Major producers seeking to enter the solar energy market will lose renewable energy support from next year which is causing developers to race to finish solar plants.
New solar plants are cropping up like mushrooms after a light drizzle. Plants covering several hectares are being constructed in Paldiski, Pärnu County, Türi-Alliku, while a smaller plant is under construction in Mäo. The largest solar field in Estonia was finished in Järva rural municipality in spring. Estonia has a total of roughly 1,300 solar power plants.
“Solar energy production has roughly doubled every year over the past six or seven years, but the future looks less sunny. Support will be based on tenders, while it is difficult to tell how lack of universal support will affect the market,” said Chairman of the Estonian Chamber of Renewable Energy Mihkel Annus. He said it is likely the solar energy market will become unstable from next year.
Annus explained that it takes an average-size solar plant seven to ten years to become profitable with current renewable energy support at €53.7 per megawatt hour. That time would roughly double from next year.
Momentum built up
Member of the board of Eesti Gaas, that is constructing Estonia’s largest complex of solar plants near Pärnu, Margus Kaasik said that the solar energy market has only now picked up momentum.
“The prices of solar power devices have dropped to a level where Estonia can afford them. The market did not favor construction of solar plants before, while it is high time to build now as support is set to disappear,” Kaasik said.
He added that investors are not interested in the long pay-back period once support runs out. “We will definitely build more solar parks in the future as we cannot keep out solar know-how to ourselves, but it is likely future solutions will be on a smaller scale and tied to medium-sized apartment buildings or offices,” Kaasik said.
Eesti Energia subsidiary Enefit Green AS is building €5 million worth of solar plants that will still qualify for support under the previous scheme this year. CEO Aavo Kärmas said that while solar power will play an important role in Estonia in the future, it is not competitive without state subsidies. Even though renewable energy counts for 19 percent of total production in Estonia, the question is what will happen in the coming years.
“According to Estonia’s energy economy development plan, the goal is to have 50 percent renewable energy by 2030. This would require renewable energy volumes to grow several times compared to what we have today,” Kärmas found.
The amendment in question, passed with only a narrow margin in the Riigikogu in June, comes as a result of European Union state aid rules to switch renewable energy support to tenders, said Timo Tatar from the economy ministry’s energy department.
Renewable energy technology being cheaper today also plays a role. “Recent support levels were fixed nearly ten years ago and were outdated, at least as concerns total output of major plants,” Tatar said.
If the state is set to cover around half of the cost of solar plants this year, from next year, support will only be retained for solar devices installed on medium-sized houses the power of which is around 50 kW until December of 2020.
Tatar said that renewable energy support will be based on tenders that are in turn based on Estonia’s renewable energy goals in the future.
To soften the blow of the transition, the state will hold separate tenders for renewable energy producers the average capacity of which falls between 50 kW and 1 MW in the next three years. Up to 5 GWh of energy will be procured a year.
Aavo Kärmas added that if Enefit Green alone will construct 7 MW of solar plants this year, procuring 5 GWh hours through tenders in the coming years is clearly too little. He believes bigger auctions are needed.
Power system operator Elering reported last week that Estonian power plants produced a total of 402 GWh of renewable energy in Q3 of 2018, up around 20 percent year-over-year.
Power from solar panels that reached the grid came to 5 GWh in Q3 which is three times as much as in Q3 of last year, courtesy of new panels.
Because micro-producers consume most solar energy produced in Estonia, the total output of solar panels could be four or five times greater than what reaches the grid and qualifies for support.