How the Polish state supports energy efficiency

NIK about efficiency of energy economy

Streamlining of production processes, modernisation of machines and buildings or implementation of new technologies - all these are actions to boost efficiency of energy economy. The point is to provide the same number of products or services while using less energy, and thus less resources (also imported ones) to produce it. As a result the emission of contaminants should be reduced and the energy security of the state should be improved. 

According to NIK, the mechanisms that are to improve energy security in Poland, despite their weaknesses, make up a coherent system and in the long run contribute to a lower use of energy by companies that are obliged to do so.

The data of the Energy Regulatory Office showed that from October 2016 to December 2018 the activities of enterprises statutorily obliged to increase energy efficiency (mainly selling electricity, heat or earth gas to end users) ended in savings of nearly 564 thousand tonnes of oil equivalent (toe - is a unit of energy defined as the amount of energy released by burning one tonne of crude oil, equalling 10 000 kcal/kg).

Increasing energy efficiency is not only an obligation, though. It is also real savings since the cheapest (and the cleanest) energy is the one that is not used. Investing in energy efficiency is like investing in inexhaustible resources. Therefore it is called „the sixth fuel”, next to oil, gas, carbon, atom and renewable resources.

White certificates (energy efficiency certificates) - scheme basics

In Poland the key measure to support the energy efficiency is the scheme of so-called white certificates - or white tags - issued by the Energy Regulatory Office. The act imposes an obligation, under penalty of a fine, mainly on companies selling electricity, heat or earth gas to end users (who buy energy for their own use).

While requesting the white certificate a company declares how much less energy it is going to use thanks to the planned investment or modernisation - insulation of industrial installations, replacement of lighting, reconstruction or renovation of a building including installations and technical devices or modernisation of local district heating. That declaration needs to be confirmed by an audit.

After the request is submitted, the Energy Regulatory Office grants the white certificate that the owner may sell at the Energy Commodity Market. The white tags may be then bought there by the so-called obliged companies, selling energy to end users. They may pay substitution fee instead but in 2018 it could reach only up to 10 per cent of the obligation.

In line with the data of the Energy Regulatory Office provided during the NIK’s audit, from 1 October 2016 to the end of 2018 the ERO received nearly 2,5 thousand requests for energy efficiency certificates. The Office CEO issued almost 600 white tags and refused to issue them in 38 cases. Other requests were still under review.

Number of certificates issued by CEO of Energy Regulatory Office from 1 October 2016 (from implementing the energy efficiency act) to the end of 2018. Source: NIK audit

Most white certificates were issued with regard to:

  • reconstruction or renovation of a building including installations and technical devices - 204,
  • modernisation or replacement of devices and installations used in industrial processes, related to energy, telecommunications or IT - 113,
  • reduction of losses in district heating -107.

The average planned period of obtaining savings was 13 to 15 years.

In the same period the CEO of ERO issued nearly 1.5 thousand decisions to cancel the energy efficiency certificates that confirmed savings of about 564 thousand toe of energy.

The system of white certificates worked properly, though they were issued with significant delays. Nearly 95% of white tags were granted after the statutory deadline, being 45 days. The average time for the request handling was 240 days and was 5 times longer than the one defined in the provisions. The record-breaker was 1158 days.

A similar situation was related to white tag refusals. On average the requests were handled within 449 days from the day they came in. The longest waiting period was 624 days, and the shortest one was 210 days.

The consequences of delays in the work of the Energy Regulatory Office:

  • companies were unsure if they get support,
  • it was more difficult for them to handle subsequent tasks,
  • the investor was afraid about its financial situation.

According to NIK’s findings, the delays resulted from staff shortages. Four persons maximum were to verify requests and issue white tags in the Energy Regulatory Office. The Office CEO repeatedly asked the Prime Minister and the Minister of Finance for money for extra staff but without effect.

Another obstacle in ensuring full coverage of staff was uncompetitiveness of employment conditions as compared with the situation on the labour market. As a result the success rate of the recruitment procedure at the Energy Regulatory Office was getting lower and lower. In 2018 only 50% of candidates were hired. There were often no candidates for some vacancies, despite lowering the requirements and offering them better financial conditions.

Incomplete database of the Energy Regulatory Office

There were also other consequences of the ERO’s underfinancing. The Office should verify if the companies obliged to improve their energy efficiency meet their obligation. The Energy Regulatory Office did not have proper IT tools for effective verification. As a result they had incomplete registers and delays in data processing. The data was entered manually in spreadsheet files which significantly prolonged the whole process due to the number of companies subject to monitoring and a broad scope of data analysis.

According to NIK another consequence of the Office’s underfinancing, and thus understaffing, was the data analysis issue. Until the end of the audit, the Office CEO reviewed information concerning compliance with the obligation to improve energy efficiency for 2013. It shows that the energy saving in that period exceeded 459 thousand toe which means that the obligation was met in 99.5% of which:

  • In over 98% by paying the substitution fee (in the amount of PLN 452 million which makes more than 452.5 thousand toe),
  • in 1.4% by cancelling the energy efficiency certificates (totalling over 6.5 thousand toe).

Works on data analysis for the coming years were in progress during the NIK’s audit.

The CEO of the Energy Regulatory Office also did not have a full list of companies obliged to carry out the energy audit once in 4 years. The audit is to define how the companies could obtain payable energy savings and in what quantities. The register only included data of the companies which conducted the audit at least once and informed the Office about that.  As a result it was unfeasible to effectively monitor and enforce the obligation. It was also impossible to impose potential fines and estimate the energy that could be saved. All the companies that were audited by NIK and were obliged to carry out the energy audit met that obligation.

The Supreme Audit Office found also other irregularities in the work of the Energy Regulatory Office. NIK auditors took under the microscope 10 random requests and white certificates issued on their basis. In 4 cases there was no clear-cut specification of the energy efficiency project. In three of them the Office CEO did not call the requesting company to complement the request, therefore breaching the energy efficiency act.

Besides, the Energy Regulatory Office failed to comply with the procedures provided in the Code of Administrative Proceedings, such as:

  • reminders were not reviewed formally,
  • procedures to establish persons guilty of delays were not used anymore,
  • inappropriate legal basis was indicated in three issued certificates,
  • not a single white certificate refusal was issued on time,
  • the random verification of audits was not carried out (although it was required by law).

NIK stands in the position that the Energy Regulatory Office does not operate properly because it was given tasks in the field of energy efficiency without being given proper financing.

Support from the National Fund for Environmental Protection and Water Management (NFEP&WM)

The state financial support for the energy efficiency projects is not only based on the White Certificate Scheme. In the period audited by NIK such projects were supported by the National Fund for Environmental Protection and Water Management. In the period 2015-2018 it spent from the state budget:

  • as loans - over PLN 701 million,
  • as grants - nearly PLN 923 million,
  • as part of the Operational Programme Infrastructure and Environment for the years 2014-2020 - approx. PLN 558.5 million.

A part of the NFEP&WM’s budget are substitution fees and fines paid on the Fund’s account by the so-called obliged companies that failed to submit white certificates to the Energy Regulatory Office CEO for cancellation. The total income on that account goes to support entities engaged in projects that are to reduce demand for energy in end users.

In the audited period the National Fund also made use of domestic funds as part of 18 priority programmes and EU funds from the Operational Programme Infrastructure and Environment. By allocating grants and loans it supported the energy efficiency projects.

The National Fund’s priorities included investments or modernisations connected with the production, distribution and use of energy in end users, including development of cogeneration (which is simultaneous production of heat and electrical or mechanical energy in the course of the same technological process), modernisation and expansion of district heating, thermal upgrading of public utility buildings and energy-saving constructions. The NFEP&WM verified how the projects were implemented and monitored how effective they were.

From among 17 audited energy companies, nine used the National Fund’s financial aid, mainly the distribution system operators and heat energy companies.

EXAMPLE: One of the power distribution system operators carried out five energy efficiency projects in the audited period. The investments included replacement of transformers in order to limit technical losses of power in the distribution network. The total cost of the projects was PLN 165 million and the grant for their implementation from the Operational Programme Infrastructure and Environment totalled PLN 75 million (45% of costs). As part of two thoroughly scrutinised  investments the company replaced 2768 transformers. In both cases the final amount of saved energy was bigger than initially assumed and totalled about 11 000 MWh.

In the audited period the projects financed by the NFEP&WM helped reduce the demand for heat and electricity by approx. 375 thousand toe.

Delays in planning and changing provisions

In 2006 and 2012 the European Union imposed on member states the obligation to develop energy efficiency action plans once in three years. The plans are to provide specific principles and measures aiming to improve the condition of different sectors of the economy. However, against the provisions of the EU- and domestic law, the Ministry of Energy (previously the Ministry of Economy) developed two domestic action plans in the field of energy efficiency with delays. The third action plan was sent to the European Commission in October 2014, nearly half a year after the deadline, and the fourth one - in January 2018, with almost 9-months’ delay.

The draft act adjusting the Polish regulations to the EU law adopted in 2012 was developed also with delay (of more than two years). Although the works started already in November, they were stopped and then renewed after a year or so. As many as 127 remarks were made in inter-ministerial consultations to the draft act developed by the Ministry of Economy. The discrepancies referred e.g. to issuing white certificates and principles of fulfilling the obligation to pay the substitution fee. That is why, the project was sent for further consultations, in particular between the ministries of economy and environment.

Previous energy efficiency regulations were supposed to be in force until 31 December 2016. Therefore, prolonging works on new provisions caused uncertainty on the market and could discourage people from planning investments, especially in the cases where the development and implementation of the provisions would take several years. In order to ensure stability of the White Certificate Scheme by the time of adopting the new regulation, the Polish Sejm (lower house of the Polish Parliament) was forced to extend the validity period of the act from December 2015 to the end of 2017.

In the long run, the new energy efficiency act, was passed by the Sejm in May 2016, and came into force 2 months later, with over 2 years’ delay. According to NIK the government did not meet its obligation in that matter arising from the act on cooperation with the Sejm and Senate in the issues related to the membership of Poland in the EU. In line with this act, the Council of Ministers should submit the draft act executing the EU law to the Sejm by the date of implementing that law. The Supreme Audit Office requested the Minister of Energy to take actions enabling the government to comply with that obligation.

Another consequence of delays in passing the new energy efficiency act and adjusting the Polish regulations to the EU law were formal charges against Poland filed by the European Commission which considered our rationale for implementing some provisions insufficient.

In January 2019 the European Commission raised other doubts. This time they concerned 14 issues, such as: the method of calculating energy savings, random verification of energy efficiency audits, compliance between real energy savings achieved by a given energy efficiency project and the energy savings declared by the obliged company. The Ministry of Energy responded to the doubts of the European Commission in March last year. By the end of the NIK audit in the Ministry (30 April 2019) the Commission did not react to that response.

Article informations

Date of creation:
13 February 2020 15:22
Date of publication:
13 February 2020 15:22
Published by:
Andrzej Gaładyk
Date of last change:
13 February 2020 15:22
Last modified by:
Andrzej Gaładyk
Coins and Electric energy meter © Adobe Stock

Read content once again