Changes on green energy subsidies scheme for politicians to decide

Wind farm in Paldiski. Photo is illustrative.
Wind farm in Paldiski. Photo is illustrative. Source: Enefit Green

Changes to the support scheme launched to provide incentives for renewable energy producers, can only be made at a political level. Under the current scheme, which was launched in 2007, some renewable energy companies will continue to receive subsidies for the next decade, despite the recent sharp rises in electricity prices. According to Minister of Economic Affairs Riina Sikkut (SDE), the issue could be discussed during budget negotiations.

"The scheme is politically designed and the decision to change it has to come from the politicians, because to do that you need to change the law," Ain Köster, a spokesperson for Estonia's power distribution network operator Elering, told ERR on Wednesday.

Köster said, Elering's role in the scheme is that of a paying agent, with the company required to make a forecast of renewable energy volumes for the next year as well as calculate renewable energy fees to be added to the bills of electricity consumers.

In 2007, the state launched a scheme under which renewable energy producers were paid a premium of €53.70 for each megawatt-hour of renewable energy, regardless of the price of electricity. Although the scheme has now ended, companies which began producing wind energy prior to 2016 and solar energy producers which started before the end of 2020, will still be eligible to receive the premium for up to 12 years. However, as electricity prices have since increased several times over, green electricity producers may no longer require such financial support.

This was also the view of Märt Ots, advisor to IT and foreign trade minister Kristjan Järvan (Isamaa) and former head of the Competition Authority (Konkurentsiame)

"At the time, the scheme was set up because the equipment needed to generate renewable energy generation was very expensive and electricity prices were low. But now the situation has changed dramatically," Ots told ERR.

At the same time, a spokesperson for the Ministry of Economic Affairs and Communications said, that the support scheme cannot be changed retrospectively, as promise have already been made to renewable energy producers. "We can get new production equipment if we keep the investment environment stable and keep our promises. The current situation on the electricity market clearly shows that we need even more generation capacity and even faster," said Kadri Laube, the ministry's public relations adviser, in daily Postimees on Tuesday.

Ots also stressed that any change to the system, which would impose a ceiling, above which green energy producers would no longer receive financial support should electricity prices rise, would be a political decision. However, Ots disagrees that the scheme cannot be changed retroactively to honor earlier promises made by the state to energy producers, believing it is entirely possible to do so.

"According to the EU treaties, state aid must be proportionate as it is intended to support a specific sector of the economy. Because the economy is dynamic, the state is required to constantly assess the situation," said Ots, adding that the Competition Authority has repeatedly proposed changes to the current support scheme.

Minister of Economic Affairs Riina Sikkut (SDE) told ERR on Wednesday, that as the coalition agreement did not address the issue, she had no grounds to initiate changes at this stage.

"All new decisions (regarding the scheme) must remain part of the budget negotiations," Sikkut stressed. Sikkut also suggested that the budget negotiations would start in mid-September.

According to Elering's website, the total amount of subsidies paid for to companies for the production of energy from renewable sources between 2010 and July 2022 was around €900 million. The highest amount of subsidies paid out in a single year was in 2020, when €100 million was given to green energy producers through the scheme.


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Editor: Michael Cole

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