On 15 February 2020, amendments to the Electricity Market Law entered into force, which strengthened the supervision of electricity generators receiving state aid in the form of mandatory procurement or guaranteed fees and eliminated their overcompensation.
Since 2012, undertakings are no longer granted new rights to sell electricity within mandatory procurement or receive guaranteed fee for the capacity installed in their power plant. The amendments to the law instructed the government to develop a new version of conditions for operation and control of the power plants receiving the aid.
“Adoption of amendments to the Electricity Market Law at the beginning of this year was an important milestone for arranging the MPC system in order to reduce electricity costs for Latvian residents, businesses and the state budget as a whole. Today, the government took the next step by including rules in regulations of the Cabinet of Ministers that will reinforce the responsibility of undertakings in complying with mandatory procurement conditions and supplement the state aid conditions for biogas plants,” emphasises the Minister of Economics Jānis Vitenbergs. “By the end of the year, the Ministry of Economics will come forward with further additions to the regulatory framework, including the development of conditions for applying the principle of a single technological cycle. We will also submit an offer for reducing MPC to the government by the end of the year,” the Minister continues.
At the meeting of the Cabinet of Ministers on this September 2, the Regulations of the Cabinet of Ministers drawn up by the Ministry of Economics have been approved:
- “Regulations Regarding the Production of Electricity Using Renewable Energy Resources and the Procedures for the Determination of the Price and Supervision” (which will replace the current Regulations No. 262 of 16 March 2010 “Regulations Regarding the Production of Electricity Using Renewable Energy Sources and the Procedures for the Determination of the Price”),
- “Regulations Regarding the Production of Electricity, Supervision and Determination of the Price Upon Production of Electricity in Cogeneration” (which will replace the current Regulations No. 221 of 10 March 2009 “Regulations Regarding Electricity Production and Price Determination Upon Production of Electricity in Cogeneration”).
The updated conditions for the production of biogas as fuel raw materials should be highlighted among the most significant changes compared to the current regulations. The CM Regulations include additional requirements for biogas plants for the use of waste products, including manure. This means that biogas power plants will have to increasingly reduce, from 2022, the use of agricultural products intended for human consumption, including maize, in the production of biogas.
In order to promote the interest of economic operators to switch to the use of waste products in the production of biogas as soon as possible, the regulations include a link between the type of fuel used at the biogas plant and the price of electricity purchased as part of mandatory procurement. If an undertaking fails to comply with the minimum requirements regarding the composition of the fuel raw materials to be used during the year, the CM Regulations provide for the cancellation of the mandatory procurement rights.
Similarly, the new CM Regulations clearly define the principles of energy generation efficiency or use of useful thermal energy. The amendments to the law have already imposed an obligation on the undertaking to ensure that the thermal energy produced in cogeneration plants and power plants is used efficiently, including the fact that the total amount of useful thermal energy is not included in the total amount of thermal energy used in self-consumption1. The regulatory framework that has been in force so far included detailed rules for calculating the efficiency of energy production only in the CM Regulations for cogeneration plants. With the CM Regulations that have been approved today, the same rules will also apply to the power plants operating under renewable energy rules; these new requirements will take effect from 1 January 2021.
Useful thermal energy use requirements will affect the conditions for applying a single technological cycle principle, which are scheduled to be developed by 1 January 2021, when the EML regulations with the definition of a single technological cycle principle enters into force. The Ministry of Economics will therefore, by the end of this year, develop amendments to the CM Regulations supplementing them with the relevant legal regulations.
The CM Regulations reinforce the responsibility of electricity generators for fulfilling their obligations by significantly extending the number of infringements for which mandatory procurement rights are to be cancelled. The infringements for which mandatory procurement rights are to be cancelled include:
- if the useful use of thermal energy has not been technologically ensured in the power plant;
- if the appropriate systems of meters or means of measurement are not installed in the power plant;
- if the biogas or biomass power plant does not use the appropriate fuel raw material;
- the use of the generated electricity for the operation of the power plant is ensured in the power plant.