Discomfort payments for wind turbines in Latvia finally approved

Two years after announcing there would be discomfort compensation payments for wind turbines located in the neighbourhoods of residential properties, the relevant amounts and payment mechanisms have been finally approved and are coming into force on 30 August 2024.

Below are the main points you need to know if you are either a developer and a future operator of a wind farm or a resident having its property located nearby a wind farm under development.

If you are a developer and a future operator of a wind farm, you need to know that:

• payments would apply for wind turbines with capacity starting from 1 MW (irrelevant of the height of the wind turbine or whether its location is inland or offshore);
• payment amount is EUR 2500 per each MW (also incomplete) of the installed capacity per year (i.e., for the wind turbine with capacity of 6,5MW payment would equal to EUR 2500 x 7 = EUR 17,500). The plan is to revise the amount every 5 years based on the indexation model which will be developed separately. In case of extraordinary circumstances in state economy the amount could be revised sooner;
• payments will be administered by the local municipality where the wind turbines will be located (or several municipalities if the wind farm is located in several municipalities), who will collect and distribute the amounts to the residents who qualify for the compensation;
• payment shall be made yearly by 1 March for the previous year of operation to the local municipalities bank account available online. The payments shall be made starting with the year following the start of operations and during the full lifecycle of the wind turbines, i.e., until dismantled and the respective territory put in order;
• payment will be due only for the wind turbines that are commissioned and connected to the transmission or distribution network starting from 30 August 2024 (thus, it will apply to wind farms currently in development), and would apply to wind turbines connected earlier only in case of upgrading the capacity of such wind turbines or increasing the number of the wind turbines in the wind farm after 30 August 2024 (in case of increase of wind turbines, compensation is payable only for the new wind turbines).

If you are an owner of a residential property, you need to know that:

• compensation shall be paid to the members of the households – natural persons, and its amount shall vary from 1 (with exceptions when the amount can be lower) to maximum 3 minimum wages (i.e., currently between EUR 700 and EUR 2100), and as a compensation it will be exempted from the application of the income tax;
• to receive the compensation you need to comply with all of the following criteria:
  a) be recognized as a household, i.e., a natural person or persons who use the property as their place of residence and do not perform any economic activities therein in the understanding of taxation laws (e.g., if the property is used as a place of commercial activities or legal entity’s registered address, it will not qualify for the compensation);
  b) own the residential property, i.e., the apartment property or residential house: (i) which was commissioned prior to receipt of the building permit for the wind turbine, (ii) is not destroyed or degraded structure, and (iii) which in full or at least 0,001% part thereof is located within 2 km radius from the onshore wind turbine, or within 2 km radius from the point in the coastline from which an offshore wind turbine is located in the distance up to 25 km in the internal sea waters, territorial sea or exclusive economic zone. Non-residential properties and properties commissioned later or not commissioned at all will not qualify for the compensation;
  c) have your ownership rights registered in the Land Register (in case of a joint ownership the compensation will be split between the co-owners evenly, i.e., not based on the amount of shares owned);
  d) none of the household members shall have ownership or possession rights of the wind turbines, nor shall have transferred the possession of the land for the construction and operation of the wind turbines to its owner (i.e., land owners who have leased their land for wind farm purposes will not qualify for the compensation even if they live within the radius of compensation).

The range of persons entitled to the compensation shall be determined based on data from the public registers collected by the administering municipality, i.e., no specific application is needed to receive the compensation.

Compensation will also be paid if the wind turbine is located in a neighbouring municipality, provided that the distance and other prerequisites are met.

The residents of the municipality will also benefit from improvements of the infrastructure, nature preservation and energy efficiency measures implemented by the local municipalities at cost of the part of compensation attributable to them, and respective data will also be made available publicly on a yearly basis to ensure the transparency.

The above regulation has long been awaited, since the law provided that such payments shall be established already in 2022. Finally, there is a legal framework which will allow investors and wind farm developers to calculate their investments more precisely. However, as with any new regulation, questions regarding its applicability (or even its validity) will definitely arise. If you have some already, please do not hesitate to reach out to us!