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Latvian government receives plan for MPC cancellation in 2022

Photo: pixabay.com
Latvian Economy Ministry has submitted to the Cabinet of Ministers Committee a report on solutions for support of electricity producers to allow for the cancellation of the mandatory procurement component from 2022 onward and provide fair support for green energy producers based on market principles.

The ministry claims that the proposed solutions for the cancellation of MPC system were evaluated from ecological and legal aspects, as well as with consideration in regards to the impact on the state budget. «If proposed measures are to be implemented fully, it will help balance public and national economy interest in the medium-term, as well as secure state electrical energy security and help achieve long-standing goals of Latvia’s energy policy,» Economy Ministry explains.

The proposed solutions include the following:

-prevent over-subsidization of all MPC power plants in 2019;

-reduce support for non-commissioned power plants in 2019;

-introduce stricter requirements for biogas stations’ raw materials in 2022;

-cease processing payments from end users to natural gas CHP plants, except for TEC 2 as a strategically important energy plant, in 2022.

At the same time, the ministry also offers a solution for the transition to market principle-based support mechanism for electricity producers. ‘It is important to note that there are currently no plans to provide support for new power plants; the market model will apply to honestly working existing power plants to help achieve the goal for renewable energy,’ adds the ministry.

Together with other involved sides, specialists of the ministry worked in different formats across 2018 to find ways to cancel the MPC system, which has become an uncontrollable burden for households and businesses. This hard work has resulted in a report containing several complex solutions for the cancellation of the MPC system by 2022.

«Inspections organized by Economy Ministry at different MPC plants showed that now is the time to put an end to this system. We have revoked permits for several dozen power plants, thereby preventing a potential cost increase of EUR 391 million,» the ministry explains.

Economy Ministry plans to submit amendments to the Electricity Market Law, which provide for replacing MPC system with a feed-in-premium system starting with 1 January 2022. The solution included in the report provides for the implementation of complex solutions to ensure that starting from 1 January 2022 state support for electricity production is based on market principles and the total support costs for production do not exceed 0.3% of GDP, which is consistent with other countries, especially when compared to Latvia’s 1% of GDP in 2017.

«Subsidized energy producers will have to prove they are able to work in market and fair competition conditions. We do expect objections and that there coordination process may take a long time. We also cannot completely exclude the possibility of legal action, because not everyone is prepared to drop privileges so readily. The planned changes also have to be coordinated with the European Commission. At the same time, I am certain that our proposed plan is the best possible one for the termination of this outdated system,» says Latvian Economy Minister Arvils Ašeradens.


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