Economics Ministry to review energy subsidies

The Economics Ministry plans on reviewing energy subsidies for select energy producers, as it's getting more and more difficult to keep consumer energy bills small, reported Latvian Television's "De Facto" Sunday. 

Being connected to other states' electricity grids doesn't guarantee smaller prices as subsidies are sucking up more and more resources, Economics Minister Arvils Ašeradens told "De Facto". 

Latvia subsidizes energy to plants powered by gas and renewables. The state buys it for above-market prices so that investments in such plants are feasible.

According to "De Facto" estimates, last year the state paid an extra €225m above market prices to these stations for output and electricity.

To ensure that consumers' energy bills don't grow due to the subsidies, the state pays the difference, for example, from the dividends of Latvia's state energy company Latvenergo.

The Economics Ministry says that the return on power plant investments will be reviewed so it doesn't go over 9-12%, as per suggestions by the European Commission.

Energy producers see the proposed changes as further endangering their investments.

For example, a representative of the Graanul Invest wood pellet manufacturer said that the power plant tax introduced previously, together with falling gas prices, has already made it so that the company will earn back its investment into the power plant within 20 as opposed to the previously projected 7 years.

Further changes will harm the investment climate in Latvia, Haralds Vīgants, a representative of Graanul Invest, told "De Facto".

Graanul Invest has invested about €250m into pellet manufacture and woodchip bioreactors in Latvia.

However the interests of energy producers are at odds with that of large energy consumers, like the Latvian fiberglass company Valmiera Glass that has moved production to the US, at least partially due to lower electricity prices.

"If we talk about what's fair and what's not, it must be said that [electricity subsidies] have been a big present up until now," said Kaspars Osis, the head of the Energy Committee at the Latvian Chamber of Commerce and Industry.

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