The European Commission (EC) has given the green light to a €2.6bn ($2.7bn) support scheme for Estonia’s offshore wind energy sector, marking a significant step towards the country’s transition to a net zero economy.

The funding will aid the construction and operation of offshore wind farms in line with the Estonian Maritime Spatial Plan.

The scheme, which falls under the State Aid Temporary Crisis and Transition Framework (TCTF) adopted in March 2023, is designed to boost the renewable energy sector through a transparent and competitive bidding process.

The aid will be available until the end of December 2025 and aims to facilitate the development of sustainable energy sources.

Beneficiaries of the scheme will receive aid in the form of variable payments under two-way contracts for difference for a 20-year period.

The amount of aid will be determined by the difference between a strike price, set during the tender process, and the prevailing market price for electricity.

When the market price is lower than the strike price, the Estonian state will pay the difference to the offshore wind farm operators, capped at a maximum of €65 per megawatt hour (MWh).

If the market price exceeds the strike price, the operators must pay back the difference to the state.

The scheme also includes a limit on the annual volume of electricity supported, set at a maximum of 2 terawatt hours (TWh) per year.

The EC concluded that the Estonian offshore wind energy support scheme aligns with TCTF conditions and is a necessary, appropriate and proportionate measure to expedite the country’s green transition.

Clean, Just and Competitive Transition executive vice-president Teresa Ribera stated: “This €2.6bn scheme will enable Estonia to support the development of offshore wind as a way to reduce its dependency on fossil fuels and foster the energy transition.

“At the same time, it limits undue distortions of competition in line with state aid rules.”

In July 2024, the EC approved a €1.2bn ($1.3bn) Spanish scheme to boost investments in renewable hydrogen production.