Fixed price or day-ahead market? A biogas plant in H1 2024

No, in H1 2024 the gap between the RDN and the fixed price was the largest in zloty terms since the start of the series. The average RDN price was PLN 372.0/MWh, while FIT for a new declaration was PLN 828.4/MWh, so the market accounted for just 45% of the fixed price. 2× operation gives PLN 440.6/MWh (53% of FIT), 3× operation PLN 468.6/MWh (57% of FIT). The closest to FIT is FIP with flexibility: PLN 782.3/MWh with 2× (94% of FIT) and PLN 810.3/MWh with 3× (98% of FIT). The common conclusion: on the RDN alone a double-membrane roof shortens the distance but does not close it.

A reminder of the mechanism

The support rules (Articles 70a–70f of the Act on Renewable Energy Sources (ustawa o OZE)), the scenarios and the model assumptions are described in the first analysis of the series. You will find the results for the previous half-year in the previous analysis of the series (H2 2023).

Fixed prices in 2024

The reference prices from the regulation of 8 November 2023 (Journal of Laws (Dz.U.) 2023, item 2440) apply: PLN 872/MWh for agricultural biogas up to 500 kW and PLN 793/MWh for the 500 kW–1 MW band. This gives a FIT of PLN 828.4/MWh and a FIP of PLN 713.7/MWh for new declarations; for "other biogas" up to 500 kW the FIT is PLN 600.4/MWh, and for agricultural cogeneration (CHP) PLN 973.8/MWh. A 2019 installation after indexation (index for 2023: 111.4) has a FIT of PLN 874.9/MWh.

Figures for the half-year

The "2019 installation" price is 95% of the 2019 reference price (PLN 617.5/MWh) after cumulative indexation by the annual average CPI for 2019–2023 (Article 70e(3); GUS: 102.3; 103.4; 105.1; 114.4; 111.4).

The monthly averages form a U shape: PLN 408.2/MWh in January, PLN 324.4/MWh in March (the minimum), PLN 455.3/MWh in June. March is just 39% of the FIT price. There were 65 hours with a negative price in the half-year; excluding them raises RDN revenue from PLN 372.0 to PLN 378.3/MWh.

This is the first half-year in the series in which the daily profile does not have its minimum at night. The cheapest hour is 12:00 (PLN 286.6/MWh), and the highest prices fall in the evening: 20:00 (PLN 514.2/MWh). This shape is consistent with the rise in photovoltaic output during the day. For a biogas plant this means that the 2× and 3× operating windows move to the morning and evening peaks, and the midday hours become the time for storing gas. The premium for flexibility is PLN 68.6/MWh for 2× and PLN 96.6/MWh for 3×.

Why FIP + flexibility is closer to FIT

Under FIP the generator sells energy on the market and receives a top-up to the fixed price, calculated from the average RDN price for the day. A wider spread of prices within the day therefore increases the profit of a flexible generator without reducing the top-up. In H1 2024 FIP with continuous operation gives PLN 710.7/MWh (86% of FIT; this is slightly below the FIP fixed price of PLN 713.7/MWh, because energy from negative hours covered by the six-consecutive-hours rule is not supported), and with 2× operation PLN 782.3/MWh. Positive balances from the crisis months of 2022 may already have been used to offset later negative balances; the model does not track this. The legal risk also concerns the capacity expansion itself: exceeding the capacity thresholds may change the class of the installation and the reference price, which needs to be clarified with the President of the Energy Regulatory Office (URE) before the investment.

Is a double-membrane roof enough

In the model, "2×" operation means that a generating set with capacity increased to about 1.0 MW runs only in the 12 most expensive hours of the day, and "3×" that a set of about 1.5 MW runs in the 8 most expensive hours; the same daily energy (about 10.96 MWh) is therefore produced in a shorter time, at higher power. Biogas from fermentation flows throughout the day (in the model about 216 Nm³/h, resulting from a capacity of 0.5 MWel, an electrical efficiency of 40% and a methane content of 53%), so the rest of the day is storage in the double-membrane roof. The gas balance for this half-year gives on average 2,693 m³ of capacity for 2× (95th percentile: 3,629 m³) and 3,639 m³ for 3× (4,839 m³). According to DLG, a single double-membrane roof with a diameter of 26 m has a gas capacity of about 2500 m³ (we adopt this as an assumption for Polish installations too): in this half-year it accommodates the 2× demand on 45% of days, and the 3× demand on 3% of days. Two roofs, i.e. 5000 m³, cover all days of the half-year in the model in both variants (the maximum demand did not exceed 5000 m³).

How much can be spent on flexibility

The premium for operating in the expensive hours is in this half-year PLN 68.6/MWh for 2× and PLN 96.6/MWh for 3× compared with continuous operation. After annualisation (×2, an assumption) this gives an annual surplus of PLN 274 thousand for 2× and PLN 385 thousand for 3×; divided by the annuity factor (12-year depreciation, cost of capital 10% or 6%), this gives a budget for an additional generating set and gas store of PLN 1,865–2,294 thousand for 2× and PLN 2,625–3,230 thousand for 3× (the lower value at a cost of capital of 10%, the higher at 6%). The cost ranges are assumptions, not offers: €500–800/kW of additional capacity plus €20–70/m³ of missing storage, at an exchange rate of PLN 4.3/€, which gives PLN 1,092–1,778 thousand for 2× and PLN 2,248–3,783 thousand for 3×. The arithmetic conclusion: the 2× variant pays back across the whole assumed cost range, while the 3× variant pays back only at the lower part of the cost range and a lower cost of capital. The same benefit from the price profile occurs under FIP and in a pure RDN (under FIP it is sometimes slightly larger, because flexible operation avoids the hours excluded from settlement), because it stems from the market, not from support; FIT does not provide it, because it pays the same for every hour.

The third option: an energy store

A 0.5 MW / 1 MWh store, one cycle per day, 85% efficiency, adds PLN 19.6/MWh to continuous operation (revenue PLN 391.6/MWh). The average of the daily differences between the average price of the two most expensive and the two cheapest hours of the day is PLN 296.4/MWh. The annual surplus is PLN 78 thousand; with 15-year depreciation, servicing at 2.5% of capital expenditure per year and an average capacity degradation of 2% per year (assumptions), this allows spending PLN 430–526 thousand on the store, i.e. PLN 430–526 per kWh of capacity. The assumed range for the system cost is PLN 800–1,500/kWh, and for the additional grid connection PLN 50–400 thousand — these are assumptions, because there are no hard Polish prices for a scale like this. After deducting the connection (PLN 50–400 thousand) from the budget at a cost of capital of 6%, the permissible system cost is PLN 126 to 476/kWh; the store would not pay back under the assumed cost assumptions. The model ignores distribution charges for off-take, the capacity charge and the balancing market, so the result is rather optimistic.

Conclusions for this half-year

• The RDN (PLN 372.0/MWh) and the RDN with flexibility (PLN 440.6–468.6/MWh) do not come close to FIT (PLN 828.4/MWh): a gap of PLN 359.8–387.8/MWh.
• The midday price trough and the evening peak make a 2×/3× operating schedule more valuable than cheap night hours.
• An additional generating set and gas store: the 2× variant pays back across the whole assumed cost range, while the 3× variant pays back only at the lower part of the cost range and a lower cost of capital.
• An energy store (PLN 19.6/MWh) still would not pay back under the assumed cost assumptions; falling battery prices may change this in the coming years.