Renewable Energy Charge at 0.87 Cents per Kilowatt-Hour in 2013

Elering, Estonia’s transmission system operator, projects that next year’s renewable energy charge for consumers will be 0.87 cents per kilowatt-hour, which is 10% smaller than this year.

The size of next year’s renewable energy charge is affected by the end in 2013 of the biomass subsidy for the 11th block of the Baltic power plant, which is part of Eesti Energia’s Narva power plants; as well as the increase in the generation of subsidized wind power.

According to the projections, the amount of electricity produced from renewable energy sources and in combined heat and power mode will grow to 1278 gigawatt-hours next year. This will mean a total subsidy pay-out of 65 million euros.
Out of the total payments for electricity produced from renewable energy sources, 43% goes to wind power, 38% goes to biomass-fuelled power stations with over 20 megawatts of capacity, and 19% to other sources, such as hydro energy, trash incineration, and biogas. Electricity produced in efficient CHP plants is subsidized in the amount of 5.8 million euros.

Based on the data presented by producers, as well as statistics and Elering’s analysis, the amount of wind power that is entitled to subsidy will grow by 84%. At the same time, the amount of electricity produced from biomass will shrink by 55%. The production from efficient CHP plants is expected to increase by 43%.

Riigikogu, the Estonian parliament, is currently working on amendments to the Electricity Market Act, designed to change the size and structure of renewable energy subsidies. “The current calculation of the 2013 renewable energy fee is based on existing legislation. If the law is changed and a new subsidy mechanism is enacted, along with new subsidy rates that are pegged to the market price of electricity, Elering will recalculate the renewable energy fee for consumers. Because of that, we have submitted a proposal to amend the legislative bill in such a way that in the future, it would be possible to change the size of the renewable energy fee collected from consumers in the middle of the year, taking into consideration the significantly increased unpredictability of the renewable energy subsidies compared to today,” commented Taavi Veskimägi, Elering’s Chairman of the Board.

According to the Electricity Market Act, Elering is obligated to prepare and publish the size of next year’s renewable energy fee by December 1st of each year. The fee’s calculation is based on the forecasts for the next year’s electricity output from renewable energy sources or combined heat and power generation (based on the data provided by producers), as well as the amount of money required to subsidize them, the consumption forecast for the next calendar year (based on net consumption in the preceding 12 months), and the under- and overpaid amounts for the preceding 12 months.

The renewable energy fee is the mechanism by which electricity consumers finance the subsidy paid to renewable energy producers. It is applied to all end consumers of electricity in Estonia, based on the size of the network service they have received. Elering acts as the payment agency, collecting the renewable energy fee from consumers and paying out the renewable energy subsidy to electricity producers, based on the conditions and subsidy rates set forth in legislation. The renewable energy fee is subject to VAT.

Next year’s share of electricity produced from renewable energy sources is forecast at 12.6% of total consumption. The target set by the state for next year, in accordance with planned amendments to the Electricity Market Act, is 11.3%. The calculation does not include the electricity that may be produced from biomass at the Narva power plants.

Elering is Estonia’s transmission system operator, whose main task is to ensure that Estonia’s consumers enjoy a consistent, high-quality electricity supply. To ensure supply security, Elering maintains and develops the domestic transmission network and external interconnections. Elering manages Estonia’s electricity system in real time, ensuring the functioning of the transmission network and the balance between output and consumption.