TALLINN - Estonia retracted an application to the European Commission to approve state aid of as much as 1.5 billion euros for two new power plants fueled by oil shale, a senior government official said, reports Bloomberg. The Baltic country instead seeks permission from the European Union executive to award free carbon allowances for the construction, Einari Kisel, vice chancellor at the economy ministry, said in an e-mailed response to Bloomberg questions on June 2.
“Essentially the reconstruction of oil-shale power plants is a fully acceptable project for allocating free allowances under the EU directive; there should be no question about that,” Kisel said.
Power utilities in Western Europe must buy all their allowances for the carbon market’s third phase, starting in 2013. Some nations in Eastern Europe are being allowed to hand out a portion of free allowances, adjusted to exclude electricity exports. Estonia is still in talks with the commission about conditions for using free allowances.
The commission said on March 23 that it’s probing Estonian aid, which would be spread over 20 years as it may harm competition.
Estonia’s government in December awarded a 950 million euro contract to build up to two power units, each at 300 megawatts, to Alstom, the world’s third-largest maker of power equipment. The contract was conditional on state aid approval.
Estonia is the only country in the world where oil shale, a rock from which petroleum-like oil can be extracted, is the primary source of energy, at over 90 percent of the total.
The country seeks to raise the use of renewable energy sources in line with EU targets. Still, it expects to rely on oil shale for most of its output in coming years to reduce security of supply risks.