The general attitude of local governments and the public towards the development of wind power plants as a source of renewable energy is still not sufficiently supportive. The implementation of wind power plant projects is a source of concern and anxiety. This inevitably delays the exploitation of wind energy potential and the development of projects in Latvia, but they are necessary to strengthen our country’s energy security and independence, while ensuring progress towards the EU’s common climate neutrality goals.
In order to balance the interests of the public, local governments and electricity producers, on 27 August, the Cabinet of Ministers adopted Regulation No. 577 “Procedure for wind power plant payments for local community development”, which requires electricity producers with wind power plants located both onshore and offshore in Latvia to make annual payments for local community development. The aim of the regulation is to provide both households and local governments with an economic benefit from the operation of wind power plants located in or near their territory.
Which wind power producers will have to make the payments?
The regulation shall apply to wind power plants with an installed capacity equal to or greater than 1 MW (megawatt) which are connected to both the electricity transmission and distribution system after the entry into force of these regulations. This means that the rules do not apply to wind power plants that started operating before the rules entered into force. However, if an electricity producer decides to increase the capacity of wind power plants already built and connected to the distribution or transmission system, or to increase the number of turbines in the wind farm, the compensation payment will apply equally to the power plants owned by that electricity producer.
How much will the local governments receive?
The electricity producer’s obligation to make a payment to the relevant local government starts the year after the system operator issues the certificate for connecting the wind power plant to the grid.
The payment to the local government shall be made by the electricity producer once a year, by 1 March for the previous calendar year. The amount of the payment is €2,500 per year (excluding VAT) for each megawatt, including partial, of nominal capacity of the wind power plant.
Which households will qualify for a compensation payment?
The payment made by the electricity producer to the community will be split between the local government in whose territory the wind farm is located and the household that meets the criteria defined in the rules:
- Firstly, households that are classified as an apartment property, residential building or part thereof in accordance with Cabinet Regulation No. 326 of 12 June 2018 “Regulations on the Classification of Buildings” and that are not completely or partially collapsed, dangerous or landscape-damaging structures will be eligible for the payment. In addition, the household must have been commissioned before the building permit for the wind farm has been issued.
- Secondly, the ownership of the household must be registered in the Land Register in favour of a natural person.
- Thirdly, the household must be located within a radius of 2 km of the boundary of the onshore wind farm or, if the wind farm is located in inland marine waters, the territorial sea or the exclusive economic zone, 25 km from the boundary of the wind farm, taking into account a point on the coast measured at right angles to the shore.
To qualify for this distance, at least 0.001% of the property must be located within the defined distance. In addition, a household is not eligible for a community payment if at least one member of the household is the owner or legal holder of the wind farm for which the payment is being made, or if the household has given possession of the land it owns (e.g. under a development right agreement) to a wind power producer. Each individual local government is obliged to identify the range of households that qualify for the payment.
Distribution of compensation between the local government and the household
The municipality is obliged to allocate at least 50% (but no more than 90%) of the payment received to households qualifying for the above criteria and to distribute it in proportion to the number of households, subject to payment of a minimum of one minimum monthly wage per household and a maximum of three minimum monthly wages per household per year. The amount of compensation to be paid to each household is based on the minimum monthly wage in Latvia for that year. The local government may reduce the amount of the minimum payment to be paid to each household if the amount of the redirected payment to the community is less than one minimum monthly wage per person when distributed among the number of qualified subjects.
In the case of a household in joint ownership with several owners, the payment to be made to a particular household shall be divided equally according to the number of joint owners, irrespective of the size of the fractional share of the joint owners of the property. The local government calculates the cost of the payment by 1 July each year and pays it to specific individuals as owners of the households. As the payment to the community is of a compensatory nature, it is not subject to personal income tax in accordance with Article 9.1(16) of the law On Personal Income Tax.
The part of the payment transferred to the local government’s budget revenue can only be used for the purposes set out in the regulation, for example: promoting energy efficiency, environmental protection measures, renovation and maintenance of the local government’s road infrastructure, etc. The local government must primarily use the revenue from these compensation payments for the needs and purposes specified in the regulation of the municipalities in which the households qualifying for the payments are located.
The local government is obliged to inform the public and publish a report with information on the funds received and actually spent from community payments.
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