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Estonia Aims to Cut `Too High' Energy Subsidies, Minister Says
Estonia’s government wants to reduce subsidies for renewable energy producers to cut costs for consumers, Economy Minister Juhan Parts said.
The Economy Ministry will prepare a bill on amendments within a month, Parts said in a phone interview in Tallinn. “The order of magnitude” for the reductions will be 50 percent, while cuts may differ across energy sources. Proposals will be based on a study by the country’s Competition Board, due to be presented “soon,” Parts said.
“This is about what is a reasonable level of return and what is the actual price of electricity,” Parts said. “Our main goal is to avoid discrediting investment in renewable energy, which may be the result of too high profitability and too high subsidies granted by law.”
Estonia’s parliament in 2007 raised subsidies to renewable energy producers by 42 percent to 115 senti (9.48 cents) per kilowatt hour of electricity for up to 12 years, with a purchase obligation of up to 200 gigawatt hours annually, while further support was established for sold electricity of as much as 400 gigawatt hours.
The cost of renewable energy for consumers, calculated each year based on expected subsidies, more than doubled this year to 0.81 euro cents per kilowatt hour plus VAT from a year earlier.
“With this kind of infrastructure service, these kind of unreasonable support levels are at odds with the justified expectations of consumers,” Parts said.
Wind Applications
Applications by wind park developers to grid operator Elering to join Estonia’s energy system total about 4,000 megawatts of capacity, while Estonia’s peak consumption is about 1,500 megawatts, said Taavi Veskimagi, the Chief Executive Officer of Elering, in June.
The parliament in January partly reduced subsidies for electricity and heat cogeneration from renewable energy sources, causing protests from Fortum Oyj, the second-largest Nordic utility. Fortum built a power and heat co-production plant in Tartu, southern Estonia, after such subsidies were introduced in 2007 and is finishing another plant in Parnu, southwestern Estonia.
Lawmakers in August approved a bill, proposed by Parts’s Isamaa ja Res Publica coalition party, aiming to limit profit at the country’s largest water and heating utilities, including AS Tallinna Vesi. The bill requires the biggest utilities to seek approval from the competition board for tariffs, which have to be based on “reasonable profitability.”
To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net
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