Government to decide on €9 million support for renewable energy producers

Utilitas Mustamäe cogeneration plant.
Utilitas Mustamäe cogeneration plant. Source: Utilitas

Although the government decided last week to allocate €4 million to cover costs for renewable energy instead of raising prices, there is still an estimated €9 million shortfall not covered for producers of renewable energy. There is now a decision to be made if support for those production fees should be allocated out of next year's state budget or if prices should be raised.

Last year, Estonian consumers paid close to €90 million for renewable energy. The price on renewable energy was €0.125 per kWh, but this year, Elering has raised prices to €0.136 per kWh.

Producers of renewable energy are paid support packages out of received fees. Currently, this is done on the basis of a 12-year scheme which ended in 2016 and paid producers €0.537 per kWh and another support package for efficient cooperation, amounting to €0.32 per kWh.

Elering's charge for renewable energy should cover their yearly expenses. Last year, when the prices were set, the Estonian grid distributor predicted similar growth in renewable energy usage to what it was in 2019, while still taking into account a 1.14 percentage increase in electricity usage in the country.

In reality, however, the production of renewable energy increased exponentially and the usage of electricity in general decreased due to the coronavirus pandemic.

One of the factors behind the growth of energy production is a Utilitas cogeneration plant in Mustamäe, operating on biofuels, which was opened last November. Since the project was started in 2013, it still fits under the regulations set in 2016.

Ain Köster, a spokesman for Elering, told ERR the renewable energy sector is missing an estimated €13 million this year. To cover the missing resources, the company could increase prices for the consumer. According to an assessment made by the company, prices on renewable energy should be raised by close to 30 percent - from €0.136 per kWh to €0.175 per kWh.

While an increase in prices would not affect a regular household as much as it would affect companies which consume large amounts of renewable energy, the government allocated €4 million last week to keep prices of energy low.

Timo Tatar, Deputy Secretary General for Energy at the Ministry of Economic Affairs and Communications, told ERR: "The €4 million allocated allows us to delay the extraordinary increase in tariffs."

He added: "If necessary, the government can reopen discussions in the autumn on whether we need to find even more resources or if Elering will increase the tariffs on renewable energy to cover expenses. Since renewable energy is largely dependent on wind, sun, the amount of water, and in the case of cogeneration plants - the heating period, the process is difficult to predict and that is not a new occurrence. That can be directed by regular changes in tariffs in the end of 2020.

"An important factor is that soon, large producers of renewable energy will come out from under the scheme because the subsidization period of 12 years is nearing completion. Wind and solar farms in development do not need as many grants and will join the scheme by support offers. Even currently, we've seen half as many applications for support."

It is still unclear if Eesti Energia's Tootsi wind farm will fall under the scheme. The state-owned energy group submitted an application to Elering to assess the farm and to make a decision by June 19. By law, Elering has three months to announce their findings, but that period can be extended if additional information is necessary.

The first five months of 2020 saw 881 gWh of renewable energy produced, with support packages nearing €100 million. Compared to 2019, 759 gWh was produced with a total of €91.4 million allocated as support for producers.

Estonia has allocated €691 million for renewable energy producers in 2010-2019.


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Editor: Kristjan Kallaste

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