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Poland - Energy Efficiency & Waste Management

With Poland’s accession to the European Union in 2004 came a huge package of European funding.

Structural and Cohesion Programmes worth a total of €67bn are running in the period 2007-2013, addressing the country’s development needs across a range of areas. The UK is one of Poland’s leading trading partners and the two countries have deep historical and economic ties. The opportunities for business in Poland are not just in Poland itself, a market of 38m people, but also in surrounding areas. Poland can be a great springboard for UK companies planning to expand into other parts of Central and Eastern Europe.

As a British company you could potentially plug into these opportunities in two main ways:

• As a direct applicant – Most of Poland’s EU funding programmes list enterprises among the types of organisation that can apply for funding. Companies applying for funds must be registered in Poland, so as a UK company you might for example consider opening a branch office, setting up a subsidiary or entering into a joint venture with a Polish partner.
• By supplying goods or services to organisations that have been awarded grant to run projects.

Market Report

In 2010 the UK retained its position as Poland's top 10 trade partner. UK exports to Poland in 2010 went up to £3.6bn (a 35% increase comparing to 2009). Poland has enjoyed uninterrupted growth since 1992, even through the current world recession. The Polish economy continues to be among the leaders in Central Europe. In 2009, Poland was the best performing economy in the EU with 1.8% growth and growth was again positive at 3.8% in 2010.

The country has proved to be most effective on the whole continent in managing the crisis. Thanks to this Poland managed to go up in a number of rankings assessing the economic performance of countries worldwide.

Recent GDP projections for 2011 are for continued expansion of about 4%. The strong economic performance was fuelled by high export output, individual consumption and increased business investment. Over the medium term, growth will be generated by domestic demand, infrastructure spending (with EU support), and capital investment.

Strengths of the Market

• A strategic location (gateway to the East)
• A strong, dynamic economy (Poland has been developing twice as fast as Western Europe)
• The largest allocation of EU funds in the current programming period (€67bn for 2007 – 2013)
• A huge domestic market of 38 million consumers
• A young, well-educated work force
• Vast experience in trade with Eastern Europe
• Investment incentives in Special Economic Zones, Business and Technology Parks
• The availability of support from foreign lawyers, accountants and consultants already well established in Poland to help foreign investors
• English is increasingly spoken, particularly by the younger generation

Opportunities in Poland

Located at the heart of Europe, Poland is the largest of the new EU member states, with a population of 38 million and a land mass roughly the size of Spain. It is a great springboard for UK companies planning to expand to other Central & Eastern European countries, as well as emerging markets further east. In recent years, Poland has been one of the fastest developing countries in the EU. Consumer spending in Poland is proving resilient to the general downturn across the rest of Europe and is expected to remain strong this year.

EU Structural and Cohesion Funds will help maintain Poland as a market offering growth, stability and good prospects for UK business. Poland's allocation of €67 billion will underpin investment in Polish infrastructure, environmental and technology projects, as well as supporting human and regional development. There are business opportunities in a range of sectors from infrastructure to healthcare, consumer goods to traditional and advanced engineering.

Poland’s co-hosting of Euro 2012 championships has driven development in airports, railways, motorways, stadium and sport infrastructure, security and other related sectors.

Overall, the Polish market can count on moderately increasing domestic demand and a general affinity for western products. Sectors which offer particularly strong sales opportunities include power generation, equipment and services for shale gas exploration and production; environmental technologies including recycling and waste management, water and waste water treatment, air pollution control and renewable energies; medical equipment; defence equipment; IT products and services; and automotive after-market products.

Poland continues to offer the benefits of a positive public attitude toward foreign investment, consistent economic growth rates, a well-regarded workforce, proximity to major markets and political stability.

European Investment in Poland (2007-2013)

For the period of 2007–13, Poland has been allocated €67 billion, which makes it the largest beneficiary of European Cohesion Policy for this period. A sum of €66.6 billion has been allocated under the Convergence Objective and €731 million under the European Territorial Cooperation Objective. Poland has translated its strategic development priorities into 21 programmes: five national and 16 regional programmes for all 16 Polish regions.

The largest national programme is for ‘Infrastructure and Environment’, which will receive almost €28 billion from the European Regional Development Fund and Cohesion Fund.

Energy Efficiency Sector

Poland’s energy efficiency market size is estimated at approximately $6-13 million annually. To enable this development, the Polish government will introduce, in the second half of 2011, a new Energy Efficiency Law that will create a tradable white certificates scheme for energy savings. These certificates will become actual financial instruments for covering energy efficiency activities both in the public and private sectors.

Additional drivers for ESCO development should be observed within energy price increases, international and governmental funds now being reduced, energy efficiency programs, and continuing high energy usage in Poland as compared to Western Europe.

Poland’s ESCO model is not based on ESCO contracts such as the Energy Performance Contract (EPC), but rather on co-financing by the state. For example: the “thermo-modernization fund” in Poland allocates the debt write-off as a thermo-modernization premium for those who invest in new, energy efficient windows, doors, roofs, wall insulation, or boiler exchanges.

In addition, the National Fund for Environmental Protection and Water Management, together with their regional subsidiaries, provide grants and loans for both individual and institutional investors.

This entity recently announced that it would pay out almost $280 million in grants and loans to institutional investors for thermo-modernization works in public buildings. Within the next four years, this fund plans to spend over $1.1 billion for such activities.

Renewable Energy

Poland has very favourable technical and economical factors for renewable energy. Poland has begun to experience a shift and political and public support away from traditional fossil fuels and toward the development of renewable energy resources.

Poland has established a target of 10.4% of energy production from renewable sources by 2010, and to continue with this target till 2014. These targets were set forth in Ministry of Economy regulation of November 3rd, 2006. Utilities are required to purchase electricity from renewable sources, and prices are regulated by tariffs. Producers of green energy can apply for green certificates that are tradable on global energy stock exchange markets.

Biomass/gas and wind appear to be the most promising renewable energy resources for development in Poland, with an estimated potential of about 4,000 MWe each. Both liquid and solid biomasses are considered to be the main sources of renewable energy in Poland, for both electricity and thermal energy production. Biomass technologies and supply sources are relatively mature, and the investment costs are lower than for other maturing renewable energy technologies. Poland also has some of the best documented wind resources in Central and Eastern Europe with areas reaching up to 1,000 W/m2 in power density.

Environmental Sector

Environmental investments in Poland accounted for 3.4% of GDP in 2009. Under the National Ecological Policy of Poland, over €16bn will be spent by the end of 2016 on environmental projects, of which 55% will go towards water and waste water treatment (WWT), 29% for air pollution control (APC), 10% for waste management (WM) and 6% for other projects.

Water and Waste Water Treatment

Investment worth €12bn is needed to bring Poland’s water and waste water management in line with EU environmental standards. The EU has allocated €6bn for this purpose covering the period 2007-2013.

Poland is now implementing a national programme for urban waste water treatment (KPOS), which is scheduled for completion by 2015. This requires the construction of around 30,000 km of new sewage networks (est. cost over €5bn), plus the construction of 180 new WWT plants and the modernisation of 569 existing plants (est. cost €3.1bn). More than €1bn is spent on the improvement and modernisation of the water supply in Poland every year.

The sector offers considerable opportunities for British water sector solutions, consultant engineers, contractors, manufacturers and suppliers of specialist machinery, equipment and materials.

Air Pollution Control

Reduction of emissions is a major concern for Poland. The control of atmospheric emissions from certain industries has been under scrutiny recently. In line with the EU Integrated Pollution Prevention and Control Directive, Poland introduced an integrated permit system covering around 2,500 installations. Poland has made significant progress in reduction of SO2, NOx, NH3 and volatile organic compound emissions into the atmosphere. However, emission reduction is hard to achieve in large part because hard coal supplies 95% of electric energy and 80% of the heating generated in Poland.

The Polish Act on Greenhouse Gas and Other Substances Emission, which transposes the Kyoto Protocol to Polish legislation, set a target of 6% for the reduction of greenhouse gas emission levels between 1988 and 2012. A national system for trade in emission allowances was established in 2005.

Poland negotiated transitional arrangements lasting until 2015 in relation to Directive 2001/80/WE for the reduction of SO2 emission and until 2017 for the reduction of dust and NOx emissions.

Opportunities for UK companies are in the area of Particulate Control, Gaseous Control, Monitoring Technology, Consultancy and Support. There is a requirement for advanced technologies and sophisticated equipment for improving efficiency, reducing operational costs and minimising pollution emissions.

Waste Management

Poland is a relatively large producer of waste, with around 138 million tonnes in 2009. Over 90% of Poland’s waste is produced by industry. The remaining 10%, over 12 million tonnes, is municipal waste. Although recycling bins are beginning to appear in cities, 93.2% of municipal and household waste is still stored in landfills without any pre-sorting. Per capita annual volumes of waste produced in 2009 were 3.5 tonnes of industrial waste and 320 kg of municipal waste.

Waste Management investment stood at €153m in 2009. The majority of waste is land-filled (87%), 9% recycled, 4% composted and only 1% incinerated. Currently, Poland’s single incineration plant deals with 0.4% of the country’s waste.

As an EU member, Poland is obliged to reduce the amount of biodegradable municipal waste sent to landfills. To meet the reduction targets, a number of thermal treatment plants with the annual capacity of 200,000 Mg each are going to be built over the next few years. EU financing support will apply.

Opportunities for UK businesses include advanced technologies and expertise related to waste recovery, recycling, thermal treatment, minimising generation of waste in industrial processes, waste-to-energy solutions and recovery of end-of-life landfills.

Financial Support

The areas eligible for support (energy and environmental protection):

• Electricity
• Natural gas
• Renewable energy: wind energy
• Renewable energy: solar energy
• Renewable energy: biomass
• Renewable energy: hydroelectric, geothermal and others
• Energy efficiency, cogeneration, energy capture
• Waste water treatment
• Municipal and industrial waste management
• Management and distribution of potable water
• Threat prevention
• Promotion of clean local public transport
• Regeneration of industrial and contaminated areas
• Other activities for environmental protection and risk prevention
• Air quality
• Promotion of biodiversity and nature protection including NATURA 2000 programme.

Eligible Beneficiaries in Various Programmes

In each region types of beneficiaries are defined by the relevant Managing Authority.

Therefore, the beneficiary type may vary, but as a rule, however, it shall be assumed that the following entities are potential beneficiaries:

• Enterprises*,
• Local municipalities, their unions and associations as well as the municipality-owned entities with legal status,
• State government administration bodies,
• National parks, the State Forest and its entities,
• Health Care Facilities (ZOZ) operating in the public healthcare system,
• Scientific entities,
• Universities,
• Cultural institutions,
• Natural and legal persons managing schools and educational establishments,
• Other entities with legal status from the public finance sector,
• NGOs,
• Churches,
• Water companies,
• Co-operatives and housing communities, Social Housing Construction Associations (TBS),
• Business support institutions, organisations supporting entrepreneurship and innovation.

* For 2007-2013 most of the national and regional operational programmes named private entrepreneurs as beneficiaries. The Ministry of Regional Development has indicated that there are 24 billion Euro available to business and what matters is the place of investment (Polish territory) not the country of origin of the company. However, in order to compete for the EU funds in Poland, a foreign company will need to establish a legal presence on Polish territory.

Maximum Grant Levels

The maximum reimbursement level in the Regional Operational Programmes is 85% of the eligible costs of the project. The final reimbursement level for each project will be defined depending on its nature, place of execution and type of beneficiary.