Competition Authority recommends phasing out renewable energy subsidies

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The Competition Authority (Konkurentsiamet) analyzed the renewable energy subsidy schemes implemented in Estonia and their economic impact and has recommended switching to a market-based solution and phasing out renewable energy subsidies.

In 2007, the Electricity Market Act set the period of support for renewable energy at 12 years. This means that a company that started production in 2007 received support until 2019, the Competition Authority said.

Although the transition to an auction-based renewable energy system has been fully completed in 2021, the support is still intended to be paid to the producer for 12 years. A company building a plant this year will therefore be able to receive support until 2033.

The Competition Authority said the experience of other countries shows it is possible to build renewable energy plants with minimal renewable energy support. Based on the European Union's clean energy package, renewable energy targets should be achieved with the least possible support and under conditions of free competition.

The costs related to the production of renewable energy will also decrease over time, and therefore, according to the Competition Authority, it can be assumed that in the future it will be possible to build the majority of plants without support.

Director general of the Competition Authority Mart Ots said there is great renewable energy potential in offshore wind farms. "Offshore wind farms can be compared in some ways to the oil and gas reserves discovered decades ago in the North Sea, which have brought prosperity to quite a few countries," Ots said.

"It is important to use the resource in a transparent way, because through it the state would benefit and the consumer would benefit from the lowest possible electricity price," the director general said.

The Competition Authority found the current support scheme also imposes an unreasonably high tax burden on consumers, which will continue for decades to come.

The authority said that while Estonia has fulfilled its commitments on renewable energy, it has not come cheaply for consumers - in 2007-2020, the consumer's tax burden totaled €829 million. Subsidies paid by consumers are projected to reach €1.5 billion by 2030 and are expected to be paid by 2045.

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Editor: Helen Wright

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