Regulatory environment

• In 2020, the amended rules for connecting new customers to district heating networks came into force.
• The Polish Energy Law was adapted to the developments in the prosumer electricity market.
• The EU legislation on interconnector pipelines was implemented in 2020.
• In view of the COVID-19 epidemic, the application of the supply

• In 2020, due to the COVID-19 epidemic, the deadline for construction of the minimum number of compressed natural gas (CNG) refuelling points was extended until March 31st 2021.
• The amended legislation additionally permits compressed natural gas (CNG) refuelling points already in operation to be counted towards the total number of planned points.
• Another regulation amended in 2020 now provides for a possibility to consult preliminary designs of LNG bunkering points with the Director of the Transport Technical Inspection.

For more information, see here

• European Regional Development Fund (ERDF) and Cohesion Fund (CF)

In 2020, negotiations (the so-called trilogues of the European Commission (EC), the Council of the European Union (CJEU), and the European Parliament (EP)) on the ERDF/ESF regulation were concluded. It was agreed that investments related to the use of natural gas could be financed from ERDF/CF under certain conditions and that the allocation of funds would vary between Member States (for Poland, a maximum level of 1.55% of the ERDF/CF funds allocated to Poland was allowed). Fossil fuels were excluded from the scope of support with the exception of: natural gas substitution of solid fuels in district heating systems; extension/modernization of natural gas networks on condition that the investment adapts the network to the use of renewable and low-emission gases; clean vehicles within the meaning of Directive 2009/33/EC. Hydrogen, biomethane and RES projects as well as CCS/CCU technologies will be eligible for funding. The exclusion of 'fossil fuel processing’ from ERDF and CF support means that blue hydrogen production is unlikely to be supported from these funds.

• Just Transformation Fund (JTF)

In 2020, the negotiations on the regulation establishing the Just Transition Fund were concluded. The Fund will not support investment in the production, processing, transport, distribution, storage or combustion of fossil fuels and is limited to coal regions. Hydrogen, biomethane and RES projects as well as CCS/CCU technologies will be eligible for funding. The exclusion of „fossil fuel processing” from the scope of JTF support means that blue hydrogen production is unlikely to be supported from this fund. Access to the full amount of the JTF is conditional on commitment to the EU’s 2050 climate neutrality target. Rules contained in the Territorial Fair Transition Plan and the relevant operational programme will be crucial to eligibility for support from this Fund.

• Recovery and Resilience Facility (RRF)

In 2020, negotiations on the regulation establishing the RRF were concluded. In practice, the extent of support for gas projects from this instrument will depend primarily on the content of the technical guidelines on the DNSH (do no significant harm) principle prepared by the EC, and on the outcome of negotiations between Poland and the EC on the National Reconstruction Plan. Support will be available for replacement of district heating systems (transition from coal to gas), distribution and transport of natural gas to replace coal, high-efficiency co-generation and district heating. Hydrogen, biomethane and RES projects as well as CCS/CCU technologies will also be eligible for funding.

• InvestEU

In 2020, negotiations on the regulation establishing the InvestEU programme were concluded. In the Sustainable Infrastructure window, sustainable investments in energy infrastructure will be supported. Priority will be given to RES projects, but support for natural gas infrastructure has not been explicitly excluded from the scope of support. It may potentially include investments in high-efficiency cogeneration, alternative fuel infrastructure and critical infrastructure. Hydrogen, biomethane and RES projects as well as CCS/CCU technologies will also be eligible for funding.

• Connecting Europe Facility (CEF)

The Regulation establishing the CEF was agreed in 2019, but following decisions taken at the European Council summit in July 2020, some aspects of the compromise are again discussed. Decisions are expected in early 2021. The PGNiG Group was not a direct beneficiary of the funds under the Facility, but the development of interconnections financed with such funds had a positive effect on the operations of the PGNiG Group. The CEF is designed to support infrastructure projects that form part of the so-called supply corridors allowing diversification of natural gas supplies to the European Union. The scope of supported projects will depend on the final content of the Regulation on guidelines for trans-European energy infrastructure [2020/0360 (COD)].

• European climate legislation

In March 2020, the European Commission presented a proposal for a regulation establishing a framework for achieving climate neutrality – European Climate Law [2020/0036 (COD)]. The Commission proposed to set the objective for the EU to become climate-neutral by 2050. In addition, the Commission is to explore options for a new 2030 target of 50-55% reduction in greenhouse gas emissions compared to 1990 levels (the current target is 40%). The relevant communication from the Commission was issued on September 17th 2020 [COM(2020) 562]. In its position adopted in October 2020, the European Parliament (EP) supported the goal of climate neutrality, and advocated for targets at the level of Member States. The EP additionally proposed an obligation for Member States to achieve negative net emissions after 2050. For the 2030 emissions reduction target, the EP proposes that the target be increased to 60%. Both the EU Council’s and the EP’s positions also envisage an intermediate target for 2040. In the general approach developed in December 2020, the EU Council supported the EU’s 2050 climate neutrality target and advocated an increase to at least 55% of the 2030 target for greenhouse gas emissions reduction. Both the EU Council’s and the EP’s positions also envisage an intermediate target for 2040.

• TEN-E Regulation

The European Commission (EC), as part of its ongoing review of Regulation (EU) No 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infrastructure (TEN-E Regulation) [2020/0360 (COD)], published a draft review of the Regulation on December 15th 2020. According to the presented draft, natural gas transmission, LNG and storage infrastructure will not be further supported under the TEN-E policy and natural gas projects are not foreseen to qualify for the Projects of Common Interest (PCI) status and therefore, according to the EC draft, they will not be able to apply for CEF funding either. The draft currently provides for hydrogen and smart gas grid projects to apply for the PCI status.

• EU hydrogen strategy

On July 8th 2020, the EC published a Hydrogen Strategy for a Climate Neutral Europe [COM (2020) 301]. The development of hydrogen technology is set to be the key area for delivering the energy transition. Hydrogen is expected to contribute to reducing greenhouse gas emissions by the EU economy in a cost-effective manner. Investment in hydrogen technology is also expected to foster sustainable growth and job creation, which is crucial as Europe recovers from the crisis caused by COVID-19. Hydrogen is to be essential not only for the energy sector but also for sectors where emissions are difficult to reduce, such as manufacturing, heavy transport, sea transport and aviation. The Hydrogen Strategy classifies hydrogen into renewable (green) hydrogen – produced by electrolysis using energy from RES, and low carbon (blue) hydrogen – produced using fossil fuels with the involvement of greenhouse gas capture (CCS) technology. The European Commission intends to promote renewable hydrogen in its strategy.

• EU strategy for the integration of the energy system

On July 8th 2020, the EC adopted the EU strategy for energy system integration [COM(2020)299]. The strategy is an integral part of the European Green Deal and is intended to contribute to the achievement of the EU’s climate neutrality objective. The EC Strategy proposed, among other things, to adapt the existing regulatory framework for the gas market, in particular with a view to integrating new gases into the market. Among other things, the strategy calls for the creation of a comprehensive terminology and a European certification scheme for renewable and low-carbon gases based on life-cycle greenhouse gas savings. In addition, the Commission proposed a revision of the Energy Taxation Directive and the extension of the EU ETS to include further sectors.

• European Commission preparatory work

In 2020, the EC carried out preparatory work on: the revision of the Industrial Emissions Directive – IED [2010/75/EU], the revision of the Directive establishing a scheme for greenhouse gas emission allowance trading within the Community – EU ETS [2003/87/EC]; revision of the Directive to promote the use of renewable energy sources [2018/2001]; revision of the Energy Efficiency Directive [2012/27/EU]; revision of the Energy Taxation Directive – ETD [2003/96/EC]; revision of the guidelines on state aid for environmental protection and energy – EEAG [2014/C 200/01]; the planned mechanism for adjusting prices at borders to take account of CO₂ emissions. The EC is considering bringing forward a legislative initiative in this regard. The purpose of the mechanism would be to reduce the risk of carbon leakage and to more accurately reflect the emissions associated with imports of non-EU products. PGNiG participated in public consultations on the abovementioned initiatives.

In November 2020, the EC published a draft of the delegated regulation. The project consultations were concluded on December 18th 2020. The delegated act is expected to be adopted in the second quarter of 2021. The proposed wording of the delegated regulation significantly restricted the possibility of financing gas-related projects and using natural gas as a bridging fuel for the energy transition. PGNiG presented its position in public consultations.

In December 2020, a draft Commission Implementing Regulation amending the benchmarks for the allocation of free emission allowances in the period 2021-2025 pursuant to Article 10a (2) of Directive 2003/87/EC was published. The amendments proposed by the European Commission may reduce the allocation of free emission allowances to the heating sector.