point to participate in the support schemes, even if this were to mean a lower level of support reflecting the lower costs of realising such an installation.