In a situation where the energy sector is seeing huge profits and new renewable energy producers can work on a market basis, Estonia's renewable energy fee no longer makes sense, find representatives of both the Center Party and Conservative People's Party of Estonia (EKRE) parliamentary groups.
Transmission system operator (TSO) Elering announced Wednesday that it would be increasing its renewable energy fee by 10 percent next year. It is justifying the hike with the fact that projected electricity consumption volumes are decreasing, and while the volume of support to be paid will likewise be decrease, the reduction in consumption to begin this year is already driving up the amount needed to be collected on every consumed kilowatt-hour in order to fund these subsidies.
Opposition members of the Economic Affairs Committee of the Riigikogu are critical of such a price increase.
MP Taavi Aas (Center) told ERR that this step by Elering is entirely incomprehensible.
"Renewable energy support was meant to cover green production that had been commenced previously, and that should start to be decreasing now, so the fee amount should actually be starting to go down too," Aas said. "New renewable energy production has come via reverse auctions and can now operate entirely on a market basis. No need to pay anything extra — such is the price of electricity."
The Center MP believes renewable energy fees should be reduced in light of current prices, not increased.
"In the current situation, where consumers are subsidized one way or another anyway — be it via the universal service, price caps or something else — this fee should stop being collected altogether," he said.
According to Aas, neither Elering's planned fee increase nor the opportunity to abolish it altogether have been taken up in the Economic Affairs Committee. Center has submitted proposals regarding support caps, but the Reform-Isamaa-SDE coalition hasn't taken them into consideration — although he noted that some such proposals have ultimately ended up morphing into coalition proposals.
Kokk: This support measure has run its course
Committee deputy chair and EKRE MP Rene Kokk likewise doesn't find it fair to increase the renewable energy fee. He believes certain provisions in the Electricity Market Act should be changed altogether.
"The arguments based on which this was written into the law at the time have since fallen away," Kokk said. "Currently the issue is that we're incapable of hooking new solar parks up to produce for the power grid. This measure has run its course; right now this is overcompensation and it must be stopped."
He highlighted the fact that netowrk opetator Elektrilevi is also increasing its network fee by an average of 13 percent next month, and considering the profits being earned in the energy sector, there is no justification for claiming that they cannot possibly offer cheaper prices.
"What's happening is total nonsense," the committee deputy chair said.
According to Kokk, the EKRE parliamentary group is likely planning on proposing to amend the Electricity Market Act and stop paying where it's no longer needed.
He added that what could be discussed is whether to continue supporting the production of electricity from biomass, in order to further valorize Estonian biomass. That is something to consider, however all other subsidization should be terminated.
Michal: Reverse auctions bring price down
Economic Affairs Committee chair and Reform MP Kristen Michal told ERR that increasing the renewable energy fee is an automatic consequence of reduced projected consumption.
"Prior renewable energy development obligations taken on as a society must be covered, and so the unit price goes up," Michal acknowledged. "The alternative to that would be to cover it from elsewhere — from tax money, as was done in November 2020."
He added that this is likewise public money, or, should it be possible to earn money on trade in statistics, then it may be possible to source cover from there. The payment of previously assumed obligations is inevitable, the committee chair said — it's just a matter of how.
Michal considered questioning whether it's even necessary at current energy prices to levy the renewable energy fee anymore justified.
"In 2016, my colleagues and I at the Ministry of Economic Affairs fundamentally changed course in energy, while I was minister of economic affairs and infrastructure, deciding that, going forward, renewable energy would be purchased by the cheapest means possible for taxpayers via reverse auctions," he recalled. "This was done in the Riigikogu in 2018, and that year, the first reverse auction set the price below which producers need support at 1.9-3.5 cents per kilowatt-hour."
More simply put, the logic of reverse auctions means that, in the future, society will only have to support renewables production when the price of electricity is very low, he continued.
"That is a much better way of doing things than the renewable energy fee, which is still nearing its end and will start to decrease in the next few years," Michal said. "That plan is much better than the current situation. Fortunately we're already in the process of implementing it as well."
Environment Committee chair: State should focus on entire energy network
Commenting on the planned fee increase, Environment Committee chair and Isamaa MP Andres Metsoja said that Elering was basing its price increase decision on the agreed upon legal framework, and as a lot of solar energy producers have entered the market, this is evidently the result their calculations then yielded.
Actual intervention is established by reverse auctions, Metsoja said, and consumers are actually paying for it directly one way or another.
According to the committee chair, the Environment Committee's focus isn't on the need for levying renewable energy fees, but rather on the use of resources, i.e. how to utilize wind and land in terms of solar plants as well as the state of Estonia's bioresource, e.g. its forests.
"It's a matter of sustainability," he explained. "Is such a model justified at some point in the renewable energy context? And secondly, shouldn't the state actually focus more on the entire energy network altogether, so that households and small businesses could produce renewable energy themselves?"
He believes the entire energy issue needs to be considered in a broader context than just renewable energy.
"Twelve years ago, wind turbines started receiving support so that they could enter the market," Metsoja recalled. "The majority of wind turbines should be exiting this system by now, but on the other hand, so many more solar parks have been added, and I guess renewable energy support accounts for large enough of a part there to encourage entry into the market. The legal framework is structured in such a way that this support is currently being paid. Ultimately it will all come down to what consumers can manage to afford."
The Environment Committee chair added that when it comes to the green transition, the question is increasingly to what extent consumers are prepared to pay for these things. How to proceed is a matter of policy.
"One day we're saying that the network needs to be developed, and the next we understand the issue that this network is nonexistent in the context of offshore wind farms as well and needs to be built," he said. "Where is that money going to come from? All of it, including the construction of that network, has to be paid for by consumers."
ERR had also reached out to Social Democrat (SDE) Kalvi Kõva for comment, but as of publishing in the original Estonian on Thursday afternoon had not received a response.
Between 2010 and the end of 2021, the Estonian state has paid out nearly €900 million in renewable energy and efficient cogeneration support, including nearly €95.5 million last year alone.
Editor: Aili Vahtla