Estonia: Commission approves amendment to premium scheme (SA.102228), budget rises to €1.37 billion

On 19 June 2023 the European Commission approved an amendment to the Estonian electricity support scheme under number SA.102228. The scheme budget rises by €650 million from €720 million to €1.37 billion, which means that Estonia can continue to pay premiums to generators of renewable energy, including from biogas and biomass.

What the decision covers

The scheme is a premium paid on top of the market price (the Commission's announcement describes it as a fixed-rate premium). According to the announcement, installations receive €53.7 per megawatt-hour of electricity from renewable sources, including electricity generated in cogeneration from renewable fuels. A separate rate of €32/MWh applies to high-efficiency cogeneration fuelled by natural gas, oil shale gas, peat and municipal waste.

The amendment consists in increasing the budget. The Commission found it necessary, appropriate and proportionate and approved it under EU State aid rules. The scheme was originally approved in October 2014 (SA.36023). It was amended in December 2017 (SA.47354).

How this fits with the auction system

In 2018 Estonia changed its support model: the sliding premium with a base of €53.7/MWh decreases once the average market price exceeds €39.3/MWh and disappears at €93/MWh (details in the analysis of the Estonian system). New projects compete in auctions, while installations already covered by the scheme receive the premium for 12 years from commissioning. According to the Commission's announcement, the budget increase concerns payments under the amended premium scheme; the announcement does not separately describe payments from auctions.

Significance for biogas plants

• The €53.7/MWh premium covers energy from renewable fuels also generated in cogeneration, so CHP biogas plants fall within the scope of the scheme.
• The Commission's announcement concerns an increase in the budget, not in the level of the rate; generators cannot expect a higher premium.
• The €32/MWh rate for cogeneration on fossil fuels and waste is lower than the rate for renewable sources.
• The decision gives assurance that premium payments will continue within the approved budget.

Outlook

The decision shows that the Baltic states are maintaining support for renewable electricity, although they are steering it towards competitive mechanisms. For investors considering projects in Estonia, it is important to check whether a given installation is covered by the former fixed premium or is bidding in an auction, because the level and conditions of support depend on it. It is also worth following the publication of the decision in the State aid register, where its non-confidential version will appear.