Eesti Energia wants state guarantee for investment in wind farm

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Middelgrunden wind farm (Photo is illustrative) Source: Kim Hansen/Wikimedia Commons

Inaction by the state is preventing progress on the project to build a large offshore wind farm in the Gulf of Riga, State-owned energy group Eesti Energia wants the government to offer its guarantee to the project so that when the price of electricity drops below a certain level, the state would compensate the balance, Eesti Energia CEO Hando Sutter said on Thursday.

Recently, Eesti Energia announced plans for the establishment of an offshore wind farm in the Gulf of Riga with Danish company Orsted. Preparations have been going on for ten years and it will take another ten days for the wind farm to be put into operation if the project ever materializes, public broadcaster ERR reported.

Sutter told ERR that on the rather hectic electricity market, an investment of €2 billion is too big a risk for Eesti Energia.

"We want to develop a very competitive renewable energy production facility. So that it can produce electricity at a price competitive with all other forms of electricity generation. And then, as with any large-scale investment, you need such investment climate or framework or set of rules which enables you to finance the large project," the CEO said.

Sutter said that this requires establishing a so-called price floor, which the Ministry of Economic Affairs and Communications has not considered necessary, however. 

"This is a minimum price that could be received from the market during a certain period of time, and if for any reason it should be lower, such as due to some regulatory change or unfair competition from Russian electricity, the state has given a guarantee that it will be compensated to investors for a certain period of time," Sutter said.

Timo Tatar, deputy secretary general for energy at the Ministry of Economic Affairs and Communications, meanwhile said that according to the position of the state, the market environment must be such that renewable energy projects would emerge without subsidies, without any floors or ceilings.

"We definitely are not the kind of country where one company makes a project for itself in the sea and then the state will make a support scheme suitable for that project," Tatar said.

The country's chief energy official said that the price floor should be established in competition and be producer-neutral, meaning that producers of nuclear, solar and wind energy alike would be able to participate in the offer. 

Since at present Eesti Energia has advanced furthest with its wind farm project, it would be the only participant.

"Eesti Energia is a market participant and we do not want any special treatment, we are not afraid of competition, but at the same time we have a great challenge in Estonia as a whole. We need new electricity generating capacity quite soon and quite much of it. So something just has to be done, some decisions have to be made," Sutter said.

Tatar said it is too early now to demand any public support schemes.

"It is still expensive to produce renewable energy at sea today. We can see that investment there will actually start happening after 2030. So to come up with some kind of support scheme there now is clearly premature," he said.

It is expected that Estonia is able to meet its renewable energy target for 2030 also with onshore wind farms alone.

"With land-based [farms], the problem of radars has been a barrier for a long time, which has just recently been resolved. The government invests nearly €70 million in it and 60 percent of the land area will be free for wind farms," Tatar said.

Eesti Energia is developing its wind farm in the Gulf of Riga with Danes. Simultaneously, the Estonian state is developing a separate area for wind farms with cross-border connections with Latvia. The connections will be put up for auction and the best bidder will be able to build its wind turbines there. 

Eesti Energia already has its maritime space and it doesn't need to participate in that bidding, Ain Koster, spokesman for state-owned transmission system operator Elering, said.

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Editor: Helen Wright

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