Minister: Estonia not to cut green subsidies retroactively

17.05.2012, 10:46

Estonia will not lower subsidies to renewable-energy producers retroactively unless it reaches an agreement with investors, Environment Minister Keit Pentus said, according to a Bloomberg report.

The ruling coalition partners have agreed that they cannot force a retroactive change in subsidies, introduced in 2007, as it would affect the “fragile” investment climate, Pentus told lawmakers in a question-and-answer session yesterday, according to a transcript on the parliament’s website.

The subsidies would be cut by as much as half from next year under a draft bill which is in the second of three parliamentary readings. The plan was first revealed by Economy Minister Juhan Parts in 2010 to lower costs for consumers, who pay for the subsidies directly through their energy bills.

The move would violate European Union law, the European Renewable Energies Federation lobby group said in February, urging Estonia to withdraw the plan.

The subsidies would drop by as much as 26 euros ($33) per megawatt hour of electricity, according to Brussels-based EREF lobby group. The planned retroactive changes would have a “devastating impact” on renewable-energy producers and represent a “flagrant violation” of EU rules, it said on Feb. 8.

“If the Economy Minister can negotiate with market participants and reach a common understanding, and if the market participants accept such a change, only in this case can it be implemented,” Pentus said. “If such an agreement can’t be made, then the state cannot enforce a retroactive change in the rules. This just wouldn’t be appropriate for Estonia.”

The sharp increase in subsidies in 2007 led to new investment by companies including Fortum, the second-largest Nordic utility, and Nelja Energia, majority owned by Norway’s Vardar.