Regulatory environment

Market environment Competitive environment

TAURON Capital Group is monitoring changes and taking actions in the regulatory area, both on the national as well as on the EU level.

Most important changes in the regulatory environment of TAURON Capital Group in 2020 in terms of the adopted and published legal acts that affect TAURON Capital Group

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NAME OF THE REGULATION DESCRIPTION OF THE REGULATION STATUS AS OF 31.12.2020 IMPACT ON TAURON CAPITAL GROUP
NATIONAL REGULATIONS
Regulations related to the so-called anti-crisis shield (including the financial shield) constituting a collection of measures and solutions supporting entrepreneurs and the economy in connection with the negative effects of the COVID-19 pandemic
  1. Act of March 2, 2020, on special solutions 2020 related to preventing, countering and combating COVID-19, other infectious diseases and the crisis situations caused thereby (as subsequently amended).
  2. Act of March 31, 2020, on amending the act on special solutions related to preventing, countering and combating COVID-19, other infectious diseases and the crisis situations caused thereby, as well as certain other acts (as subsequently amended).
  3. Act of April 16, 2020, on special support instruments in connection with the spreading of the SARS-CoV-2 virus.
  4. Act of June 19, 2020, on the subsidies to the interest rate of the bank loans granted to the entrepreneurs (businesses) affected by the effects of COVID-19 and on the simplified proceedings aimed at obtaining an approval of the arrangement in connection with the occurrence of COVID-19.

The acts came into force in 2020

The said regulations:

  1. exclude the possibility of the energy company stopping the supply of electricity or gas fuels to a consumer in the event of illegal consumption of fuels or electricity or a delay in the payment for services by the consumer, in case such a consumer is: the final consumer in a household,
  2. introduce the possibility (option) of concluding transactions on the exchanges and trading platforms by the introduction of the possibility of posting non-cash collaterals to cover the margins securing such transactions in the form of the property rights stemming from the certificates of origin, emission allowances, bank guarantees, as well as sureties issued by the capital group’s subsidiaries,
  3. enable entities that have concluded grid connection agreements for the renewable energy source (RES) installations to extend the deadline for delivering electricity to the grid for the first time, provided that such a deadline falls prior to June 30, 2022.
Act amending the act on the proceedings in cases related to public (state) aid The regulation introduces into the Polish legal order norms (standards) related to the situations when the Court of Justice of the European Union finds the decisions of the European Commission in cases related to public (state) aid to be null and void. The two main solutions implemented include the possibility of continuing to perform the obligation related to public (state) aid, excluding the payout of the funds, and also accumulating the funds due to the beneficiary in the period between the judgment of the Court of Justice of the European Union and the repeated decision of the European Commission. Entry into force on January 12, 2021 The uncertainty with respect to using the aid funds, stemming from the potential proceedings pending before the Court of Justice of the European Union, has been reduced.
Regulation of the Minister of Climate and Environment of November 13, 2020, amending the regulation on the detailed rules of shaping and calculation of the tariffs and billing (settlements) in electricity trading The goal of the Regulation is to:

  1. enable energy companies (electric utilities), conducting business operations with respect to electricity distribution, to establish a tariff group for the consumers using electricity exclusively for the needs of the generally accessible charging stations and the provision of the charging services thereupon,
  2. limit the negative effects of the COVID-19 pandemic for the DSO‘s and the TSO‘s, manifested in the reduction of electricity consumption by the consumers, by introducing a mechanism to equalize, based on the balance, the actual revenue and the planned regulated revenue.
Entry into force on December 4, 2020

A mechanism equalizing, based on the balance, the actual revenue and the planned revenue was introduced and the tariffs for the charging stations were established.

NAME OF THE REGULATION DESCRIPTION OF THE REGULATION STATUS AS OF 31.12.2020 IMPACT ON TAURON CAPITAL GROUP
EUROPEAN UNION (EU) REGULATIONS
European Green Deal, including:

European Green Deal was published by the European Commission in December 2019 and is a plan of actions aimed at achieving climate neutrality by the EU states by 2050. In accordance with the above regulation the steps taken by the European Commission (EC) are to cover the entire economy, including the power, agriculture, transportation (land, sea, air) and manufacturing industry sectors. The European Commission (EC) has published a legislative works schedule covering the next several years.

In 2020, the EU institutions implemented some of the activities envisaged in the timetable, including conducting consultations and adopting some legislative proposals.

Public consultations of the draft legal acts and the assessments of the effects of the regulations.

European Green Deal is a major challenge for all sectors of the economy.

It will be possible to evaluate the detailed goals for the power sector after the legislative acts related to the sector have been published.

Regulation (EU) 2020/852 of the European Parliament and of the Council of June 18, 2020 establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (Regulation with respect to Taxonomy – sustainable financing) The goal of the regulation is to establish a framework to facilitate sustainable investment projects, in order to introduce a classification system, the so- called EU Taxonomy, i.e. the green list for the sustainable economic activities.

The European Union (EU), the Member States, financial market participants offering financial products (through an obligation to disclose information on how and to what extent the investment projects underlying their financial product support an economic activity that meets all of the criteria for the sustainable environment development), financial and non-financial companies covered by the non -financial reporting will be obligated to apply the EU Taxonomy starting from December 2021.

Entry into force from July 12, 2020

The works of the European Commission on the delegated acts

The new principles of sustainable financing defined in the Taxonomy may affect the ability and conditions of obtaining capital for the implementation of the investment projects planned by TAURON Capital Group.

Commission Implementing Regulation (EU) 2020/1001 of July 9, 2020 (Regulation on the Modernization Fund)

Regulation laying down the detailed rules for the application of Directive 2003/87/EC of the European Parliament and of the Council as regards the operation of the Modernization Fund supporting investments to modernize the energy systems and to improve energy efficiency of certain Member States, aimed at defining the general rules for submitting project applications and the cooperation between the Member States and the EU institutions and the European Investment Bank (EIB).

Entry into force on July 30, 2020 The Modernization Fund may constitute significant support for the implementation of investment projects that are a part of the Green Turn of TAURON, and thus have a positive impact on TAURON Capital Group’s transition process.
Commission Implementing Regulation (EU) 2020/1294 of September 15, 2020, on the European Union’s renewable energy financing facility The regulation sets out the provisions required for the implementation and operation of the EU’s renewable energy financing facility, which will be in place as of January 1, 2021.

The goal of the facility is to create a framework and provide support for the new projects in the EU in the field of energy from the renewable sources. Under the facility the Member States will be able to pay voluntary financial contributions, that will be used to submit offers supporting the new RES projects.

Entry into force on October 7, 2020

The facility may constitute support for reducing the cost of capital of the RES projects, achieving the RES target in the energy mix at the national level and tightening the regional cooperation with other Member States.

In the period covered by this report, the legislative works were conducted on amending specific legal provisions, which, if adopted with the assumed content, will have an impact on the operations of TAURON Capital Group.

Most important legislative initiatives in the regulatory environment of TAURON Capital Group in 2020

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NAME OF THE REGULATION DESCRIPTION OF THE REGULATION STATUS AS OF 31.12.2020 IMPACT ON TAURON CAPITAL GROUP
NATIONAL REGULATIONS
Draft act on promoting electricity generation in off-shore wind farms The goal of the draft act is to create a dedicated support system for the generation of electricity in the off-shore wind farms and to facilitate applying for the documents required in the course of the investment related works conducted for the off-shore wind farms.

The act has been forwarded to the Senate and the President of the Republic of Poland

The act will have an impact on the investment opportunities in the off-shore wind energy and may constitute the basis for further analyses of the investment potential of the electricity generation sector in the off shore wind farms.
Draft act on amending the act on the greenhouse gas emission allowances trading system and certain other acts The goal of the draft act is to transpose Directive (EU) 2018/410 of the European Parliament and of the Council of March 14, 2018, amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814, in particular, to introduce the National Modernization Fund implementation system to be responsible for co-financing the implementation of investment projects modernizing the national power system and improving energy efficiency. Past the Committee for European Affairs The Act, and in particular the introduction of the National Modernization Fund implementation system, will affect the possibility of obtaining funds for investments that fall within the scope for which financing from the Modernization Fund’s funds is possible.
Draft act on amending the act on the capacity market The goal of the draft act is to adjust the content of the Act on the Capacity Market to Regulation (EU) 2019/943 of the European Parliament and of the Council of June 5, 2019, on the internal market for electricity, in particular with regard to limiting the participation in the capacity mechanisms of units emitting more than 550 g of CO2 from fossil fuels per kWh of electricity produced and an annual average of more than 350 kg of CO2 from fossil fuels per kW of installed capacity. In addition, it aims to introduce a mechanism supporting the implementation of investment projects, in particular in low emission units and mitigating the effects of delays resulting from the COVID-19 pandemic Public consultations have been completed

The act will ensure the proper implementation and functioning of the capacity market mechanism despite the negative impact of the COVID-19 pandemic on the investment processes.

Draft regulation of the Minister of Infrastructure on the evaluation of applications (motions) submitted in the resolution (decision-making) procedure The goal of the draft regulation is to establish detailed criteria to be used to determine the method of selecting, in the resolution (decision-making) procedure, an entity that will obtain a permit to build or use artificial islands, structures and devices in the Polish maritime areas. Public consultations have been completed

The regulation is required for the initiatives aimed at the development of the maritime areas after the adoption of the spatial development (zoning) plan for the Polish maritime areas. It is particularly important from the point of view of making all decisions regarding investments in offshore wind energy by the entities that have not yet obtained a permit for the construction and use of artificial islands in the Polish exclusive economic zone of the Baltic Sea.

NAME OF THE REGULATION DESCRIPTION OF THE REGULATION STATUS AS OF 31.12.2020 IMPACT ON TAURON CAPITAL GROUP
EUROPEAN UNION (EU) REGULATIONS
Just Transition Mechanism

The proposed regulation was published by the European Commission in January 2020 as part of implementing the European Green Deal, the Just Transition Mechanism consists of three pillars:

  • 1st pillar – Just Transition Fund,
  • 2nd pillar – InvestEU Program,
  • 3rd pillar – Loans for the public sector.

In December 2020, the trilogue negotiations among the EU institutions were completed, according to which the Just Transition Fund’s budget would total EUR 17.5 billion.

Works on the draft regulations in the European Parliament and the Council of the EU Works on establishing the Just Transition Fund and the InvestEU Program in the European Parliament and the Council of the EU The regulation may provide support for TAURON Capital Group first and foremost in the following areas:

  1. investments in renewable energy sources (RES) (including on the post-industrial or post-mining land),
  2. raising and changing the qualifications of, first and foremost, the personnel employed in mining or hard coal-based electricity generation,
  3. research and development of the low emission technologies,
  4. reclamation and management (utilization) of the post-mining and post-industrial land..
European Climate Law

The draft regulation was published by the European Commission in March 2020 and its goal is to establish the framework for achieving climate neutrality (European Climate Law). The draft includes, among others, a proposal of a new target for reducing the greenhouse gas emissions at the EU level by 2030 and the introduction of the EU level greenhouse gas emissions reduction trajectory for 2030-2050.

In December 2020, the European Council approved a binding target assuming the reduction of the net greenhouse gas emissions in the EU by 2030 by at least 55% as compared to the level of 1990 and called on the European Commission, the European Parliament and the EU Council to take into account the new target and to swiftly adopt the petition related to the European Climate Law.

Works on the draft regulation in the European Parliament and the Council of the EU

Tightening of the target for reducing the greenhouse gas emissions by 2030 to at least 55% may have an impact on the costs of the CO2 emission allowances and thus on the costs of electricity generation by the conventional units of TAURON Capital Group (TAURON Wytwarzanie, TAURON Ciepło).