Estonia to Retract Pledge on Wind Energy Subsidy Limits

From Bloomberg

By Ott Ummelas

Estonia will keep an annual cap on the volume of wind energy eligible for subsidies, retracting a pledge to a renewable energy lobby last year, to lower power costs and limit the amount of subsidized output, Economy Minister Juhan Parts said.

Wind energy subsidies will be capped at the current total output of 600 gigawatts per year in the amended electricity market legislation under consideration in Parliament, Parts said in an interview in Tallinn yesterday. In July, it agreed with the Estonian Renewable Energy Association to remove the ceiling in exchange for cutting the size of the support.

The renewable energy subsidies, paid for by consumers through their energy bills, will be linked to the market price of electricity and decline 15 percent to 20 percent once the new system is adopted and gets clearance for state aid from the European Commission. Total savings for consumers will be as much as 300 million euros until 2020, the Cabinet said last October.

“There is an alternative view in the market that the annual cap makes sense, but that the existing and planned investments should be treated more equally than the solution offered by the renewable energy association,” Parts said. “We’re certainly not worsening the investment environment. This bill has to be viewed in the context of market opening, while the 2007 law was based on closed market ideology.”

An increase in subsidies in 2007 led to new investment by companies including Fortum Oyj (FUM1V), the second-largest Nordic utility, and Nelja Energia OU, majority owned by Norway’s Vardar AS.

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