New CAPEX Subsidy Program for Energy Storage Development by the National Environmental Protection and Water Management Fund

November 20, 2024

A new draft regulation by Poland's Ministry of Climate and Environment (MCE) proposes public support for large-scale electricity storage systems (BESS) under the National Recovery and Resilience Plan (NERP). This initiative, now under legislative review, includes a €200 million budget to aid businesses investing in energy storage, strengthening the country's energy infrastructure.

Additionally, updated terms for the "Electricity Storage Facilities and Infrastructure for Polish Grid Stability" program by the National Fund for Environmental Protection and Water Management (NFOŚiGW) will soon be available, following public consultations that concluded in August 2024.

Program Highlights

The program is designed for investments consisting of:

1. construction of electricity storage facilities with a power rating of not less than 2 MW and a storage capacity of not less than 4 MWh, having EU CER and fire safety certification and approval (e.g., battery containers, inverters, transformers, the installation of battery modules, supporting systems such as detection of fire, air conditioning, DC/DC or DC/AC converters, active and inactive protection), along with testing and acceptance of the storage facilities - mandatory,
2. construction of a connection to the network and supporting infrastructure - optional,
3. configuration and adaptation of the storage facility (BMS, EMS, mapping to monitoring systems, creating remote access to equipment and/or data, certification and type-approval (homologation) of energy storage facilities within EU standards, etc.) - optional.

The draft regulation specifies that assistance will be provided mainly as non-refundable grants. Under the NFOŚiGW's program, however, support may also be offered as repayable loans, with the interest rate adjusted to WIBOR 3M + 50 pb, but no less than 1.5 percent annually W, according to the revised version of the program. The loan can cover up to 100 percent of eligible costs. The maximum term of the loan is 20 years, with a grace period of up to 12 months (from the date of disbursement of the last loan tranche to the date of repayment of the first capital instalment) possible.

A core indicator of the program's success will be the commissioning of a large-scale BESS with a capacity of approximately 0.9 GWh, providing energy for 4-5 hours. To qualify for funding, BESS systems must achieve a 90 percent annual availability rate (around 328.5 days). If a system is disconnected or restricted by a Distribution System Operator (DSO) or Transmission System Operator (TSO), a separate methodology will be applied to evaluate stand-alone versus co-located storage systems.

It is important to note that the SPV, that obtained the subsidy cannot change ownership within five years, which is linked to sustainability period resulting from internal regulations of NFOŚiGW.

Eligibility and Aid Intensity

Eligible applicants include entrepreneurs registered in Poland, municipal companies with local government participation, and members of energy cooperatives. Maximum aid intensity is set at 45 percent of eligible costs. Micro- and small enterprises are eligible for an additional 20 percent subsidy, while medium-sized enterprises may receive an additional 10 percent.

Key requirements include:

• Proof of grid connection readiness by the application date,
• The project must be completed and operational within 36 months of receiving aid (penalties for delays include a 5 percent reduction in aid for delays of 3-6 months and 10 percent per month for additional delays).

New Evaluation Criteria for Applications

Updated criteria will prioritise projects with advanced readiness, including grid connection terms and building permits at the time of application (the old application deadline was March 31, 2025, and, as for now, it was not confirmed if it will be changed). Additional points will be awarded for projects that enhance CO2 reduction, use EU-manufactured BESS systems, and optimize cost-effectiveness, especially for shared grid infrastructure in co-located projects. However, co-location with existing RES installations will not be eligible due to grid connection limitations, so it seems that only fully new co-located projects could apply for the subsidy, which vastly limits the competition. Also, the possibility for energy storage facilities of generating installations, e.g. RES, to use cable pooling for subsidies is questioned.

Grant Scope and Eligible Costs

As indicated above, the subsidy covers investment costs for electricity storage systems, equipment testing, grid connections, infrastructure development, and system configuration. Eligible expenses are those incurred between March 9, 2023, and August 31, 2026.

CAPEX Subsidy and Capacity Market Participation

This CAPEX funding cannot be combined with other state aid, such as aid from the FENiKS program. Funding from EU structural funds will be deducted from any income earned in the capacity market. Therefore, CAPEX funding and capacity market revenues are designed to be alternative, rather than cumulative, funding options.

Application Timeline

The subsidy application date is planned to be launched in the first quarter of 2025, with assistance agreements expected to be finalized by December 31, 2025. All payments will be completed by December 31, 2026. As of today, it is not certain whether the competition will be on a 'until funds are exhausted' or in closed mode.

Summary

The program will provide a strong impetus for the development of electricity storage technologies in Poland and will also contribute to ensuring the energy security of our country and improve the stability of the operation of the National Power System (NPS). The final details of the program will be published on the NFOŚiGW website once the program is approved by NFOŚiGW. Comments on the draft regulation from the Office of Competition and Consumer Protection, the National Fund for Environmental Protection and Water Management and the Energy Regulatory Authority are already available and the regulation is anticipated to be adopted by the year's end.