Achievement of Polish photovoltaics – key data
The IEO report „Photovoltaics market in Poland 2023” shows that the year 2022 was very good for the photovoltaic sector in Poland, better even than the record year of 2021. In 2022, photovoltaics was yet again the leader and the main driving power for the increase in RES market in Poland. According to data of the Energy Regulatory Office, the accumulated power installed in PV at the end of 2022 amounted to more than 12.4 GW, which in comparison to 2021 (7.7 GW) meant a record increase of more than 4.7 GW in new power and constitutes a record 61% increase in market growth.
At the end of the first quarter of this year, the total power of PV installations exceeded 13 GW, with the share of prosumers being 74%, the share of small installations (50–1000 kW) 21%, and large PV farms 5%. The importance of energy from PV installations in energy production in Poland increased significantly. The share of PV energy in electric power from RES increased from 3% in 2019 to more than 23.3% in 2022 and 4.5% in the total generation structure (four years ago, it was only 0.4%).
At the end of 2021, the power installed in European Union countries in photovoltaics amounted to 198 GW, which means an annual increase by 36 GW. EU countries achieved a 22% increase in PV installed power in comparison to 2021 – almost three times lower than in Poland. In 2022, Poland was ranked again on the second place, after Germany, in terms of increase in the PV installed power in the European Union. Simultaneously, as the only country in the Central and Eastern Europe, it was ranked among the first six EU countries in terms of total power installed.
Strategic regulatory environment
As a result of consequently conducted RES policy (recently, in particular, for the benefit of PV) in the years 2021-2023 the EU increased its RES-related targets, not only due to climate protection but also because of the will to replace gas in production of heat and electric power and the plan of fast and total withdrawal from import of fuels from Russia (REPowerEU). Consequently, the RES target for the EU for 2030 was raised from 27% (as agreed in 2014) to 45%. The new EU solar energy strategy assumes installation of over 320 GW in solar photovoltaic power already by 2025 (which is twice the value of 2020) and almost 600 GW by 2030. Already in 2025, the sector of cell and PV module production in the EU would near achievement of a production capacity equivalent to 20 GW annually (5 GW at present). Poland started updating the PEP, which – according to preliminary government announcements – should result in a significant increase of RES shares in the domestic energy mix and by that time (the target needs to be confirmed), 27 GW of power should be generated by photovoltaics.
New tendencies in the functioning of photovoltaics on the energy market
In 2022, negative phenomena for the prosumer market could be observed, such as: fossil fuel subsidies, freezing of electric power prices and postponement of decisions concerning renovation investments, stagnation in the housing construction sector, inflation and a decrease in net income of households, a drop in the number of construction investments started. Despite those factors and implementation of the new net-billing system on the market (according to the value of the energy received and discharged from the grid), in 2022, the interest in own micro PV-installations did not fall as it could have been expected.
The number of prosumer photovoltaic installations at the end of 2022 amounted to over 1.2 million, which means an increase by more than 41% yoy. The total installed power was more than 9.3 GW. Prosumers in Poland have still the highest share in the photovoltaic market, and in 2022 they represented 68% of the annual growth of power installed in photovoltaics. The net-billing system results in a higher self-consumption index, since PV installations are more optimally sized due to the settlement method of surplus electrical power produced.
The program “Mój Prąd” („My Power”), added to the net-billing system, has proven successful. It is directed at increasing self-consumption of energy and offers the possibility to support energy storage, heat storage and management systems, and lately also complementary technologies, such as solar collectors and heat pumps.
Economic analyses shown in the report confirm that the net-billing system, taking into account subsidies from the “Mój Prąd” program, offers a high (25%), comparable expected rate of return, just like an investment in the net-metering system. In the case of business prosumers investing in micro-installations, the rate of return (without subsidies) is even higher (IRR=40%).
In the current approach to financing of micro-installations, photovoltaics “drives” the market of installations and accompanying solutions aimed at improvement of their functioning on the energy market and multiplication of the value chain. In the net-billing system, with support from “Mój Prąd” program, heat storage units were installed with the total capacity of 30 MWh (2.7 thousand units) and battery energy storage units with the capacity of 6.9 MW (2.3 thousand units). For each selected power of the PV installation and capacity, as analysed in the report, heat storage units proved cost-effective for prosumers.
At the end of the first quarter of 2023, 3.4 thousand PV farms with the total power of 3.35 GW were in operation, constituting 26% of power installed in photovoltaics. Almost 60% of the total power represent small installations of 50–1000 kW. RES auctions in the years 2016-2022 proved the key growth stimulator, providing support for 6.8 GW of power, out of which almost 1.5 GW was completed and is selling energy to the power grid. Prices of energy contracted in the auction system for PV farms in the years 2016–2022 dropped by 18%.
A survey showed that the results of the sector in 2022 were shaped by the increase in production costs of components and transportation (the outbreak of the war and the energy crisis) and inflation. Installation prices increased on average by 11% (that is below inflation) and the increase in installation prices in the range 10-50 kW was relatively the slowest (about 5%). In comparison to 2021, prices of projects in progress increased as well, mainly projects with a decision on connection conditions (by 32%). Development projects with building permits became more expensive, by 17%, and projects which won a RES auction by 7%.
In 2023, 60% of surveyed companies are planning further development, business expansion (e.g. by energy storage and new, presently niche applications of photovoltaics, such as AgroPV) as well as a further increase of employment (although lower than in the last year). According to the surveyed companies, the biggest risk for the sector, indicated by more than 70% of respondents, is lack of available connection powers and refusals to issue connection conditions by distribution system operators. Many respondents also point out the problem of frequently changing regulations, which are not always clear and understandable.
Power and industry development forecast and limitations for PV development – power networks
The International Energy Agency foresees the global annual growth rate of power in photovoltaics in the years 2022-2027 to be 10.7% (an increase from 1.1 to 2.3 TW).
According to IEO, by the end of the present year 2023, the power of all installed photovoltaic sources will exceed 18 GW, and the increase in power yoy can even exceed 6 GW, which will be another record. The total energy production from PV in 2023 will amount to 14.6 TWh. It is projected that in 2023, trade turnover of photovoltaics will increase significantly in comparison to 2022 and will amount to almost 29 billion PLN, with the value of the PV investment market on the level of 20 billion PLN.
Based on analyses of connection conditions issued by distribution system operators and transmission system operators, connection power available, power contracted in the auction system (considering completion schedules) as well as conclusions from the market survey and the research of market tendencies, an updated forecast for the PV market development in Poland was developed. The IEO scenario assumes that the power of 26.8 GW in photovoltaics will be achieved by the end of 2025.
Throughout the whole period of 2022-2025, the power increase will amount to 14.4 GW, the PV power growth rate (CAGR) will exceed 21%, which is twice as much as the global forecasts. In the perspective of 2025, the Polish market will remain one of the largest and most dynamic ones.
The period until 2025 is a unique “time window” for development of the national PV industry and the power grid for the purposes of photovoltaics and RES in general. In 2022, the European Commission announced the possibility of starting the PV IPCEI program (Important Projects of Common European Interest) and then adding new chapters to the so-called National Reconstruction Plans, concerning reconstruction of the EU industry, including the PV industry, within the framework of the REPowerEU program (Poland has received an additional amount of 2.7 billion EUR). The border carbon tax (CBAM) entered into force and, starting from 2026, it will fully encumber supplies of PV components from Asia. New initiatives are ready to be implemented from 1 January 2024 (Net Zero Industry Act), with the aim to increase public aid for domestic industry and protect both the EU and national markets against the flood of technologies imported from China. Also in Poland, multi-area investment projects are being implemented, concerning manufacture of cells and PV modules.
Much less predictable is the situation regarding speeding up of the power grid development for PV purposes. At the end of the first quarter of 2023, the total connection power available for RES investors for the next five years (2023–2028) will slightly increase (from 3.8 to 4.4 GW), but in comparison with the plans issued by distribution system operators and transmission system operators a year ago (the first quarter of 2022), it means a drop by 41%. This shows the deteriorating condition and decreasing efficiency of the electric power grid, simultaneously reflecting the increasing problems in this area. Problems with lack of connection power for RES even until 2028 generate exponentially increasing difficulties related to the increasing number of refusals to issue grid connection conditions for new RES projects, in particular PV projects. In 2022, the summary power of refusals to issue connection conditions for PV amounted to 30.4 GW and was almost six times higher than for the issued connection conditions (5.3 GW).
A separate problem for the development of photovoltaics is the restriction of power generation in peak times by PV farms already connected to the power grid, in form of the so-called mechanism of non-market limitation of energy generation from RES. This is an ad hoc measure by operators, which leads to irrational management of deficit grid resources and its mitigation requires operators to introduce much earlier pre-emptive measures. The first restrictions of PV generation on a large scale happened twice, on 23 and 30 of April 2023.
Being a leader in the EU and in the Polish energy obliges the PV sector and the administration to increase their efforts. New challenges related to disruptions of supply chains and increasing component prices, the energy crisis and introduction of photovoltaics on the distributed energy market in the situation of serious grid restrictions will require new competences and development of new business models by the sector. It is time for a new sectoral strategy, combining the successes in development of the PV market with the growing innovativeness of the industry. Poland needs a photovoltaic strategy as the flagship element of the currently updated Polish energy policy and the Polish industrial policy, a strategy understood as a real program to face the challenges.
The "Photovoltaic market in Poland 2023" report is available here.