Controversial Aidu wind farm set to receive large amount in state subsidies

Aidu wind farm.
Aidu wind farm. Source: Kristjan Kundla

A few years ago, Oleg and Andres Sõnajalg were still at odds with the Estonian Ministry of Defense over the fate of the wind turbines at the Aidu wind farm. However, with the wind farm's construction now nearing completion, according to Elering, it is eligible to receive renewable energy subsidies in line with the previous scheme. In practice, this could mean a subsidy of around €120 million over 12 years.

According to the initial plans, developer Eleon, which is owned by brothers Oleg and Andres Sõnajalg, had earmarked Aidu wind for completion by 2020. However, they then began erecting wind turbines, which were taller than had originally been outlined and, in the view of the Estonian Ministry of Defense, interfered with air surveillance radars and intelligence signals in the area.

As a result, the wind farm's construction was held up for a number of years in disputes that eventually necessitated the involvement of both the Consumer Protection and Technical Regulatory Authority (TTJA) and the police.

The TTJA demanded that the Sõnajalgs take down the wind turbines that had already been erected. However, that did not happen.

The height restrictions were not only an issue concerning the Aidu wind turbines, but also for developers of other wind farms. The dispute was eventually resolved when the state decided to purchase new radar systems, which mean that height restrictions will no longer be necessary on most of the Estonian mainland. Those new radars will become operational next year and the year after.

Now, the construction of the Aidu wind farm is nearing completion. Oleg Sõnajalg assured ERR that the work is continuing and provided the wind does not interfere too much, the farm could be ready by the end of this year. However, with fall and then winter rapidly approaching and strong winds expected to last for at least 30 days, it may still  end up taking until the end of February for the work to finally be completed.

"From then on, we will need to do the grid testing, which usually takes a month. Then it will maybe be somewhere around February, March or April," said Sõnajalg.

Grid testing is a prerequisite in order to apply for a renewable energy subsidy from Elering.

However, the Aidu wind farm will qualify for the subsidy, according to the previous scheme, which applies to wind farms built before 2017. Elering has already confirmed that Aidu will be eligible.

ERR asked the Estonian Ministry of Climate how the situation could transpire, whereby Aidu wind farm, which has been at loggerheads with the Ministry of Defense for years, ends up collecting a hefty subsidy, while Eesti Energia's Tootsi development in Pärnu County, since renamed "Sopi-Tootsi" wind farm, has been denied.

Kadri Peetersoo, head of public relations at the Ministry of Climate, said that when the previous subsidy scheme ended after 2016, several projects had reached the half-way stage in their development. However, according to state aid regulations, only those companies, which are able to prove that their projects were at an irreversible stage by the end of 2016, are eligible to receive subsidies in line with the prior scheme.

"In Estonia, this is down to Elering to control and decide. In the case of Aidu, Elering has assessed there to be sufficient evidence that the project had reached 'irreversible' status by the end of 2016. The evidence was submitted to Elering, Elering assessed it and then made the decision," Peetersoo said.

Elering's Communications Manager Ain Köster confirmed that the company has not changed its decision.

"With regard to Aidu, a decision has been made, that it is an existing producer. We do not know at this point in time how much Aidu may ever produce. Once the facility is ready and has been declared compliant with the legal requirements, it will be able to ask for support," Köster said.

The result is, that when the wind farm is complete and all the documents in order, the Sõnajalgs will have seen a 180 degree turn in their fortunes, over a period of a few short years.

While before the wind turbines in Aidu faced the threat of demolition, now they will receive €53.70 per megawatt-hour in subsidies over a 12-year period. The cost of the subsidy is added to the market price and will, ultimately, be paid by consumers.

Although Sõnajalg preferred not to discuss the potential size of the subsidy, as that will depend on wind conditions, in response to a question regarding whether it could be around €120 million, he intimated that such a figure is likely.

The possibility of receiving a subsidy according to the prior scheme did not come as a surprise. "We asked Elering and Elering's response was positive, that the wind farm qualifies," he said.

When, in late 2020, Elering ruled that the Tootsi wind farm had not met the required conditions to receive the subsidy by the end of 2016, Eesti Energia challenged that decision in court.

Those conditions were, that Eesti Energia had to have begun construction of the Tootsi wind farm, as defined by the Electricity Market Act. It had to have made a firm commitment to order equipment for the construction of the generating plant, or other commitments that would make the investment project irreversible, as well as having secured land use rights

It had been estimated that the energy company would have been in line for a subsidy in the region of €100 million.

In December 2021, Prime Minister Kaja Kallas (Reform) issued a directive for Eesti Energia and Elering to end their legal dispute over the Tootsi wind farm. She said that given the energy prices at that point, the €53.70 subsidy should be examined to assess whether that amount remained justified.

The dispute was eventually dropped last February.

Taavi Aas (Center), who was Minister of Finance at that time, explained that, considering the electricity prices at that time, it was no longer justified for companies receive subsidies according to the conditions of the old scheme. In his view, building a wind farm was affordable without the need for any subsidy schemes.

It was during the same period that Elering also took the aforementioned decision to allow Aidu wind farm to apply for support under the previous scheme. Köster reasoned that, unlike Toots, for Aidu wind farm clear decisions had been made regarding land use rights and the connection process, along with irrevocable commitments for construction activities.

Renewable energy subsidies have been paid in Estonia for decades. However, from 2007, producers began receiving a direct subsidy of €53.70 per megawatt-hour (MWh). This scheme remained in place until the end of 2018.

In an analysis conducted 2021, the Competition Authority found that the subsidy system provided an unjustifiably high level of profitability for many producers, while imposing an unjustifiably high tax burden on consumers that will continue for decades. The authority therefore recommended a move to a market-based solution and the phasing out of subsidies for renewable energy.

At the same time, the Ministry of Economic Affairs and Communications said that the state could not go back on its word and that therefore renewable energy subsidies must be paid to producers according to previous agreements.

Renewable energy production in Estonia is supported by consumers by paying for electricity grid services. According to the Estonian Competition Authority, between 2007 and 2020, consumers paid around €828 million for renewable energy subsidies.

Since 2016, the Utilitas Tallinn Mustamäe cogeneration plant has been deemed eligible for subsidies according to the rules of the previous scheme. The plant will be completed in 2019, however, planning for the project began in 2013. Subsidies will continue to paid for the plant until 2031 and are expected to total €38 million.


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Editor: Michael Cole

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