Estonia Cabinet Approves Reduced Green Energy Subsidies in 2013

October 8, 2012 by  
Filed under Green Energy News

Estonia’s government approved
reducing subsidies to renewable-energy producers from next year
to cushion the effect on consumers of higher electricity prices.

The subsidies, paid for by consumers through their energy
bills, will decline 15 to 20 percent, the Economy Ministry said
today in an e-mailed statement. The plan also includes linking
subsidies to the market price of electricity and setting lower
limits to annual green energy output.

The reduction was first revealed by Economy Minister Juhan Parts in 2010. 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.

The Baltic country will liberalize the remaining two thirds
of its power market from January, with electricity prices for
consumers seen rising by about 20 percent as Estonia must start
buying carbon emission permits for its power production,
according to state-owned Eesti Energia AS. This may boost
average inflation next year by as much as 0.9 percentage points
to 3.2 percent, the central bank said last week.

Estonia will drop an initial plan to lower subsidies to
renewable-energy producers retroactively as it would affect the
“fragile” investment climate, Environment Minister Keit Pentus
said in May. The European Renewable Energies Federation lobby
group said in February such a retroactive move would violate
European Union law.

Electricity from renewables made up 20 percent of Estonia’s
consumption in the second quarter, compared with 14 percent for
all of 2011, grid operator Elering AS said in July. Three
quarters of renewables output came from waste, biomass and
biogas, while wind and hydroenergy made up 21 percent and 3
percent, respectively, it said.

To contact the reporter on this story:
Ott Ummelas in Tallinn at
oummelas@bloomberg.net

To contact the editor responsible for this story:
Balazs Penz at
bpenz@bloomberg.net

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