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Estonian Competition Authority recommends phasing out renewable energy subsidies

Christian Fernsby |
The Competition Authority analyzed the renewable energy subsidy schemes implemented in Estonia and their economic impact and recommends switching to a market-based solution and phasing out renewable energy subsidies.

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Topics: ESTONIA   

In 2007, the Electricity Market Act set the period of support for renewable energy at 12 years. This means that the company, which started production in 2007, received support until 2019.

Although the transition to a renewable energy auction-based system has been fully completed in 2021, the support is still to be paid to the producer for 12 years. The company building the plant this year will therefore be able to receive support until 2033.

Experience in other countries shows that renewable energy plants can be built with minimal support for renewable energy. Based on the European Union's clean energy package, renewable energy targets should be achieved with the least possible support and under conditions of free competition.

The costs associated with the production of renewable energy will also decrease over time, and it can therefore be assumed that in the future it will be possible to build the majority of plants without support.

According to the Director General of the Competition Authority Märt Ots, the potential of renewable energy in offshore wind farms is very high. "In some ways, offshore wind farms can be compared to the oil and gas reserves discovered in the North Sea decades ago, which have brought prosperity to so many countries. It is important to use the resource in a transparent way, because through it the state would benefit and the consumer would benefit from the most favorable electricity price possible, "Märt Ots noted.

The support scheme in force today also imposes an unjustifiably high tax burden on consumers, which will continue for decades to come. Estonia has fulfilled its renewable energy obligations, but it has not come cheap for consumers: in 2007 to 2020, the consumer's tax burden totaled € 829 million. Subsidies paid by consumers are projected to reach € 1.5 billion by 2030 and are expected to be paid by 2045.

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