Investing in wind power plants – a decay of Eldorado?

Professional wind power plants have been built in Poland for 20 years now. Recent years are a period of a real inundation of projects of new plants and individual turbines.  All because of a new provision in the energetic law, introducing the guarantee of 100% buy-back of energy from „green producers”, what made this business safe, predictable  and very remunerative.

However, as a result of the new act on Renewable Energy, current system of subsidies to green energy is to be replaced in 2016 by a new one, which is less beneficial. Will investing in wind plants become less profitable due to this?
At present, national and foreign power engineering corporations invest billions of PLN to complete wind power plants projects by 2016 when a new system of subsidies to green energy production is expected to be introduced.
One does not have to be a prophet to notice a good business, which is, recently, available also for small and medium investors, thanks to special purpose vehicles. The new system of subsidies, replacing Green Certificates (GC), is to consist in organisation of auctions, basing on which there will be set price, at which a wind power plant is to sell energy to a power plant for 15 years.
This price will be subject to annual indexation considering the inflation level. On the one hand, it is beneficial as we know how much we will earn for 15 years in advance but it may also transpire that prices set at such auction will not be as good for a plant as in the GC system. What is more, the price of energy may, and probably will increase faster than inflation. Some even predict an 80% incremental increase of energy prices and then we won’t earn as much as we could have. This is the first influential reason, for which the market is so stirred now and strives to launch projects of wind power plants by 2016.
Another reason why it may be the final moment for a profitable investment in wind power plants is a limited number of attractive locations, which will be reduced due to the above issues. Attractive locations are those where the wind is strong enough and which do not require a construction of long connection lines to the nearest transmission network. Each meter of such line is an initial investment of several hundreds of zlotys plus an annual land tax for the area where they run.
The third indication that now it’s the last time to invest in windmills is donations, which will be probably not possible to be obtained anymore. Currently, some banks offer loans, interest of which is almost fully paid by Voivodship Environmental Protection Funds. Additionally, there is an option of a partial write-off of such loan.
Thus, the subject of investing in wind plants in Poland is coming slowly to an end before it had a chance to become common.New investments will be still available but not as profitable like at the beginning.
Of course, even several percent profit will be enough for most of investors, provided that it is safe and stable. However, we know that in case of wind power plants, we can count on a larger return rate when we join it at the stage of investment preparation. The issue is that most of us are not able to individually verify this relatively new subject in Poland in order to make a conscious decision on investing. A solution for this may be employment of a specialist in this field, but Polish market lacks a large number of them.
Anyway, in general, advisors tend to advise against rather than recommend, in order not to take the responsibility. This is why it is necessary to confront advisor’s arguments with the project authors. Investors, who are not able or not willing to act in one of the above ways and prefer to wait for the effects, achieved by those who joined wind plants projects, will have to settle for much lower return on investment or completely resign from investing, as the Polish base of available good locations will be drained soon and the systems of supporting newly built Renewable Energy plant will change.

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