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Estonian renewable energy body says members faced with EUR 40-43 mln loss

Estonian news - etea February 5, 2013

Baltic News Service, 05.02.2013

Existing producers of renewable energy in Estonia stand to incur losses of approximately 40-43 million euros as a direct result of the decision made in the economic affairs committee of the parliament last week according to which renewable energy support would be reduced retroactively, the Estonian Renewable Energy Association said on Tuesday.

The changes voted into the draft legislation by members of the parliament’s economic affairs committee are in stark conflict with the statements made by the prime minister, the minister of environment, as well as former and current heads of the parliamentary economic affairs committee, which all have ruled out retroactive cuts, the industry body said.

It said that in the vote in the Riigikogu standing committee the ruling parties decided to violate the agreement concluded between the producers of renewable energy and the minister of economy and communications in July last year.

The Riigikogu committee decided to reduce support payments to energy produced from wind to 93 euros per megawatt-hour and restored the 600 gigawatt-hour cap the abolition of which for existing producers had been previously agreed. The agreement was violated also as far as the support rates subject to approval by the competition authority and support for own consumption by the power generating parties goes, the association said.

It said that producers of renewable energy in the Estonian Renewable Energy Association have decided to consider options to protect their investments, including a legal challenge in regard to the amendments to the existing support scheme.

“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,” it said.

“Cogeneration plants using renewables that are currently in operation in Tallinn, Tartu and Parnu 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.

“Despite warnings from the Estonian Banking Association and other concerned institutions, 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,” the statement said.

“In revising 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 Tammist.

The economic affairs committee of the Estonian parliament last Thursday decided to change the electricity market bill currently handled by the Riisgikogu in such way that the dividing line between old and new renewable producers determining the right to renewable generating subsidy would be set on March 1 this year.

The original watershed date in the bill was July 15, 2012.

The chairperson of the standing committee, Kaja Kallas, explained to BNS that the line cannot be set in accordance with the date when the law comes into effect because its coming into effect is linked to the European Commission’s state aid permission.

The provision that the amount of wind energy to be supported will be capped at 600 gigawatt-hours a year was left in the bill. “Now the producers definitely will protest,” Kallas said. “From the consumer’s point of view the sum will be the same, for the producers it will be a thinner soup.”

The board chairman of the Estonian Wind Energy Association, Martin Kruus, has said that changing of the system of support for renewable energy generation in Estonia prejudices the principle of protection of ownership and its actual effect on the development of renewable energy, but also partnership between the state and the private sector more broadly can be assessed only in the future.

 

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