A good deal of confusion has built up around energy infrastructure in the Polish Investment Zone. Many entrepreneurs hear a simple answer: „energy costs are excluded, so photovoltaics, cogeneration or similar elements cannot be included in eligible costs". But that is only part of the truth.
In practice the situation is more complex. As a rule, costs related to energy generation, its distribution and energy infrastructure are excluded in the PSI. At the same time, the application instructions contain an important clarification: some costs related to energy generation may nevertheless be included if certain conditions are met.
This is very important, because for many companies today their own energy source is not an add-on but a normal element of a new investment.
Where does the problem come from?
The Polish Investment Zone is based on the rules of regional investment aid. This means that not every type of activity and not every type of cost can be covered by support.
The PSI documents contain a general rule under which the declared eligible costs do not include investment costs related to:
- energy generation,
- energy distribution,
- energy-related infrastructure.
At first glance it therefore looks unambiguous: energy falls out of eligible costs.
But this is precisely where an important practical difference appears. Not every energy investment is treated in the same way. A project whose purpose is energy business as such is assessed differently from a project in which the energy source merely supports the company's business.
The most important point: not every case is the same
In practice, two situations must be distinguished.
1. An energy project as the main purpose of the investment
If an entrepreneur builds an installation primarily to generate and sell energy, the project is of an energy nature. Importantly, activity related to energy generation and distribution is subject to special restrictions arising from regional aid regulations, including Commission Regulation (EU) No 651/2014 and the national provisions governing the PSI.
In practice this means that such projects are as a rule not covered by support under the Polish Investment Zone. In other words, if the main purpose of the investment is energy business, the project itself falls outside the standard scope of aid available in the PSI.
2. An energy source as an auxiliary element of the main investment
If, however, the entrepreneur carries out a principal investment, for example constructing a hall, expanding a plant or purchasing a new production line, and the energy installation is intended primarily to power that activity, the situation is different.
It is precisely for such cases that the application instructions contain an important clarification.
When can energy generation costs nevertheless be included in the PSI?
The application instructions indicate that the statement on the exclusion of energy costs does not apply to costs related to energy generation if three conditions are met cumulatively.
Condition 1: energy generation cannot be the main purpose of the project
This is the most important starting point.
If most of the investment costs relate to developing production or service activity, and the principal expenditure comprises typical eligible costs such as fixed assets, intangible assets, the energy part may be treated as auxiliary to the main investment.
Put simply: the project cannot in essence be the construction of a power plant submitted to the PSI „on the side".
If the energy installation begins to dominate the budget, the project description or its economic function, the risk of the costs being challenged rises very markedly.
Condition 2: energy is to serve mainly own needs, i.e. the 80/20 rule
The second condition states that energy generation capacity should be adapted to the needs of the company. The point is that energy should be generated primarily for the plant's own needs, not for sale.
In practice the 80/20 rule is applied here, meaning:
- as a rule, energy should be consumed internally,
- a maximum of 20% of planned energy production may be sold,
- the assessment is made on the basis of an ex ante analysis, i.e. assumptions adopted at the application stage.
This is very important. The authority does not look only at whether the installation can technically feed energy into the grid. It looks above all at whether the project was designed for the company's own needs or rather for sales activity.
If the installation is clearly oversized, it will be difficult to defend the position that it is auxiliary in nature.
Condition 3: the energy source must belong to a permissible category
It is not enough that the energy source is not the main purpose and is to serve mainly own needs. A third condition must also be met: the investment must concern an energy source that could, in principle, qualify for support under the state aid rules in the energy sector.
In practice this means that the safest solutions are:
- renewable energy sources,
- high-efficiency cogeneration.
By contrast, it would be hard to justify the eligibility of costs of an energy source based solely on a diesel generator powered by diesel oil. This type of solution is not treated as a renewable energy source or high-efficiency cogeneration and as a rule does not fall within the catalogue of investments that could benefit from support provided for the energy sector.
Important: the exception applies mainly to energy generation, not to everything „energy-related"
And here we come to a practical trap.
In business conversations the shorthand is often used: „energy infrastructure can be included in costs". This is, however, too great a simplification.
It is safer to put it this way:
In certain situations, costs related to energy generation may be included in eligible costs if they are auxiliary to the main investment and cumulatively meet specified conditions.
This does not automatically mean that all infrastructure accompanying energy will be eligible. Particular caution is required, for example, with:
- infrastructure clearly serving the sale of energy,
- elements of a distribution nature,
- connections or solutions designed mainly for feeding energy into the grid,
- components that are difficult to link to the plant's own needs.
In practice this means that it is not worth including an entire energy package in costs without analysing the function of individual elements.
Practical example
Suppose a manufacturing company expands its plant and buys a new production line for manufacturing metal components. The whole project costs PLN 24 million. As part of this investment, the company also plans to install a photovoltaic system worth PLN 1.8 million.
What does the situation look like?
- the main purpose of the project is to increase the plant's production capacity, not to sell energy,
- the PV installation is to power the hall and the production line,
- the ex ante analysis shows that about 88% of the energy will be consumed for own needs, and about 12% may go to the grid,
- the technology is RES, so it falls within the catalogue of solutions that can reasonably be considered in the context of state aid.
In such a setup there are strong arguments to defend the position that the cost of the photovoltaic installation should not be automatically excluded from eligible costs.
But note: if the same company designed an installation twice as large as the plant's needs require, and a significant part of the energy were to be sold, the assessment could be completely different.
How to prepare such a topic for the application?
If an entrepreneur wants to include costs related to energy generation, they should prepare their argumentation well. In practice it is worth taking care of several things.
1. Clearly show the main purpose of the investment
The project description should clearly indicate that the main purpose is the development of production or service activity, not energy business.
2. Prepare an energy demand analysis
It is necessary to show that the installation's capacity was selected to match the company's real needs. This is where the ex ante analysis and the 80/20 rule are particularly important.
3. Describe the function of the energy source in the project
The better the entrepreneur explains that the energy installation serves the operation of the plant, the easier it will be to defend its auxiliary nature.
4. Separate safe elements from risky ones
Not every cost in the energy area has to be assessed in the same way. In practice it is worth breaking the project down into components and checking which of them genuinely serve the main investment and which may raise doubts.
The most common mistake of entrepreneurs
The most common mistake is adopting one of two extreme assumptions:
- either the entrepreneur assumes that nothing energy-related can be included in costs,
- or, conversely, concludes that since they have their own energy consumption, all energy infrastructure is automatically eligible.
Both approaches are risky.
The correct approach is more balanced: you need to check exactly what the cost item is, what function it performs in the project and whether all the conditions set out in the instructions are met.
Summary: what about energy infrastructure in the PSI?
In the shortest terms: in the PSI, energy-related costs are as a rule excluded, but this exclusion does not always operate automatically with regard to the costs of generating energy for a company's own needs.
If:
- energy generation is not the main purpose of the project,
- the installation has been matched to the company's own needs,
- the sale of energy is incidental and falls within the 80/20 rule,
- and the energy source belongs to a permissible category, for example RES or high-efficiency cogeneration,
then there are strong arguments for defending the inclusion of such costs within an investment covered by the PSI.
At the same time, remember that not all energy infrastructure will be automatically eligible. In practice, the most important thing is to correctly distinguish between the cost of an auxiliary energy source and infrastructure of a strictly energy or distribution nature.
Therefore, in such projects what matters is not only the scope of the investment itself, but also the way it is described and justified in the application.
If you are planning an investment in the PSI and wonder whether the costs of photovoltaics, cogeneration or another energy source can be safely included in eligible costs, it is worth analysing this before submitting the application. Well-prepared argumentation at the outset can determine the security of the entire project.