EU approves Estonia's €450 million renewable energy support scheme

Aulepa windfarm.
Aulepa windfarm. Source: Eesti Energia

The European Commission has approved, under EU state aid rules, the modification of the existing aid scheme worth €450 million to support electricity production from renewable sources and efficient co-generation in Estonia.

"Amending the Estonian scheme will increase the share of renewable energy sources in the distribution of Estonian energy sources," Executive Vice-President Margrethe Vestager, in charge of competition policy, said. She added this will help Estonia in its transition to a low carbon dioxide (CO2) emission and green economy in line with the European Green Deal and EU state aid rules.

Estonia notified the Commission of its intention to amend its current support scheme for electricity produced from renewable sources and efficient co-generation. The existing scheme was approved by the Commission in December 2017, and is due to expire at the end of 2020.

The new modified scheme, with a budget of around €450 million, will be applicable for 10 years from the date of this decision. The measure will help Estonia reach its renewable energy targets and will contribute to the new European objective of achieving climate neutrality by 2050, without unduly distorting competition.

Renewables installations benefitting from the scheme will receive support in the form of a premium on top of the electricity market price. The premium will be set through a competitive bidding process and cannot be higher than the difference between the average production cost for each renewable technology and the electricity market price.

With a view to reaching Estonia's renewable targets in a cost-efficient manner, the modified scheme will allow Estonia to organize multi-technology tenders. Compared to the existing scheme, tenders will not only be organized for new renewable installations, but also for existing power plants intending to switch from fossil fuel to biofuel as a result of the support. This aims at incentivizing a fuel switch from fossil fuel to renewables thus helping to reduce CO2 emissions.

The Commission assessed the scheme under EU state aid rules, in particular the 2014 guidelines on state aid for environmental protection and energy.

The Commission found the aid is necessary and has an incentive effect, as electricity prices do not fully cover the costs of generating electricity from renewable energy sources. Furthermore, existing installations will be required to apply for the aid before they start co-firing renewable fuels, while new installations can start works only after having been selected in the tender.

The aid is also proportionate and limited to the minimum necessary, as it only covers the negative difference between the market price of electricity and the production costs. In this respect, the scheme ensures that this will be case even if market prices rise unexpectedly.

Therefore, the Commission concluded that the Estonian measure is in line with EU state aid rules, as it promotes the generation of electricity from renewable sources, in line with the European Green Deal, without unduly distorting competition.


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Editor: Helen Wright

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