Fixed price or day-ahead market? A biogas plant in the second half of 2023

No, in the second half of 2023 the market was again clearly below the fixed price. The average RDN price was PLN 451.0/MWh (60% of the FIT of PLN 745.8/MWh), and in December only PLN 347.1/MWh. 2× operation gives PLN 536.8/MWh (72% of FIT), and 3× operation PLN 570.7/MWh (77% of FIT). FIP with 3× operation reaches PLN 763.2/MWh and exceeds the FIT of PLN 745.8/MWh applicable to declarations made before 10 November, but at the same time new declarations gain a higher reference price, so the bar is rising. The size of the gap, PLN 209.0/MWh for 2×, means that a double-membrane roof alone is not enough for RDN to match FIT.

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 in the series. You will find the results for the previous half-year in the previous analysis in the series (H1 2023).

New reference prices from 10 November 2023

The regulation of 8 November 2023 (Dz.U. 2023, item 2440), published on 9 November, applies from 10 November 2023. For electricity from agricultural biogas up to 500 kW it gives PLN 872/MWh, for the 500 kW–1 MW band PLN 793/MWh, and for other biogas up to 500 kW PLN 632/MWh (discussion: RES reference prices 2023). For a declaration made from 10 November this gives a FIT of PLN 828.4/MWh and a FIP of PLN 713.7/MWh. In the half-year table the FIT is PLN 745.8/MWh, because it applies to declarations made before the change. An installation from 2019 has PLN 785.3/MWh after indexation. The levy under the Act on extraordinary measures applied until 31 December 2023, but did not cover biogas plants up to 1 MW.

Figures for the half-year

The price of an "installation from 2019" is 95% of the 2019 reference price (PLN 617.5/MWh) after cumulative indexation by the annual average CPI for 2019–2022 (Article 70e(3); GUS: 102.3; 103.4; 105.1; 114.4).

The monthly average falls from PLN 514.8/MWh in July to PLN 347.1/MWh in December, and the December level is only 47% of the FIT price. There were 38 hours with a negative price; under Article 93(5), energy from negative-price hours is excluded from FIP settlement only when there are at least six such hours in a row. If the generator itself switched off the genset in negative-price hours, RDN revenue would rise from PLN 451.0 to PLN 455.2/MWh.

Daily profile: minimum at 2:00 (PLN 358.4/MWh), maximum at 19:00 (PLN 612.9/MWh). The premium for 2× operation is PLN 85.8/MWh, and for 3× PLN 119.7/MWh.

Flexibility under FIP versus flexibility outside support

The same additional genset gives a similar premium under FIP and in pure RDN (for 2×, PLN 88.7/MWh under FIP and PLN 85.8/MWh in RDN; under FIP the flexible schedule also avoids hours excluded from settlement), but under FIP it sits on a higher base: PLN 639.5/MWh with continuous operation against PLN 451.0/MWh without support. The difference of PLN 188.5/MWh is approximately the premium to the FIP fixed price (90% of the reference price), calculated from the daily average RDN and settled monthly. From the perspective of Article 93 of the Act on Renewable Energy Sources, a FIP generator that operates in the evening is still settled against the daily average, and so keeps the whole benefit of the peak hours. If a positive balance arose in previous months (Article 93(11)), the premiums will be reduced until it is used up.

Is a double-membrane roof enough

In the model, "2×" operation means that a genset with its capacity increased to about 1.0 MW runs only in the 12 most expensive hours of the day, and "3×" that a genset 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 around the clock (in the model about 216 Nm³/h, resulting from the 0.5 MWel capacity, 40% electrical efficiency and 53% methane content), so the rest of the day is storage in the double-membrane roof. The gas balance for this half-year gives an average of 2,764 m³ of capacity for 2× (95th percentile: 3,629 m³) and 3,823 m³ for 3× (4,839 m³). A single double-membrane roof with a diameter of 26 m has, according to DLG, 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 40% of days, and the 3× demand on 2% of days. Two roofs, that is 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 expensive hours is, in this half-year, PLN 85.8/MWh for 2× and PLN 119.7/MWh for 3× relative to continuous operation. After annualisation (×2, an assumption) this gives an annual surplus of PLN 346 thousand for 2× and PLN 483 thousand for 3×; divided by the instalment factor (12-year depreciation, cost of capital of 10% or 6%), this gives a budget for an additional genset and gas storage of PLN 2,356–2,899 thousand for 2× and PLN 3,289–4,047 thousand for 3× (the lower value at a 10% cost of capital, the higher at 6%). The cost ranges are assumptions, not quotations: €500–800/kW of additional capacity plus €20–70/m³ of missing storage, at an exchange rate of PLN 4.3/€, which gives PLN 1,098–1,800 thousand for 2× and PLN 2,264–3,838 thousand for 3×. Conclusion from the calculation: 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 pure RDN (under FIP it is sometimes slightly larger, because flexible operation avoids hours excluded from settlement), because it comes from the market and not from support; FIT does not provide it, because it pays the same for every hour.

A third option: an energy store

A 0.5 MW / 1 MWh store, one cycle per day, 85% efficiency, adds PLN 21.4/MWh to continuous operation (revenue of PLN 472.4/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 329.1/MWh. The annual surplus is PLN 86 thousand; with 15-year depreciation, servicing at 2.5% of capital expenditure per year and average capacity degradation of 2% per year (assumptions), this allows spending PLN 474–579 thousand on the store, that is PLN 474–579 per kWh of capacity. The assumed system cost range is PLN 1,200–2,000/kWh, and an additional grid connection PLN 50–400 thousand; these are assumptions, because there are no firm Polish prices for a project of this scale. After deducting the connection (PLN 50–400 thousand) from the budget at a 6% cost of capital, the permissible system cost is PLN 179 to 529/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

• RDN with flexibility (PLN 536.8–570.7/MWh) reaches 72%–77% of FIT; the gap is PLN 175.1–209.0/MWh.
• FIP + 3× (PLN 763.2/MWh) exceeds the FIT for declarations made before November, but is lower than the FIT of PLN 828.4/MWh for declarations made from 10 November.
• Expansion with an additional genset and gas storage: the 2× variant pays back across the whole assumed cost range; the 3× variant pays back only at the lower part of the cost range and a lower cost of capital.
• The energy store adds PLN 21.4/MWh and would not pay back under the assumed cost assumptions.