Lithuanian solar investors sue government over FIT cuts

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The former Lithuanian government’s generous photovoltaic feed-in tariff ($0.63 per kWh for plants below 30 kW and $0.70 per kWh for plants over 30kW) stirred solar power developers into a frenzy as dozens of photovoltaic plants popped up around the country in record time.

The incumbent Social Democratic government, however, has dealt a blow to investors, curbing the rampant expansion of solar power by passing amendments to the Law on Renewable Energy Resources (LRES), which slashed the green tariffs three-fold and more.

The new government, in power since December, enacted the amendments for solar plants below 30 kW in January and new changes to the law passed in May trimmed energy tariffs for solar plants 30 kW and above.

"This was a necessary action as the former tariffs would have required an extra $193 million from the budget, a significant strain to it," explains Lithuanian Prime Minister Algirdas Butkevicius.

The decision has angered a growing number of solar power developers. As many as 62 developers have already filed lawsuits against the move and are demanding the state compensate claimed losses totally $40 million.

"All entrepreneurs plan their investments and the investment return," Arunas Liskus, director of green energy development group JSC Alternatyvios Energetikos Imoniu Grupe, tells pv magazine. "Having passed the amendments, it is impossible to plan an investment return. No one can tell now what solar energy price there will be after a plant is launched."

Liskus estimates the company has already lost some $100,000 of planned revenues due to the constraints.

JSC argues in the complaint that under the country’s renewable energy sources law of 2011, small solar plants below 30 kW were granted a price of $0.63 for a fixed period of 12 years in advance. The amended law cuts the price by $0.08 per kWh.

"It is the state’s liability to make sure that laws are enacted and, if amended, not applied in reverse," Liskus says.

JSC operates four 30 kW solar plants in Lithuania.

During the peak, in 2011 to 2012, over 15,000 persons submitted requests to the Ministry of Energy for renewable energy sources (RES) expansion permits. The majority of the applicants sought permits to build solar power plants of up to 30 kW. Approximately 5,300 companies secured permits for solar power development.

Lithuania would have required an estimated $35 million in additional funds every year to purchase solar power at the previous feed-in tariff.

Lawmakers based the high electric power prices in the 2011 law on an assessment of the high investment costs necessary to develop a solar plant of up to 30 kW, which in 2011 was approximately $116,000 with an estimated pay-back period of nearly 10 years.

However, in 2012, as the price of solar panels dropped, the cost of solar plant construction plummeted and the pay-back point shortened by five years.

This resulted in a new wave of applications seeking approval for the construction of small solar plants below 30kWh — the Ministry received some 15,000 up until January 2013.

Lithuanian energy minister Jaroslavas Neverovicius estimated that if allowed, the flood of new projects would have resulted in some 450 MW of subsidized solar electricity production capacity at the high cost price of $0.63 being added to the grid, spiking the electricity price by $0.02 per kWh.

The government deemed this incompatible with the Law, which foresees promotion of renewable energy based on the criteria of economic rationality and low expenditures.

However, lawyers representing the solar power developers contend that the law might violate the Lithuanian constitution and therefore has to be revoked.

"The new LRES provisions that link the tariff with the existing tariff at the moment of the permit’s issuance for solar plants are illegitimate and unconstitutional," Mantas Gerdauskas, the plaintiffs’ lawyer, tells pv magazine.

Gerdauskas has asked the Vilnius District Court to appeal to Lithuania’s Constitutional Court to rule on the constitutionality of the amended law.

"Solar power producers are obviously being discriminated against in comparison to other renewables developers," says Ruslan Sklepovic, president of Lithuania’s Renewable Energy Producer Association. "There are many who raise the question: why is the amendment applied only to one source of energy? The bottom line is that the state’s promises have to be fulfilled, especially if they are enacted."