How Expensive Is It to Support Renewable Energy in Estonia?

Lumiste, Rünno
June 2012
Baltic Journal of European Studies;Jun2012, Vol. 2 Issue 1, p26
Climate change is forcing countries to seek new solutions for the energy sector instead of using fossil fuels. Among the solutions are the production of energy from renewable sources, the rising efficiency of existing technologies and energy consuming devices and buildings. The European Union and its members play an active role in the process of climate protection. The European Commission and European Parliament have started several legal initiatives. The goal is to have 20 per cent of energy from renewable sources by the year 2020. A change in national legislation and the rising energy prices channelled substantial investments into renewable energy sector in European Union and globally in the mid-2000s. Both public and private sources funded intensively renewable energy firms and research projects. Various legal initiatives and especially implementation of feed-in tariffs have had a big impact on the sector. Feed-in tariff is money that is paid for the production of energy from renewable sources. The money comes from all electricity users via raised electricity price. Very generous tariffs created big returns in the initial period. The big growth attracted a second wave of investors but at the same time caused caution of authorities. In several cases feed-in tariffs were reduced and in some cases even cancelled. Similar changes took place in the Estonia's energy policy. Oil-shale based power station has been the cornerstone of Estonian energy for a long time. Approximately 90 per cent of electricity is still produced from oil shale (2011). With the adoption of different incentives the use of renewable energy has started to grow. The legislative goal of producing 25 per cent of energy from renewable sources will be definitely met by the year 2020. However, several issues related to the energy sector such as participation in pan-Baltic nuclear plant, the future of energetics and economy in general remain. Boom tendencies and a high interest of investors has been also evident in the Estonian energy sector during the last five years. According to the analysts of the Competition Board of Estonia some investors received even 40 per cent of yearly return from invested capital.


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