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Nelja Energia: Latvian renewable subsidies have failed to develop sector

International News - eteap August 7, 2018

Baltic News Service. 7th of August, 2018

The system of renewable energy support being used in Latvia has been unable to develop the renewable energy sector in that country, and a switch should be made to reverse auction, Martin Kruusi, board chairman of the Estonian renewable energy company Nelja Energia, has said.

Wind energy has been developed in the Baltics since the beginning of the 2000s. In Estonia wind turbines with a total capacity of slightly above 300 megawatts have been installed, and in Lithuania with a total capacity of slightly under 500 megawatts. In Latvia there have been several different ideas during that time, but none of them have materialized and the country only has wind turbines with a total capacity of 70 megawatts,” Kruusi told BNS on Tuesday.

“But, more generally speaking, the system of green certificates rather is an already obsolete, unstable support scheme which has allowed to earn major revenue during certain periods of time but has caused payment difficulties for some producers at other times. An uncertain system like this does not support the development of the energy sector. At present a transition is being made rather to reverse auction, where the winners are both the consumers through a cheaper price of electricity as well as the producers of wind energy through a secure cash flow. The latter in its turn enables to offer a lower ex-plant price,” Kruusi added.

Latvia’s Economics Minister Arvils Aseradens told journalists last week that the country needs to cut support for green energy producers from the current 1 percent of GDP to 0.3 percent of GDP.

The minister said that as Latvia acceded to the European Union (EU), it assumed an obligation to support the production of renewable energy. Aseradens described the system of mandatory electricity purchases created in order to support green energy producers as a macroeconomic mistake.

“It has cost us more than two billion euros, while other countries did it at a much smaller cost,” the minister said. He said that Latvia’s mandatory purchase system was much more expensive than the system used in neighboring countries. In Latvia, subsidies to electricity producers make up 1 percent of GDP, whereas in Estonia they equal 0.3 percent of GDP. Aseradens said that Latvia aims to reduce the green energy support to Estonia’s level, which is seen as optimal.

Data provided by the Latvian Economics Ministry shows that the net costs of the mandatory purchase system in 2017 totaled 266.3 million euros, or 1 percent of Latvia’s GDP.

The minister said that the mandatory procurement component in electricity rates could be scrapped in three years.

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