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On 31 January, in a vote over renewable energy support measures in the Economic Affairs committee of the Parliament of the Republic of Estonia (Riigikogu), committee adopted measures which would retroactively reduce renewable energy support. Existing producers of renewable energy are expected to incur losses of approximately 40-43 million euros as a direct result of the decision in the Parliament.
The Parliament committee decided to reduce support payments to energy produced from wind to 93EUR/MWh. Parliament also decided to limit the support for the consumption of electricity by the energy branch for electricity and heat production, raise the administrative burden for controlling the amount and quality of fuel within the cogeneration process and limit the possibilities for the support measures to be agreed with the Estonian Competition Authority. Further retroactive measures are expected to be adopted in the upcoming Economic Affairs Committee meeting. The draft legislation will undergo second reading on 13th of February.
The changes voted into the draft legislation by members of the Parliament are in stark conflict with the statements made by the Prime Minister, Minister of the Environment, former and current chairmen of the Economic Affairs Committee of the Parliament, in which retroactive cuts were ruled out. The decision also contrasts the coalition agreement of the governing coalition, which set out to reduce support payments only based on an agreement with the renewable energy producers and prioritize energy production from renewable sources.
Unilateral and retroactive amendment of the renewable energy support mechanism is a short-sighted and costly step, the bill for which will inevitably be paid by the consumer. As a result of this vote, sourcing private financing for energy projects in Estonia will be more difficult, interest rates for capital will increase and investments will decrease. “Co-generation plants using renewables and which are currently in operation in Tallinn, Tartu and Pärnu have saved the consumer approximately 20 million euros so far. The decision by the coalition parties means that the rest of Estonia will not see cheaper heating prices in the foreseeable future,” said Rene Tammist, Director of the Estonian Renewable Energy Association.
The decision by the Parliament also has a regional policy dimension – as a result new jobs in electricity plant construction and operation, in forestry and agricultural economy will be lost.
Despite warnings from the Estonian Banking Association and other concerned institutions, the politicians have sent a clear message to the investors that when making investment decisions in Estonia, the legislative environment can change at any point in time and without consultation with market actors.
“During the revision of the Electricity Market Act, the Parliament made a decision, which ranks Estonia among the most typical East European countries, in the worst sense of the word – both in terms of stability of the investment climate and the choices in regard to the future of energy production,” said Rene Tammist.
Producers of renewable energy in the Estonian Renewable Energy Association are forced to consider options to protect their investments, including a legal challenge in regard to the amendments to the existing support scheme.
Director of Estonian Renewable Energy Association
The proposal for the amendment of the Electricity Market Act regarding the renewable energy support mechanism, which was approved yesterday by the government and is to be forwarded to the Parliament, is not in compliance with the Memorandum of Mutual Understanding signed by the Estonian Renewable Energy Association and the Ministry of Economic Affairs and Communication. The version of the proposal approved by the government cuts support for existing wind energy installations and therefore is in breach of the agreement reached in the negotiations for the Memorandum of Mutual Understanding.
This summer the Ministry of Economic Affairs and Communication and the Estonian Renewable Energy Association came to an agreement regarding the new principles for the support mechanism for electricity produced from renewable sources, which the Ministry agreed to uphold while drafting the proposal for the amendment of the Electricity Market Act. This promise has not been honored.
“The situation, whereby support for wind energy producers is subject to a 600GWh capacity triggered reduction (CAR) and concurrently support is reduced, is not acceptable. According to the agreement the removal of the 600GWh CAR compensated for the reduction in support payments. In its current wording, there is as real reduction in support for installations already in operation and we cannot agree with it”, emphasized Rene Tammist, director of the Estonian Renewable Energy Association.
The new proposal bypasses several other clauses in the agreement. The agreement on the principles for the calculation of the weighted average of kilowatt-hour for biomass, the principles of calculation of support measures to be agreed with the Estonian Competition Authority and support for industrial cogeneration plants using wood chip has not been reflected in the current wording of the proposal. As the proposal is not in compliance with the Memorandum of Mutual Understanding, it is unclear how application for state aid approval for the new support scheme could be made, before the Parliament has made the appropriate changes to bring the proposal in line with the agreement reached by the Ministry of Economic Affairs and Communication and the Estonian Renewable Energy Association. In addition, the the proposal limits the development of new renewable energy production capacities and as such does not reflect fully the agreement reached, added Tammist.
The selective application of the agreement and bypassing the agreement between the the state and renewable energy producers cannot be respected. Tammist added that the agreement of the coalition government foresees that “the partners of the governing coalition negotiate with the producers of renewable energy in regard to the reduction of support payments bearing in mind the principle of legal certainty”. However, as it stands the proposal is not in accordance with the agreement, which was reached between the Ministry responsible for drafting amendments and the Renewable Energy Association.
“Violating the principles of legal certainty, which is recognized as one of the general principles of EU law by the European Court of Justice, has damaging consequences for the reputation of the Estonian state, has a negative impact on the investment climate in Estonia and inhibits investments in new energy production capacities,” added Tammist.
Tammist expressed hope that the Parliament will bear in mind the Memorandum of Understanding when amending the current proposal. Otherwise, the Estonian Renewable Energy Association will be left with no other option than to seek alternative available means to protect its rights.
For further information please contact Rene Tammist, +372 56490670
According to the roadmap proposed by the Estonian Renewable Energy Association and the Estonian Council of Environmental NGOs, Estonia will be able to satisfy 100% of its energy needs in the electricity and heating sector from renewable sources by 2030. The roadmap unveiled today envisions a full transition to renewable energy in heat and power generation, which is technically feasible, economically viable and environmentally sustainable.
The Director of the Estonian Renewable Energy Association Rene Tammist assures that transition to clean energy will lead to a fall in energy prices, lower environmental impact and higher energy security. “Estonia will create the prerequisites to be a hub of renewable energy development, which adds value to our economy by increasing exports and creating high-skilled jobs” emphasizes Tammist.
The Estonian Council of Environmental NGOs estimates that the current greatest environmental threat is combustion of oil shale and therefore cooperation is essential in order to implement a plan for the use of alternative energy sources. “The co-written analysis provides a positive message in saying that widespread usage of renewable energy will radically restrict the combustion of oil shale, which today creates 80% of all waste produced in Estonia, a large part of our air pollution and greenhouse gases,” said Silvia Lotman from the Estonian Council of Environmental NGOs.
Renewable energy investor Hannes Tamjärv supports the transition to renewable sources. “Estonia has an unique opportunity to be a role model to others in the energy sector” said Tamjärv. “The vision is ambitious but realistic. It allows Estonia to take full advantage of its economic and geographical characteristics, ensuring a more powerful engine to the Estonian economy. All we need is firm leadership by the decision-makers as well as active participation from all the members of society,” added Tamjärv.