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Subsidies Spoiling Renewable Energy Producers, Says Competition Authority

Source: Photo: Postimees/Scanpix

Government support for renewable energy producers is too extensive, harming competition and burdening taxpayers, finds the Competition Authority in an investigation.

From 2007 to 2010, subsidies for renewable energy companies have grown from 5.6 to 61.5 million euros. The agency’s study examined subsidies for wind, wood, gas, electricity and hydroelectric power. Hydroelectric plants are especially profitable. The agency concluded that government should, at the least, substantially reduce the amount of support it is providing for green energy.

Initial investment for local wind energy farms was found to have a return capacity of 16 to 25 percent a year, with a payback period of four to six years. The Competition Authority’s director, Märt Ots, said this means that wind farms established five years ago have earned back their initial investment and have reached profitability.

Combined heat and power plants are an even better business. Without support, local peat and wood cogeneration plants would become profitable in seven to 11 years compared to the current four to five years. Such businesses do not need any help from the government, found the Competition Authority.

Ots said that if government were to subsidize 10 percent of production, then consumers should be paying a third less than currently. The agency’s director admitted that funding has had its benefits, as the desirability and proportion of green energy on the market has grown significantly.

But generally, the Competition Authority believes that the less subsidies, the better. “Any and all support will distort the balance of competition,” said Ots.

The ministers’ cabinet already decided to cut aid to green energy producers. Minister of Economic Affairs said that the extent of the cuts will depend on the results of the Competition Authority’s research.

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