Estonian Parliament adopts an omnibus bill on renewable energy

2023 - 02 - 17
Article by: Siim Vahtrus, Sandra Sillaots

On 15 February 2023 the Estonian Parliamen adopted an omnibus bill (SE 696) which regulates amongst many other topics matters such as energy, construction, and planning. Our Senior Associates Sandra Sillaots and Siim Vahtrus introduced the most important changes in their blog.

Amendments regarding Electricity Market Act

In addition to modifications regarding financial reporting and audit obligations it is important to point out the following amendments:

  • The regulation regarding reverse auctions held for energy generation from renewable sources will stipulate that a proposal shall be made to the Government no later than 1 October 2023 to hold a reverse auction to enable power capacity of offshore wind power generation in the market.
  • In reverse auctions held for energy generation from renewable sources, participants whose generating installation has an electrical capacity of under 1 MW are no longer exempt from the obligation to provide a deposit and henceforward every participant in reverse auctions shall provide a deposit.
  • Section 65 of Electricity Market Act provides a new subsection, which obligates the network operator to disclose regarding electricity producers in the application for grid connection, in the valid connection agreement offer and in the connection agreement the market participant’s business name; the date of the issuance and period of the validity of the offer; the date of the conclusion and the deadline for performance of the connection agreement; the location and the voltage of the connection point; the type and the name of the power station; the connection capacity; when the power generator or storage installation was connected to the grid. The network operator has the obligation to disclose the aforementioned information on their website.
  • Section 87shall be added to Electricity Market Act, which provides contractual conditions for production-oriented connection agreements. Except in cases where over 70% of the connection charge has been paid for or the power generating installation is constructed on an apartment building, in order to gain access to the grid with a power installation with a capacity that exceeds 15 kW, the producer must provide the network operator with a deposit of EUR 38 000 per megavolt-ampers. The deposit shall be returned or accounted for the connection charge in case the application for grid connection is not taken into proceedings or in case power generation has commenced within 1 year for solar parks, 3 years for off-shore wind farms and 2 years for other type of installations (including mainland wind farms) starting from the due performance of the connection agreement. The deposit shall not be returned in case power generation has not started within the aforementioned time periods. Additionally, in case the producer has failed to commence power generation within the stipulated period, it is obliged to pay a fee of EUR 38 000 per megavolt-ampers each year for the unused power capacity, except when such failure has resulted from actions irrespective from the producer. An exception is set for power installations with a net capacity that exceeds 100 MW, by which the producer is obligated to pay 30% of the unused power fee for the first year and 60% of the unused power fee for the second year on the condition that at least 50% of the applied for capacity has been taken into use within the first year. By failing to pay the aforementioned fees the network operator shall not provide the production-oriented capacity and the producer is required to apply for a separate application for grid connection. The regulation shall be applied to previously concluded connection agreements after 2 years of the implementing provisions coming into force. The regulation shall not be applied sooner than 1 January 2025 for grid and connection agreements for the generation of power by wind farms in areas subject to restrictions regarding national security on the condition that such restrictions have been eliminated.
  • In addition, according to forthcoming section § 87of the Electricity Market Act, it is prohibited to change the technology used for power generation after providing the chosen technology in the application for grid connection. In case the producing installation subject to grid connection is changed from a construction work with insignificant spatial impact to a construction work with significant impact, such case is considered as a change of technology in the meaning of the forthcoming section § 87of the Electricity Market Act. The draft act does not provide consequences to previously mentioned conduct.

Changes to rules on spatial planning and building

  • Proceedings for national designated plans as well as local government designated plans of on-shore wind parks may be completed already after the first stage (where the location of the park is chosen), if there are no factors that would preclude the further development of the park. In such instances, building design specifications (onshore) or superficies licence (offshore) would be required for drafting the building design documentation. Framework conditions for these later decisions should be determined when adopting the designated plans. NB! These rules may also be applied to ongoing planning procedures, if the first stage (choice of location) has not been completed yet.
  • Minimum surface area that an application for superficies license for an offshore wind park must cover is set at 75 sq. km.
  • In case there are competing applications for initiating a national designated plan for an offshore wind park, a competitive bidding procedure (auction) will be organised by the Consumer Protection and Technical Regulatory Authority (CPTRA). The winner of the auction shall have the exclusive right to finance the spatial planning procedures and if the national designated plan is adopted, would also have the exclusive right to apply for a corresponding superficies license within 5 years. In other words: in such a case, the auctioning as to which developer gets exclusivity regarding a certain marine area would take place earlier, before the spatial planning, not at the stage of initiating superficies license (which would be the case where the national designated plan is not needed). These rules would mostly apply around the Hiiumaa island, as for the rest of marine area, areas for wind energy development are determined by earlier spatial plans.
  • The law would provide the starting price for competitive bidding for the right to apply for superficies license (providing exclusivity), which is set at EUR 15,000.00 per sq. km.
  • Local government designated plan for an onshore wind park may alter a previously adopted comprehensive plan for the same municipality (provided that the circumstances have changed to warrant such a change).
  • Renewable energy installations are now clearly allowed to be built on mineral deposits; this would however still be subject to the approval by the Ministry of Environment or the authority delegated by it (in practice, such approvals are issued or refused by the Land Board) and additional conditions may be set (most importantly, the date by which the installations must be removed). Related to this, clearer regulation on requiring demolishing/removal of buildings and technical installations and the enforcement of such requirements is provided.

Changes to environmental impact assessment (EIA) rules

  • Requirements for applying for EIA lead expert’s license were eased somewhat; the duration of the license was extended from 5 years to 7 years.
  • To speed up the EIA of onshore wind parks, the EIA programme which will set the framework for the EIA will be drafted not by the developer, but the decision-maker (in most cases this will be the local government) and the programme will already be adopted as part of the decision to initiate the EIA.