Economics committee wants deposit for 'phantom' electricity suppliers

Electricity pylons.
Electricity pylons. Source: Rene Kundla/ERR

On Thursday, the Riigikogu's Economic Affairs Committee debated the amendments to the Electricity Market Act and the problem of so-called "phantom" customers. The committee wants to introduce a deposit for electricity network customers and also a ban on modifications to technology.

The Riigikogu still wants to amend the Electricity Market Act, particularly the part related to the issue of so-called "phantom" customers, who reserve capacity on the grid, but do not actually provide electricity.

At present, a company planning to produce renewable electricity has no incentive to build up its production levels quickly, though, it can still reserve capacity on the electricity grid.

However, if a large proportion of the grid's capacity is reserved by these so-called "phantom" customers, then there may no longer be sufficient capacity available on the grid for those companies that actually will.

On Thursday, the issue was discussed by the Riigikogu's Economic Affairs Committee. After the meeting, committee chair Kristen Michal (Reform) said, that the problem could be solved with the introduction of a deposit for those connecting to the grid.

"What it means is, that in future, for somebody to connect to the [grid], there will be a deposit of €38,000 per megavolt ampere (MVA). This will ensure, that if somebody is asking for an amount of  [grid] capacity for themselves, they are actually planning to start generating [electricity]," Michal said.

The second nuance concerns a ban on modifications to technology.

"If, for example, somebody has some stored capacity somewhere in the region, but has no plans to use it anytime soon, and then at some point [later] wants to free it up for, say, wind turbines, that will no longer be an option either," Michal explained.

The third nuance relates to the introduction of fees for unused grid capacity.

"Over a certain period of time, if a particular capacity is supposed to be ready, but the planned amount of electricity is not generated, then fees proportionate to that unused capacity have to start being paid."

"If you are asking now, what all this adds up to, then it means, that in future, network capacity will not be taken up without considerable thought, nor based on speculative targets. However, connection requests will still be made by those, who actually want to start generating electricity for the grid. For us, as consumers, this means that there will be more generated [electricity] on the grid, competing to drive down prices, and we will have more choice," Michal said.

According to Michal, ordinary household consumers will mostly not be affected by the new draft, though they will be subject to certain nuances.

"For example, the same income tax exemption, which applies to small producers, [who generate] less than 15Kw, where previously there was a tax liability on the difference between the [amount of] electricity sold and the amount purchased. This income tax liability for the previous year will disappear," Michal said.

ERR asked Elektrilevi how many of its existing customers can be categorized as electricity producers.

"The number we have at the moment is 15,562. If we look at how many of them are now not using [their] grid connections, the number is around 120 customers. This is less than one percent of [our] customers," said Rudolf Penu, head of regulated services and legal affairs at Elektrilevi.

Penu added that the precise number of Elektrilevi customers, who are still in the process of connecting to the grid, and those who own capacity, but, for a variety of reasons do not wish to connect, remains unknown.

"Given that the connection costs are clear, with all the direct costs of connection borne by the subscriber, plus the fixed monthly fee for the customer once the connection is activated, we do not dare to predict that this could become a serious problem in the distribution network in the future. We can't predict the future, but at the moment we don't see the kind of 'phantoms' in our own network that are described in this draft," Penu said.

Penu went on to suggest, that there could be several reasons for those with network capacity not starting the generation process, including for instance, supply problems, unresolved financial issues or a lack of time to set up the necessary equipment.

"One of the things we also tried to point out during the drafting process is, for example, that the current draft does not take into account the fact, that all solar farm solutions, require some amount of refinancing over a certain period of time. Panels or other components, for example, need to be replaced. The [current] draft does not allow for all of these temporary interruptions in production. This could be one of the reasons why grid connections are temporarily inactive for certain periods of time," Penu said.

"What may be a problem in the future, is that generation at certain times [of day] will no longer be attractive for small producers. This is especially the case when it comes to making additional investments, if it turns out, that at certain hours, when solar parks are in active use, electricity prices remain consistently cheaper than they are today. This will certainly have an impact on [potential] further investments in the market. However, at the moment, I really can't say why someone who owns grid capacity would deliberately choose not to use that capacity, in a situation where there is a monthly cost to [them] in order to maintain it," he added.

The bill to amend the Electricity Market Act will face its second reading at the Riigikogu next week, after which, further amendments may be made.


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Editor: Michael Cole

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