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Even before the announcement of the Fit for 55 package by the European Commission, the cost of transforming the Polish heating sector was estimated at over PLN 100 billion. This may prove to be a challenge for local government heating companies, that will not be able to bear such costs without external assistance. However, it is an opportunity for private investors, including construction groups, for whom entering this sector can help with business diversification.
District heating companies are found in a difficult situation. Any attempts to estimate the costs of transforming the district heating sector may turn out to be futile due to the constantly emerging regulations. The estimates prepared four years ago on the basis of the Winter Package are no longer relevant owing to the introduction of Fit for 55 package.
So far, the costs of transforming the heating sector were estimated at PLN 70 billion on the side of generation sources, and PLN 30 billion on the network. However, it is difficult to say how long these estimates will remain accurate, given that new regulations need new forecasts.
Thwarted by the regulations
Bogusław Regulski, the president of the Polish District Heating Chamber of Commerce, is of the opinion that “the economic environment is stifling the investment capacity of the sector”. The current regulatory policy also disrupts the completion of heating projects – it does not guarantee that the planned activities will be able to achieve the expected return on capital within a given period.
The industry hopes for a profound transformation: firstly, on the creation of long-term regulatory mechanisms; ones that will be transparent and allow for the construction of realistic business plans.
Hoping for a change
Therefore, the recent changes to the tariff regulation are just the beginning of the changes expected by heating engineers. The regulations are aimed at improving the financial condition of the sector in order to secure the “bankability” of heating companies. However, the current state of affairs is different – there are no aid or subsidy programs that could help to finance the projects in full and an own financial contribution is expected.
Heating companies have suffered enormously due to the constantly rising prices of CO2 emission allowances. This fact has so far not been properly included in the regulations, which has turned out to be a financial challenge for the industry. However, the financial liquidity of heating companies is to improve due to the recent changes in the regulatory module.