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Estonian Renewable Energy Association: Estonian parliament in the process of imposing retroactive reductions in renewables support scheme

EWPA's blog - etea February 5, 2013

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.

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