Subsidy system puts 150 MW cap on market

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Convinced that anything more than 100 MW of wind power will threaten the stability of Estonia's electricity system, the government and national utility have introduced what the Estonian Wind Power Association's Jaan Tepp calls a "tricky" way of capping wind development. While revisions to the country's electricity market law increased the subsidy for wind power production to EUR 0.071/kWh from EUR 0.053/kWh, it also placed a cap on the volume of electricity that would be economical for wind plant owners to feed into the network. From January 1, 2009, only the first 200 GWh of wind power generated in any one year will receive the full subsidy. After that limit is reached, the subsidy drops back to EUR 0.053/kWh for the next 200 GWh. Once 400 GWh of wind power has been generated during a year, any remaining wind generation receives nothing but the market price, currently running at about EUR 0.022/kWh to EUR 0.029/kWh. In effect, the system, set to run for 12 years, caps installed wind power capacity at around 150 MW. About 60 MW is in operation today. Tepp says the belief is that Estonia's weak coastal network and heavy reliance on the relatively inflexible oil-shale plant at Narva means that more wind power is out of the question. At the same time, however, the government is under pressure to increase the supply of renewables generation to meet a goal for 5.1% green power generation by 2010 and to comply with an EU mandate for 20% by 2020. "It is already clear that market caps will need to be revised upwards, perhaps as soon as the second half of 2009 in order to set new national targets," Tepp says. "Interested international parties are aware that the larger Estonian market -- investments in and erection of wind plants -- will happen after 2010." Offshore wind developments, such as the planned Neugrund project off the coast of Estonia's Ossmusaar Island, are not part of the subsidy system, representing another variable not yet dealt with, Tepp says.

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