Regulatory environment in 2022

According to the Regulation, the obligation to sell natural gas through commodity exchange in 2022 and 2023 will apply to no less than 30% of high-methane gas injected into the transmission network. Reduction of the amount of gas covered by the obligation by way of a regulation was made possible by the Act Amending Certain Acts to Enhance National Gas Security in View of the Situation on the Gas Market. The solution is of a one-off nature.

Two acts protecting gas consumers in connection with the gas market situation were passed in January and December 2022. January 2022 saw the enactment of regulations freezing the price of gas fuel for tariff-protected consumers in 2022, with the protection simultaneously extended to include homeowner associations and cooperatives, as well as strategic public service institutions. In return, energy companies were given the right to compensation for the difference between the market price and the frozen price. In addition, the Act extended the effective period of the rules whereby security could be provided to the commodity exchange clearing house in non-cash form, introduced the possibility for the minister competent for state assets to grant loans to certain energy sector entities, and the possibility for the State Treasury to issue guarantees for the benefit of energy sector entities in respect of liabilities they incur to ensure supplies to consumers. In December 2022, a decision was made to maintain the freeze on gas fuel prices for tariff-protected customers in 2023, with the prices kept at a level not higher than the prices applied in 2022 under the maximum price mechanism. At the same time, the compensation mechanism for sellers of gas fuels (compensating the sellers for the introduction of a cap on the price they may charge their tariff-protected end-users) was maintained, and a parallel mechanism was introduced to compensate gas fuel distribution system operators for the concurrent freezing of distribution fees at the 2022 levels. The Act also placed an obligation on natural gas producers to contribute part of their profits to finance the compensation for sale of gas to tariff-protected customers at a capped price.

It introduces the following VAT rates for the period February 1st 2022 – July 31st 2022: 0% for natural gas and 5% for electricity and heat. During the period, sellers of natural gas, electricity and heat are required to provide purchasers with information on reduced VAT rates. By way of two other Acts: The Business Crowdfunding and Support for Borrowers Act of July 7th 2022 and the Act Amending the Act on Corporate Income Tax and Certain Other Acts dated October 7th 2022, the application of reduced VAT rates was extended until October 31st and then until December 31st 2022, respectively.

The Act includes provisions increasing the cost of connection for customers to be connected to the gas transmission network (including gas-fired power plants) from 25% to 100% of actual connection costs.

The Act introduces the possibility of extending the deadline for first-time feeding of electricity into the power grid from June 30th 2022 to July 16th 2024, which will make it possible to extend expiring connection agreements for RES projects.

The Act establishes a certification system for offshore wind farms. Electricity producers will be required to obtain three certificates during the construction and operation of an offshore wind farm: a certificate of design compliance, an operating certificate, and an operational safety certificate. The Act also includes provisions governing the issuance of permits for the construction and use of artificial islands, structures and facilities (PSzW), and permits for the laying and maintenance of cables or pipelines for the power evacuation system (PUUK), which require that preliminary grid connection conditions, grid connection conditions or a grid connection agreement should be submitted along with the application.

The Act sets the prices of heat generation for households and public utilities in the period from October 1st 2022 to April 30th 2023, and introduces compensation for producers for the difference between the approved tariff prices and the set prices.

Act of September 29th 2022 on the Rules of Implementation of Business Support Programmes in View of the Situation on the Energy Market in 2022–2024 – The Act sets out the rules for providing assistance to certain groups of companies which incur additional costs resulting from the increase in electricity and natural gas prices in 2022–2024. It establishes the legal basis for the European Commission-approved Polish scheme to support energy-intensive companies experiencing particular difficulties in the context of Russia’s war against Ukraine. Details of the aid will be defined in schemes adopted by resolution by the Council of Ministers. The total aid limit for 2022–2024 is nearly PLN 17.5 billion.

The Act removes the obligation to sell electricity through an energy exchange and imposes more severe penalties for manipulation on the energy market.

The Act introduces the obligation to charge the same prices as in 2022 for the sale and distribution of electricity for household consumers with consumption levels of up to 2 MWh (up to 3 MWh for holders of the Large Family Card and farmers, and 2.6 MWh for persons with disabilities). Electricity sellers and distributors are entitled to compensation for the price freeze, with the compensation amount depending on the difference between the 2023 tariffs and the prices charged in 2022.

The Act provides for a price freeze for tariff G consumers at PLN 693 per MWh after exceeding a certain limit (2 MWh or 2.6 MWh or 3 MWh), and for SMEs and public service institutions at PLN 785 per MWh. Electricity sellers are entitled to compensation for the price freeze, with the compensation amount depending on the difference between contract prices or average exchange prices or tariff rates for 2023 and the adopted maximum price. An obligation to pay a contribution to the Difference Payment Fund has been introduced for sales of electricity by producers and trading companies in the event of exceeding the price cap calculated in accordance with the Regulation of the Council of Ministers of November 8th 2022 on the calculation of the price cap.

It includes provisions resolving the problem of a tie in the procedure for the selection of the entity to be granted a permit to build an offshore wind farm in a given location (PSzW). Amendments were also made to administrative procedures for PSzW and PUUK (cable laying permit).

The Act introduced a price limit of PLN 200.17 per MWh for gas fuels for households and put a freeze on gas distribution rates. In addition, it introduced changes designed to improve the economics of offshore wind farm projects and streamline administrative procedures, extend the time limits for commencing the sale of electricity in the FIT (feed-in-tariff) and FIP (feed-in-premium) systems and in the auction system, and to freeze electricity prices under the emergency laws of October 7th and 27th.

Both Acts make changes to other regulations, including the Act on Consumer Rights, the Act on Counteracting Unfair Market Practices, the Act on Provision of Information on Prices of Goods and Services, the Civil Code, and were enacted in connection with the implementation of three EU Directives: the Omnibus Directive, the Sales of Goods Directive, and the Digital Content Directive. The new regulations stipulate that a trader who announces a promotion or sale of a product is obliged to present, in addition to the current price, the lowest price of the product in the last 30 days prior to the price reduction. Rules for complaints were modified. The regulations changed the nomenclature (the term ‘warranty’ was replaced with ‘liability for non-conformity with the contract’) and the hierarchy of instruments that a consumer can use when filing a complaint, and extended the period for which it can be presumed that non-conformity with the contract already existed at the time of purchase to two years, and to the limitation period for complaint claims six years. It will be prohibited to market a product in one Member State as being identical to a product marketed in other Member States if that product has significantly different composition or characteristics, unless justified by legitimate and objective factors. Consumers will be clearly informed whether an entity offering goods, services or digital content in online marketplaces is a business or a natural person. If a trader provides consumers with the possibility to search for products, it must inform them on the main parameters that determine the ranking of products within the search results. It will also be necessary to clearly disclose paid advertising or payments made specifically to secure higher ranking of products within the search results. A trader that provides access to product reviews will have to provide information on whether and how it verifies their authenticity, and whether it posts all reviews or only positive ones. Posting false consumer reviews or endorsements, or misrepresenting consumer reviews will also be prohibited.

Suppliers of last resort are required to attach to invoices for households a presentation of the percentage structure of costs of electricity supply (including the estimated cost of CO₂ emission allowances, cost of certificates of origin and the buyout price, excise tax, justified expenses, margin); a formula was introduced for calculating the estimated cost of CO₂ emission allowances.

The regulation sets out detailed requirements for components of facilities used for power evacuation from offshore wind farms, including the minimum operational life of the facilities, minimum availability and maximum loss of power, requirements for substation components, including construction requirements and requirements for export transmission cables.

The Regulation set the parameters for the main auction for 2027 and for additional auctions for 2024. For the main auction for 2027 the parameters were as follows: projected power demand – 6,237 MW, entry price – PLN 406.35 per kW per year.

The Regulation changes the obligation to redeem green certificates from 18.5% in 2022 to 12% in 2023. The obligation to redeem blue certificates remained unchanged (0.5%).

The Regulation places an administrative limitation on bid prices in the balancing market. The prices have been limited to amounts close to the amount of variable production costs by introducing a maximum amount of balancing bids for the supply of electricity. Furthermore, the provisions on price arbitrage for the purposes of settlements between the TSO and commercial balancing entities of the difference in electricity volumes in the case of overcontracting and undercontracting were repealed.

The Regulation defines the volumes and value of electricity to be sold in renewable energy auctions in 2022–2027.

The Regulation sets out the detailed scope of expert opinions assessing the impact of an offshore wind farm and facilities on state defence systems. The expert opinions must be prepared by the project owners and approved by the Ministry of National Defence and the Ministry of Internal Affairs and Administration before applying for a building permit.

The Regulation differentiates the fuel stock obligation volumes for companies generating electricity in Centrally Dispatched Generation Units (CDGU) and companies generating heat and/or generating electricity in units other than CDGUs. Daily stock limits for CDGUs were reduced, and the definition of daily consumption for CDGUs was changed by tying it to the installed capacity of the unit.

The Regulation sets out the method of calculating the electricity sale price cap for producers and trading companies for the purpose of calculating the amount of contribution to the Price Difference Payment Fund required to be made by such entities in the event of exceeding the price cap. The Regulation was amended by the Regulation of the Council of Ministers of December 9th 2022 amending the Regulation on the method of calculation of the price cap – The changes included: taking into account an investment allowance of PLN 50 per MWh in the calculation of the price cap by renewable energy producers (excluding producers of hydropower); taking into account the cost of redeeming certificates of origin; clarification that the cap for trading companies is calculated depending on whether the company purchased the electricity it resells on the POLPX or otherwise.

The Regulation sets reference prices, i.e., the maximum VAT-exclusive prices at which renewable electricity can be sold in renewable energy auctions and which are used to calculate electricity prices for renewable energy installations in the FIT (feed-in-tariff) and FIP (feed-in-premium) systems.

The Regulation introduced changes in the calculation of prices and fee rates for energy companies using the simplified calculation method which will make it possible to reflect the material change in operating costs that affects cogeneration of heat. At the same time, an amendment was introduced whereby fee rates for heat may be reduced in the event of a drop in average heat selling prices. Energy companies using the simplified calculation method were allowed to apply, by March 15th 2023, for a tariff change before the end of the tariff term. In addition, energy companies were given a one-time right to increase the heat price specified in the tariff by a certain amount to cover fuel costs that were not included in the reference price (up to PLN 22–30 per GJ, depending on the fuel).

The Regulation introduced provisions on remote reading meters, passing on certain cost categories to tariff prices; electricity storage; tariffs for volunteer firefighting units. In addition, it clarified the problem of including excise tax in the calculation of the price of electricity by electricity trading companies.

Draft Act Amending the Act on Entrepreneurs’ Obligations with respect to Management of Certain Waste Types and on the Product Charge and Certain Other Acts – The purpose of the proposed act is to reduce the amount of waste generated from single-use plastic products present in the environment. On the one hand, the new regulation requires reduced use of certain single-use plastic products and introduces a charge for marketing such products and making them available to buyers, and applies to products such as beverage cups with lids and food containers. On the other hand, it imposes a ban on marketing single-use plastic products and products made of oxo-degradable plastics (e.g., cutlery, plates, straws, drink stirrers) specified in the Act. The proposed regulation may affect ORLEN’s petrochemical segment as it aims to reduce the production of certain components of plastic products covered by the ban or marketing restriction. Moreover, given the extensive network of retail shops at ORLEN’s service stations, the regulation will affect the marketing volumes of the products it applies to.

The Regulation was changed in connection with an amendment of the Energy Efficiency Act that added transport sector projects to the list of energy efficiency improvement projects. The Regulation specifies the detailed scope and method of completing an energy efficiency audit and the energy savings calculation methods for energy efficiency improvement projects consisting in replacement or modernisation of road or rail transport vehicles, and for projects reducing losses associated with the storage and handling of liquid fuels.

The draft act provides for the development of deposit-refund systems for plastic beverage packaging of up to 3l, reusable glass beverage packaging of up to 1.5l, and aluminium cans of up to 1l. A deposit-refund system is a system in which a fee is charged at the time of sale of packaged beverages and then refunded when the packaging or packaging waste is returned, without the need to show a receipt confirming that the fee has been paid in advance. Based on the proposed regulations, retail and wholesale shops with an area of up to 200 m² would be obliged to participate in the system by collecting empty packaging and packaging waste generated from packaging covered by the deposit-refund system and returning the fee. The wording of the new regulations not final yet. It should be assumed that it will, to a greater or smaller extent, apply to the Company as it markets packaged beverages in retail shops at ORLEN service stations.

The draft act provides for amendments whereby income from the sale of emission allowances could be used to support modernisation of the energy sector through a dedicated account at the National Fund for Environmental Protection and Water Management (NFOŚiGW ) – Energy Sector Transformation Fund. Under the proposed regulations, 40% of CO₂ emission allowances sold each year by Poland in auctions in the period 2021–2030 are to be allocated to the Energy Transformation Fund. In accordance with the draft Act, in 2022–2031 the amount of support from the Energy Sector Transformation Fund would be more than PLN 112 billion. The draft identifies a number of energy sector areas in which investment projects may receive support from the Energy Sector Transformation Fund resources. These include nuclear power, renewable energy, gas-fired power generation, energy storage, and innovative technologies. The new regulation also provides for a special path for projects classified as strategic to energy security or Poland’s climate and energy policy commitments.

The draft act contains provisions supplementing the regulations on the Central Energy Market Information System (CSIRE) enacted on May 20th 2021, including provisions on the technical process of switching electricity suppliers taking no longer than 24 hours as of 2026, conclusion of dynamic electricity price contracts, and on aggregators in the electricity market. As regards ORLEN, the draft introduces changes with respect to electricity producers’ supplying their own premises through a direct line.

The draft act seeks to liberalise the 10H principle, which bans the construction of wind power plants within a distance of less than 10 times the turbine height (with the blades raised) from residential buildings. The objective is to facilitate the construction of onshore wind farms closer to residential buildings and to re-launch certain projects that were suspended as a result of the entry into force of the 2016 regulations. Draft Act Amending the Act on Renewable Energy Sources and Certain Other Acts (UC99) – The draft implements into Polish legislation the provisions of RED II concerning, among other things, guarantees of origin, biomethane, energy clusters, and peer-to-peer trading. It includes provisions concerning hybrid renewable energy systems, introduction of a support mechanism for modernised energy generation units and units that are nearing the end of their 15-year support period, and an increase in the auction volume for Phase 2 of the offshore wind power development.

The draft imposes a requirement for municipalities to develop a long-term spatial planning strategy and to adopt master zoning plans. According to the new regulations, the location of solar PV units with a capacity of more than 1 MW may only be approved on the basis of a local zoning plan.

The draft introduces regulations to facilitate the construction or alteration of pumped storage power plants by streamlining and shortening the process. The new regulations provide for giving pumped storage power plant projects the status of a public purpose investment, streamlining of the process of obtaining title to real estate, and shortening of the time for issuing administrative decisions. The definition of a pumped storage power plant includes storage of electricity, which will allow such projects to operate and keep accounts in accordance with the general regulations applicable to energy storage facilities.

The draft is part of Phase 2 of the balancing market reform. It provides for the introduction of scarcity pricing on the balancing market, the introduction of new roles on the balancing market, i.e. Balancing Services Providers (BSP) and Balancing Responsible Parties (BRP), the departure from the existing concept of balancing bids and introduction of balancing energy bids and balancing capacity bids (aligned with exchange on the European platforms), and the change of the technical requirements for the equipment, installations and networks connected to the grid.

The draft constitutes a comprehensive amendment of the Act of October 28th 2002 on the Liability of Collective Entities for Acts Prohibited under Penalty and aims to ensure greater effectiveness of the legal solutions that define the principles governing such liability. The purpose of the new regulations is to increase the effectiveness of this legal instrument, especially with regard to combating serious economic and fiscal crimes. One of the most important changes is the establishment of different principles of criminal liability for smaller and larger entities. In essence, in the context of so-called ‘large entities’ the proposed amendments remove the requirement of prior conviction of a natural person as a precondition for liability, and allow for proceedings against such entities to be conducted irrespective of a lawsuit against a natural person acting on its behalf. The draft identifies the persons for whom the entity will be liable, specifies the prerequisites for culpability on the part of the collective entity and the conditions for releasing the collective entity from liability if all obliged persons and bodies of the entity have exercised due diligence.

The draft aims to implement Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (the EU Whistleblowing Directive). The Directive requires that the individual countries enact laws on the reporting of breaches, including laws governing protection of the individuals reporting breaches and procedures for reporting breaches and taking follow-up action by legal entities and public authorities.

Two drafts of amendments to the Labour Code were being considered. The first draft (Ref. No. 2335) provides for the permanent introduction into the Labour Code of the possibility of remote work and the creation of a basis for employers to introduce and carry out, when necessary for the protection of certain interests, preventive checks of employees for the presence of alcohol or similar substances in their bodies. According to the draft, employers will have two months to comply with the new regulations. The other draft (Ref No. 2932) provides for the implementation into Polish law of the provisions of two directives of the European Parliament and the Council (EU): Directive 2019/1152 of 20 June 2019 on transparent and predictable working conditions in the European Union and Directive 2019/1158 of 20 June 2019 on work-life balance for parents and carers and repealing Council Directive 2010/18/EU. Directive 2019/1152 is intended to ensure transparency regarding the working conditions of all employees and establish new rights. Its overall goal is to promote more secure and predictable employment, while ensuring the adaptability of the labour market and improving living and working conditions. Directive 2019/1158 establishes minimum requirements to achieve equality between women and men in terms of labour market opportunities and treatment in the workplace by making it easier for employees who are parents or carers to balance work and family life.

– On December 18th 2022, after a series of trilogues, the Parliament, the Council and the Commission reached a preliminary agreement on the final form of the revision of the EU ETS Directive. The agreement provides, among other things, for removal of 90 million EUAs in 2024 and a second cut of 27 million EUAs in 2026. In addition, the Linear Reduction Factor will increase significantly, from the current 2.2% per annum to 4.3% in 2024–2027 and then to 4.4% in 2028–2030. This is the key instrument of the directive, which will accelerate growth in prices of CO₂ emission allowances. As a result of the proposed regulations, including the increase in the LRF, the volumes of free allocation of emission allowances will be reduced. The agreement also provides for extension of the EU ETS to include the maritime sector and the creation of a self-standing ETS for building and road transport sectors, with A separate pool of allowances, where regulated entities, defined as entities responsible for the release for consumption of fuels which are used for combustion in the sectors of buildings (for heating of business, institutional, and household buildings) and road transport, would be responsible for surrendering allowances. Phasing out of free allocations is proposed for the sectors to be included in the CEBAM to prevent carbon leakage. Additional funding is planned for the Modernisation Fund to finance the energy transition. However, the new regulations do not envisage support for the use of fossil fuels, with some exceptions for gas-fired power plants, but such support will be subject to strict conditions.

Revision of the Energy Efficiency Directive (EED) – On June 27th 2022, the EU Council adopted a negotiating position (the ‘general approach’) on the revision of the EED. The position of the European Parliament was adopted on September 14th 2022. Trilogues are underway to agree on the final form of the recast Directive. There are no binding agreements at this stage, including on the criteria for efficient heating and cooling systems. Depending on the final form of the Directive, the new requirements may undermine the role of natural gas in the power generation sector. The European Parliament advocates a more ambitious overall energy efficiency target (i.e., reducing energy consumption by 14.5% by 2030 compared to the projections of the 2020 Reference Scenario), while the EU Council supports a 9% energy efficiency target.

– Trilogue negotiations are underway (three trilogues have been held so far) and are to be closed in the first half of 2023. A preliminary agreement has been reached to support renewables uptake in heating and cooling. It was agreed that the share of renewables would increase on average by 0.8% in 2021–2025, and by 1.1% per annum until 2030 (subject to change during negotiations). No agreement has been reached on the other key issues, including the level of renewable energy targets (the Parliament supports the 45% target as set out in the EC’s proposal for REPowerEU of 18 May 2022, while the Council advocates the 40% target as originally proposed by the Commission on July 14th 2021) and the role of renewables in transport, particularly with regard to the share of renewable fuels of non- biological origin (RFNBO) and renewable hydrogen in transport by 2030.

– In 2022, the European Parliament and the EU Council published their positions on the proposed regulation [COM(2021) 562 final]. In its position of June 2nd 2022, the Council included provisions for calculating greenhouse gas intensity – the penalties and fines were raised to prevent circumvention of the regulation. Initiatives were included in the proposal to stimulate demand for the most environmentally friendly sustainable fuels, particularly renewable fuels of non-biological origin (RFNBO). In its report of October 19th 2022, the EP decided that LNG would play a transitional role in maritime transport, enabling a gradual shift to zero-carbon alternatives. Concurrently, LNG should be increasingly decarbonised. From 2030, at least 2% of the yearly average energy used on-board a ship is to be met with RFNBOs. Greenhouse gas emissions in the maritime sector are to be reduced by 20% from 2035, 38% from 2040, 64% from 2045 and 80% from 2050 (the EC proposed a reduction by 13% from 2035, 26% from 2040, 59% from 2045 and 75% from 2050).

On October 27th 2022, the European Parliament and the Council reached a preliminary agreement on the revision of the regulation setting the CO₂ emission performance standards for new passenger cars and new light commercial vehicles. In its final version, the regulation sets a new emission reduction target for passenger cars and light commercial vehicles as of 2035, which would in fact ban the registration of new cars emitting CO₂. The ban on the registration of new cars with internal combustion engines from 2035 onward may adversely affect the return on investments in CNG or LNG fuelling infrastructure. The proposal aims to promote the zero-emission vehicle market, which may include vehicles powered by hydrogen and biogas (bioLNG or bioCNG) satisfying the relevant technical requirements. Growing demand for such vehicles may contribute to the growth of the hydrogen market and development of hydrogen distribution and storage infrastructure.

In 2022, the EP and the EU Council published their positions on the proposal for AFIR [COM(2021) 559 final]. In its position of June 2nd 2022, the Council proposes to reduce requirements for hydrogen infrastructure. The Member States are of the opinion that the liquid methane-powered trucks in heavy road transport are already fully developed and that liquid methane, similarly to liquefied biomethane, can be developed in the EU’s base network. This also applies to seaports, and the ‘adequate’ number of liquefied methane refuelling points should be deployed by January 1st 2025.

In its proposal of October 6th 2022, the Parliament proposes to accelerate the construction of hydrogen refuelling stations and to reduce the distance (from 150 to 100 km) between them along the Union’s main roads by the end of 2027 (from 2031 in the text proposed by the Commission). The EP upheld the Commission’s proposal to require the construction of the ‘adequate’ number of LNG refuelling points for road transport by 2025. However, it stated that using LNG is not compatible with the Union’s climate neutrality objective, and therefore LNG should be phased out as soon as possible and substituted by more sustainable alternatives.

On December 18th 2022, the EU Council and the European Parliament reached a preliminary agreement on the regulation establishing the Social Climate Fund [COM(2021) 555 final] which aims to address negative social consequences of the inclusion of the buildings and road transport sectors into the ETS. The Fund will be established in 2026–2032 and will be financed from the sale of emission allowances (EUR 65 billion) and from Member States’ budgets (EUR 21.7 billion) – EUR 86.7 billion in total. Initiatives to be financed from the Fund include: renovation and decarbonisation of buildings, support for increasing energy efficiency, providing access to zero and low-emission vehicles and bicycles and to free public transport, development of zero- and low-emission mobility and transport services.

On June 4th 2021, the European Commission adopted Delegated Regulation 2021/2139 required by Regulation (EU) 2020/852 of the European Parliament and of the Council (the ‘taxonomy’) establishing the technical screening criteria for climate change mitigation and climate change adaptation. The Regulation has been effective since January 1st 2022. On March 9th 2022, the Commission agreed on supplementary Delegated Regulation 2021/1214. It introduces specific criteria for activities involving natural gas and nuclear energy, and provides for the possibility of inclusion of natural gas as a transitional technology in the EU taxonomy, subject to the conditions laid down in the act. The Regulation has been effective since January 1st 2023.

Regulation (EU) 2022/1032 of the European Parliament and of the Council amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas storage was adopted on June 29th 2022. The amendments sought to take the first measures to counteract the Russian Federation’s negative impact on the functioning of the EU gas market by increasing the stability of operation of EU storage facilities and enhancing their role in safeguarding the security of gas supply in the Union. The regulation introduced gas capacity filling targets to be reached by storage facilities by November 1st of each year, a certification procedure for storage system operators, and the option to apply a discount of up to 100% to capacity-based transmission and distribution tariffs at entry points from, and exit points to, underground gas storage facilities and LNG facilities (until December 31st 2025).

On November 23rd 2022, the European Commission adopted Commission Implementing Regulation (EU) 2022/2301 setting the filling trajectory with intermediary targets for 2023 for each Member State with underground gas storage facilities on its territory and directly interconnected to its market area. Filling trajectories with intermediate targets for 2023 for Poland are as follows: February 1st intermediate target – 45%, May 1st intermediate target – 30%, July 1st intermediate target – 50%, September 1st intermediate target – 70%.

Council Regulation (EU) 2022/1369 of 5 August 2022 on coordinated demand-reduction measures for gas introduces voluntary and mandatory demand-reduction measures for gas and the possibility of declaring a Union alert. The Regulation seeks to reduce gas consumption in individual Member States in the period from August 1st 2022 to March 31st 2023 at least by 15% compared to their average gas consumption in the period from August 1st to March 31st in each of the years 2017–2022. The base mechanism is for the Member States to voluntarily achieve the demand-reduction target. Mandatory demand reduction in accordance with the above methodology is applied in the event of declaration of a Union alert by the Council. The Member States may choose demand-reduction measures at their own discretion. The mechanisms introduced by the Regulation are to remain in force for one year.

On October 6th 2022, the EU Council adopted Regulation 2022/0289 on an emergency intervention to address high energy prices. The Regulation provides for a temporary solidarity contribution from the oil, coal, natural gas and refining sectors. The contribution must be made by EU companies or permanent establishments generating at least 75% of turnover in the field of the extraction, mining, refining of petroleum or manufacture of coke oven products. The solidarity contribution is a temporary measure and limited to surplus profits made in the fiscal year 2022 or 2023. The contribution is to be calculated on the basis of the taxable profits made in either of those years that are above a 20% increase of the average taxable profits generated in the previous four fiscal years starting on or after January 1st 2018. The rate applicable for calculating the temporary solidarity contribution is at least 33% of the base and applies in addition to the regular taxes and levies applicable according to the national legislation of a Member State. The Member States were required to adopt and publish measures to apply the mandatory solidarity contribution by December 31st 2022.

The Regulation introduces a number of obligations, including disclosure obligations, on gas undertakings. As a first step, natural gas undertakings are required to inform the Commission and where applicable the Member State of their intention to launch a tender or open the negotiations or conclude a memorandum of understanding with natural gas producers or suppliers from third countries on the purchase of gas of a volume above 5 TWh/year. The Regulation also introduces a mechanism for mandatory aggregation of gas demand in volumes at least equal to 15% of the total volume necessary to meet the national filling targets. However, the decision to purchase gas shall be made on a voluntary basis. It also introduces a more stringent mechanism for the mandatory withdrawal of unused capacity and offering it to other network users. The mechanism will be activated if in the preceding calendar month a network user utilises less than 80% of the booked firm capacity which was contracted for a duration longer than a month.

No later than 31st 2023, each trading venue on which energy-related commodity derivatives are traded is required to set up, for each energy-related commodity derivative traded on it, an intra-day volatility management mechanism based on an upper and lower price boundary that defines the prices above and below which orders may not be executed. This is to prevent excessive movements of prices on energy exchanges. The Regulation also requires ACER to produce and publish daily LNG price assessments and benchmark. In addition, the rules of the application of the solidarity measure referred to in Article 13 of the SoS Regulation were clarified. The basic issue, i.e., the option to activate the solidarity measure as a measure of last resort that applies only in an emergency, was not changed. In particular, the scope of application of the solidarity measure was extended, the possibility of limiting supplies to protected customers was introduced, the solidarity measure was extended to LNG facilities, and the basic issues enabling the application of the SoS Regulation and the solidarity measure were clarified.

The price correction mechanism applies to derivatives with a maturity between month-ahead and year-ahead, traded on the TTF and, following the adoption of the implementing act, also on other virtual gas trading platforms (VTPs) in the EU. The mechanism does not cover the OTC market or intra-day or day-ahead contracts. The price correction mechanism will only be activated if two conditions are met at the same time: the price of a month-ahead TTF contract exceeds EUR 180/MWh during three consecutive trading days and the price of the month-ahead TTF contract exceeds the reference price (published by ACER), intended to reflect prices on the global LNG market, by EUR 35/MWh during three consecutive trading days. As from the day following the publication of the market correction notice, regulated market operators will not accept, and market participants will not place any orders for contracts covered by the mechanism on the TTF or other VTPs (after the adoption of the implementing act) with prices above the ‘dynamic bidding limit’, which is the reference price intended to reflect prices on the global LNG market + EUR 35/MWh. Should the reference price fall below EUR 145/MWh, the limit is to remain at EUR 180/MWh (145+35). The ‘dynamic bidding limit’ will apply for at least 20 trading days. If the reference price remains below EUR 145/MWh for three consecutive trading days, the limit will be deactivated. The mechanism will not apply to TTF derivatives or to the purchase and sale of selected TTF derivatives executed before the entry into force of the Regulation, or to the purchase and sale of TTF derivatives under the central counterparty default management procedure. The Regulation entered into force on February 1st 2023, and the price correction mechanism itself can be applied for one year, starting from February 15th 2023.

On May 18th 2022, the European Commission published a policy document called REPowerEU (see above). The plan was accompanied by proposed Directive of the European Parliament and of the Council updating the policy objectives related to decarbonisation, i.e., the REPower Directive. The proposal presented by the Commission provided for increasing the share of renewable energy in gross final energy consumption in the EU in 2030 from 40% to 45%, and increasing the 2030 energy efficiency target from 9% to 13% (with 2020 as the benchmark year). The proposal also includes an obligation to install solar panels on new buildings: by December 31st 2026 on all new public and commercial buildings with a floor area above 250 m², by December 31st 2027 on all existing public and commercial buildings with a floor area above 250 m², and by December 31st 2029 on all new residential buildings. Dedicated ‘go-to’ areas for renewables should be put in place with shortened and simplified permit-granting processes in those areas. The proposal is currently debated in the European Parliament and the EU Council. The latter has proposed that the 2030 target for renewables should be at least 40%.

The Regulation, published on December 29th 2022, introduces instruments to accelerate the implementation of renewables projects, understood as the construction, upgrading (including where this results in an increase in capacity) and operation of plants for the production of energy from renewable sources including heat pumps, co-located energy storage facilities, and assets necessary for their connection to the grid. The Regulation introduces deadlines limiting the length of the permit-granting process for solar PV or heat pump projects, as well as the concept of administrative positive silence, that is considering the permit as having been granted in the absence of a response from the authority as long as the conditions stipulated in the Regulation are met. In addition, the Regulation is to be without prejudice to national regulations establishing shorter deadlines for permit- granting processes than those laid down in the Regulation. The Regulation may also apply to pending permit-granting processes if this will significantly accelerate the granting of the permit. The Regulation’s validity is limited to 18 months starting from the date of its entry into force, i.e., December 30th 2022, with its review scheduled for December 31st 2023 at the latest, and the Commission may propose extending its validity, if necessary.

On December 14th 2022, negotiators from the EU Council and the European Parliament reached a preliminary agreement on a proposal for a regulation as regards inclusion of REPowerEU chapters in national recovery plans [COM(2022) 231]. The agreement is of a preliminary nature and will become final once it has been endorsed by the EU Council and the European Parliament. Under the agreement, the REPowerEU chapters included by Member States in their national recovery plans should present new reforms and investments, implemented as of February 1st 2022, or expanded parts of reforms and investments included in the already adopted national recovery plans, with their corresponding milestones and targets. The reforms and investments included in the national REPowerEU chapters are expected to contribute to the following objectives: boosting energy efficiency in buildings and critical energy infrastructure; decarbonising industry; increasing production and uptake of sustainable biomethane and renewable or renewable hydrogen; increasing the share of and promoting renewable energy; improving energy infrastructure and facilities to meet immediate security of supply needs for gas, including LNG, notably to enable diversification of supply in the interest of the Union as a whole; improving oil infrastructure and facilities to meet immediate security of supply needs – in the case of the Member States which have been granted an exceptional temporary derogation due to their particular dependence on oil and geographical location; fighting against energy poverty; encouraging energy demand reduction; addressing internal and cross-border energy transmission and distribution bottlenecks; supporting energy storage; accelerating the integration of renewable energy sources, supporting zero-emission transport and its infrastructure, including railways.

In the wake of Russia’s invasion of Ukraine on February 24th 2022, the United States, the EU and Western countries adopted a number of sanctions packages. To date, the EU has introduced nine packages of sanctions against Russia and Belarus.

The sanctions should be divided into those imposed on natural and legal persons, financial institutions, and those levied on exports and imports of specific goods and services. The EU imposed restrictions on LPG imports from Belarus and banned exports of helium-3 to the Russian Federation as well as dual-use technologies; restrictions also apply to the mining and energy sectors (including restrictions on conducting business activities in cooperation with Russian entities), as well as products used in hydrocarbon production. The EU has imposed an embargo on coal supplies from Russia and on Russian oil transported by sea.

On December 15th 2021, the European Commission published a proposal for a regulation of the European Parliament and of the Council on methane emissions reduction in the energy sector [COM(2021) 805]. On December 19th 2022, the EU Council, chaired by the Czech Presidency, reached an agreement on the General Approach to the proposed Regulation.

The General Approach agreement imposes the obligation to take appropriate measures to prevent and minimise methane emissions. The requirements are to become more specific, particularly with respect to the quantification, reporting and verification of methane emissions in the energy sector in the Union, as well as the abatement of those emissions, including through:

• the obligation to submit leak detection and repair (LDAR) surveys, to immediately repair Type 1 leaks of more than 7,000 ppm (parts per million) or 17 g/h, and Type 2 leaks of more than 500 ppm or 1 g/h for above-ground components, of 3,000 ppm or 5 g/h for underground components and marine components above sea level, and of 7,000 ppm or 17 g/h for marine components below sea level and below the seabed.
• ban on venting and routine flaring except in the case of defined emergencies and requirements concerning flares and their replacemen.

The Regulation applies to oil and natural gas upstream exploration and production, gas transmission, distribution, underground storage and liquid gas (LNG) terminals, to operating underground and surface coal mines, closed and abandoned underground coal mines, as well as to active, inactive, temporarily and permanently plugged wells and abandoned wells in earth layers resulting from mining operations. The Regulation also lays down rules on tools ensuring transparency of methane emissions from imports of fossil energy into the Union.