Economy ministry: State must not break word on renewable energy subsidies
Timo Tatar, deputy secretary general for energy at the Ministry of Economic Affairs and Communications, said on Wednesday that the state must not break its word and renewable energy subsidies must still be paid out fully to the producers in the extent promised.
The Estonian Competition Authority has made a proposal to the Ministry of Economic Affairs and Communications to review renewable energy subsidies in light of the surge in free market prices for electricity in 2021. As the price of electricity has increased exponentially in 2021, the Competition Authority recommends reviewing the current subsidy amounts and aligning them with the exchange tariff of electricity.
Tatar told BNS that regardless of whether the support rates of the support scheme established more than 10 years ago seem high or low to us today, the state must still pay out the subsidies promised to producers fully.
"The state should not break its word and start changing support schemes retrospectively as soon as it seems more useful. The European Union's renewable energy directive also does not allow such a step to be taken by a member state, and it is likely that the country would face years of litigation with producers," the deputy secretary general said.
He added that the wish of the ministry is for renewable energy producers to build new renewable energy capacity in Estonia and not have to spend time going to court with the state. "In short, such a hasty and seemingly simple solution would have a long-term negative impact on our energy economy and the development of electricity generation capacity," Tatar said.
The deputy secretary general also pointed out that the market price of electricity has been rather low in previous years. "A very high market price of electricity that has lasted for a few months does not change the profitability of renewable energy projects over the entire life cycle. A much longer period should be used as the basis for assessing the alleged overcompensation," he said, adding that fossil fuels have led to high electricity prices, which is why it is particularly important today to maintain investment security in the construction of renewable energy production facilities.
"We have by now completely switched to a lowest bid auction based support scheme, with which we offer developers who won in competition conditions a guaranteed price rate determined at the lowest bid auction. If the market price is higher than this price, no support is received from the state," Tatar said.
For example, in the lowest bid auction that ended this summer and was aimed at smaller production equipment, the price ended up being around €45 per megawatt-hour (MWh), and thus the state does not have to pay support in the current market conditions.
According to the deputy secretary general, the experience of the Nordic countries shows that modern wind turbines can be built against an even lower price guarantee, and the ministry is also expecting such results from new lowest bid offers. "The long-term goal is to move to support-free renewable energy in the coming years, but in the meantime we need to create a fertile ground for businesses to want to invest in green energy," Tatar said.
"The old support scheme for renewable energy, where support was paid regardless of the market price, is coming to an end. Most investment decisions were made based on this about a decade ago, and today many projects built with this support are leaving the support scheme. This also means a reduction in the renewable energy fee component on the electricity bill for consumers," the deputy secretary general added.
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Editor: Marcus Turovski