Rural Development Programme

The development of renewable energy sources in the countryside offers an opportunity for rural development. RES can contribute to building new envi-ronment-friendly infrastructure, encourage entrepreneurship as well as creating new non-agricultural jobs in rural areas. It should be noted that Poland has great possibilities of the development of renewable energy sources due to enormous resources of energy carriers, favourable environmental conditions as well as the need to make the Polish power sector more environment-friendly. Therefore, rural areas face a unique opportunity to exploit the growing interest in RES. Fur-thermore, rural and urban-rural districts can additionally benefit from RES in-vestments as such projects are eligible for financial assistance, e.g. under the Rural Development Programme. Such support can be granted to projects imple-mented in towns and villages in rural or urban-rural districts, excluding towns with more than 5,000 inhabitants or towns in urban districts with less than 5,000 inhabitants. The maximum value of a project concerning renewable energy sources eligible for support is PLN 3 million.

The Rural Development Programme provides for the financing of in-vestments aimed at setting up installations using RES and support for holdings wishing to undertake such activities. Financial assistance concerning RES was covered by the following measures the Programme: under Axis 1 “Improving the competitiveness of the agricultural and forestry sector” these include:

“Modernisation of agricultural holdings” and “Adding value to agricultural and forestry products”; under Axis 3 “Quality of life in rural areas and

diversifica-tion of the rural economy” the measures are: “Diversificadiversifica-tion into non-agricultural activities”, “Creation and development of micro-enterprises” and

“Basic services for the economy and rural population”.

Table 1. EU instruments for financing investments in renewable energy

Programme Axis Measure

Modernisation of agricultural hold-ings

Axis 1 Improving the competi-tiveness of the agricultural and

forestry sector Adding value to agricultural and forestry products areas and diversification of the rural economy

Basic services for the economy and rural population accessibil-ity of energy from renewable sources

Opera-tional Programmes Environmental protection in-frastructure (Operational Pro-gramme of the Małopolskie voivodship)

Improving air quality and increasing the use of renewable energy sources

Direct payments for energy crops

Rural producers growing energy crops can apply for payments of EUR 45 per hectare. The maximum area of agricultural land within the EU for which the aid may be granted is 2 million ha. If this limit is ex-ceeded, reductions are applied EU-wide. In 2007 the reduction rate for crops was 0.70337, which means that the Agency for Restructuring and Modernisation of Agriculture multiplies the declared area under crops by 0.70337, and then calculates the payment for this area.

Source: Own study.

The measure “Modernisation of agricultural holdings” gives them the op-portunity for modernisation, improvement of production quality and adjusting farming activities to the current market needs. The measure aims at co-financing the modernisation of agricultural holdings so as to improve their competitive-ness through increased efficiency of using the existing and modernised produc-tion factors⁵³. The concept of modernisation is very broad and hence the meas-ure covers all investments aiming at the improvement of the holding’s situation in respect to farming conditions, infrastructure, health and safety at work, the environmental protection. Therefore, this type of support can be granted to in-vestments such as construction or repair related to the modernisation of build-ings, the purchase or modernisation of machinery, the establishment and mod-ernisation of orchards, the acquisition of patent rights, licenses and fees for ser-vices connected with the preparation of necessary documents⁵⁴. The measure in question is targeted at natural or legal persons and partnerships engaged in agricultural activities. The maximum amount of support per beneficiary and per agricultural holding cannot exceed PLN 300,000. The public contribution ranges from 40 to 75% depending on the type of investment⁵⁵. The measure “Moderni-sation of agricultural holdings” is significant in terms of adjusting agricultural holdings to market conditions and improving their competitiveness. However, it seems that in Poland the measure will primarily support agricultural holdings planning to purchase agricultural machinery or modernise storage buildings rather than investments related to RES. The measure does not exclude RES in-vestments, but it determines such a broad scope of eligible modernisations that it gives no incentive to invest in RES to beneficiaries with insufficient knowledge in this respect.

Under the measure “Adding value to agricultural and forestry products”

support is granted for projects concerning the processing of “solely agricultural products into food or non-food products, including agricultural products used for energy purposes.”⁵⁶ Moreover, the scope of the measure also covers investments aiming at generating energy from renewable sources. The measure is oriented to increasing the competitiveness of processing enterprises, as well as to the im-provement of the production conditions and compliance with Community stan-dards. The Rural Development Programme specifies that support can be granted to natural persons, legal persons or organisational units without legal personality with registered processing activities and operating as small or medium-sized

53 Rural Development Programme for 2007-2013 (RDP 2007-2013), op. cit., p. 191.

54 Ibidem, p. 193.

55 Ibidem, p. 196.

56 Ibidem, p. 92.

terprises⁵⁷. Aid under the measure concerns companies engaged in the process-ing of all kinds of products: milk, vegetables, fruit, cereals, potatoes, hemp, as well as in the processing of agricultural products for the purposes of the power sector, which is important in terms of renewable energy sources. As in the measure “Modernisation of agricultural holdings”, investments eligible for sup-port include: the construction, modernisation and reconstruction of buildings used for processing activities, the purchase of machinery and equipment used in processing, the purchase of special modes of transport, the purchase of environ-ment-friendly installations and equipment, the acquisition of software, patents, the preparation of the project’s documentation⁵⁸. Depending on the type of in-vestment, aid intensity ranges from 25% to 50%. The measure “Adding value to agricultural and forestry products” represents a mechanism encouraging invest-ments in renewable energy sources since it directly provides for support for growers of energy crops. It is of particular importance from the perspective of rising demand for this type of crops on the part of power plants wishing to limit CO2 emissions.

Axis 3: “Quality of life in rural areas and diversification of the rural econ-omy” is the answer to ever-growing challenges to rural areas, connected with the dynamic market changes. Rural areas and agricultural holdings are in particular danger of marginalisation in the situation where the success of undertakings is determined by their commercial character, innovativeness or the proximity to the final user. Nevertheless, owing to support obtained under the axis in ques-tion, rural areas also have a chance to switch to more efficient economic activi-ties. One of the measures specifically addressing the ongoing changes is the

“Diversification into non-agricultural activities”, the aim of which is to promote taking up activities not related to agriculture. It may contribute to the improve-ment of the income situation of farmers and to the increase in rural employimprove-ment.

As a matter of fact, it is not possible to undertake all types of economic activity in rural areas. Nevertheless, the Rural Development Programme clearly specifies what is considered to be non-agricultural activities: services for agricultural holdings or for forestry; wholesale or retail trade; craftsmanship, construction and installation works, transport services, tourist services, the processing of ag-ricultural products, warehousing and storage of goods, advisory and IT services and, which is especially important with regard to RES support, the production of energy products from biomass⁵⁹. The beneficiaries of the measure

57 Rural Development Programme for 2007-2013 (RDP 2007-2013), op. cit., p. 201.

58 Ibidem, pp. 202, 203.

59 Ibidem, pp. 275, 276.

cation into non-agricultural activities” can only be persons covered by agricul-tural social insurance.

The measure “Creation and development of micro-enterprises” is oriented towards stimulating rural entrepreneurship. It is aimed at supporting the estab-lishment of micro-enterprises as such companies contribute to the diversification of economic activity, job creation and the economic development of rural areas.

The measure in question promotes the setting-up of micro-enterprises engaged in non-agricultural activities, the scope of which is the same as those eligible for support under the measure described previously. Beneficiaries of the measure

“Creation and development of micro-enterprises” include natural persons, legal persons and organisational units without legal personality operating as micro-enterprises, i.e. those which employ fewer than 10 persons and whose turnover is less than the PLN equivalent of EUR 2 million⁶⁰. Depending on the number of new jobs as specified in the business plan, the amount of support granted under the measure in question ranges from PLN 100,000 to PLN 300,000 and accounts for a maximum of 50% of eligible costs of the project⁶¹. The measure is particularly important as it contributes to the activation of rural areas; never-theless, as regards RES, one might ask why the support is limited to investments related to biomass.

The measure “Basic services for the economy and rural population” ex-plicitly refers to investments oriented towards the production, use and distribu-tion of energy from renewable sources. The aim of the measure is to improve infrastructure in rural areas, necessary to create better conditions for economic activity and to attract new investments. Apart from projects connected with the generation and distribution of energy from renewable sources, assistance is also granted to undertakings in the field of water supply and waste water treatment in districts⁶². This measure is targeted at rural districts, rural-urban districts, ex-cluding towns with more than 5,000 inhabitants, as well as at urban districts, excluding localities with more than 5,000 inhabitants⁶³. The maximum contribu-tion rate is 75% of eligible costs of investment, and the amount of support ranges from PLN 200,000 to PLN 4,000,000, depending on the type of project.

The measure “Basic services for the economy and rural population” offers an opportunity to obtain financial assistance for projects related to renewable en-ergy sources (RES). Nevertheless, under the measure in question it is also possi-ble to be granted support for projects concerning waste water treatment and the

60 Rural Development Programme for 2007-2013 (PROW 2007-2013), op. cit., p. 282.

61 Ibidem, p. 282.

62 Ibidem, p. 286.

63 Ibidem, p. 287.

construction of sewage systems. As such facilities are frequently absent, espe-cially in rural areas, it seems that those projects have priority and are more likely to be implemented as compared to RES investments. It is difficult to imagine that local authorities, with the support of inhabitants, would first set up wind turbines in districts without sewage systems. It is within the discretion of local authorities. Nevertheless, the measure does not encourage RES investment, even with the percentage level of support.