Fixed Rates to subsidize solar power plants in CAP farm investment projects
About this good practice
The Lithuanian agricultural sector faces challenges related to rising energy prices and the effects of climate change. Traditional energy sources in rural areas are not only expensive, but also reduce sustainability. Many farmers have faced difficulties in installing solar power plants due to high installation costs and limited financing options. Therefore, a practice has been introduced whereby farmers who invest in solar power plants under their CAP farm investment projects get the subsidy based on the fixed rates per kW. Fixed rate is one of the instruments of Simplified Cost Options (SCO), promoted by European Commission. If SCO instrument is used, no commercial offers, invoices, public procurement documents and etc. are needed to be submitted with the subsidy claim. The administrative burden is reduced and fixed rates can be and are higher, than regular (co-financing) subsidy rates, also, each year there are adjustment based on market situation and technological achievements. They cover all the main stages of installing a solar power plant: from design to installation. This ensures that farmers receive fair support that is in line with market prices, thereby reducing the risk of errors in project financing and increasing the transparency of project implementation.
Fixed rates help farmers to estimate the possible costs of the project more easily and follow simple procedures of financing.
Expert opinion
Resources needed
Policy changes were required to introduce Fixed rates instrument in CAP farm investment projects evaluation process. The calculation of fixed rate was done with the help of independent consultants through paid service.
Evidence of success
The practice achieved significant results. More than 1,000 solar power plants in agriculture have been installed in Lithuania, the total capacity of which exceeded 80 MW. This made it possible to reduce farmers' energy costs, and the share of renewable energy in agriculture increased to 17% (according to the data of the Ministry of the Environment of Lithuania). After implementing this practice, farmers saved more than 5 million. EUR per year for energy bills alone.
Potential for learning or transfer
This practice can be useful for other EU countries that seek to promote renewable energy sources in agriculture. Lithuania has successfully shared this experience with Latvia and Estonia, which have started to apply similar financing mechanisms and fixed rates, adapting to their local markets and climate conditions. The most successful aspects are clear funding parameters, strong cooperation with consultants and technical support for farmers, as well as flexibility to adapt to market changes.
Further information
Documents
Strateginis_planas 2023-2027.pdf
Fixed rates detailed.docx
Website
Good practice owner
You can contact the good practice owner below for more detailed information.
National Paying Agency under the Ministry of Agriculture of the Republic of Lithuania