“The government is preparing a comprehensive package aimed at increasing the competitiveness of the economy and bringing down energy prices,” said Prime Minister Kristen Michal. “Today, we got a summary of the options for lowering electricity prices in the coming years, as well as in the longer term. We need to keep up the pace of building new generation capacity and have sufficient reserves at hand, we need new controllable capacities, more resilient connections, and growth in renewables. Industries which can consume electricity efficiently should also be given the opportunity to be largely exempt from the renewable energy levy. We will continue to discuss this in more detail in the near future.”
In terms of the security of electricity supply, there is enough controllable capacity in Estonia to satisfy the local energy needs. While the average consumption in Estonia is around 1,100 MW in winter and around 1,600 MW during peak load, the total amount of the capacity controllable on site is around 1,800 MW.
“The disruption of EstLink 2 will not affect the security of supply of Estonia, but it will affect the price of our electricity, because we will not receive the same amount of cheaper Nordic power during the disruption,” said Minister of Climate Yoko Alender. “In the case of the last EstLink 2 failure, the final price of electricity for the consumers rose by 10 per cent as the annual average. In this case, the price increase may be lower due to the additional capacity, as local wind and solar power generation capacities – e.g. the Sopi-Tootsi wind farm – have been built in the meantime. At the same time, more than half of the consumers have fixed their electricity prices, so they will not be affected by a possible price increase,” she said.
One solution for bringing down the price of electricity is a temporary differentiation of renewable energy charges, which is already being used in many countries.
“If we wish to develop a smarter economy with higher added value in Estonia, create more high-quality jobs, and keep the electricity prices low, we need to increase the electricity consumption. This can only be done by attracting smart industries here,” said Erkki Keldo, Minister of Economic Affairs and Industry. “Currently, our renewable energy charges for businesses are 1.7 times higher than elsewhere. This makes our energy prices too expensive for large industries by international standards. Differentiating renewable energy tariffs would allow us to be an attractive country to major industries. It is very important to take into account that if there are more major industries in Estonia, which requires more electricity, this will also bring down the price of electricity for domestic consumers.”
According to the Minister of Climate Yoko Alender, in the long term, the entry of new generation capacities into the market, in particular low-cost renewable energy capacity, and the development of storage and consumption management will bring down electricity prices.
“The government supported the amendments to the Electricity Market Act for the development of renewable energy and submitted the relevant draft act to the Riigikogu in December 2024. The amendments to the Electricity Market Act will speed up the connection of electricity producers and large consumers to the transmission grid and make connection costs more uniform and predictable,” said Alender.
In order to add new plants to be managed, the government today also discussed increasing the share capital of Eesti Energia to build a gas power plant in the city of Narva, which would also provide a solution for the heat supply of the city.
The government has already endorsed a proposal to create an isolated operation measure to ensure that existing controlled capacity is kept under control until new capacity is created. Such plants, such as oil shale power plants, also help to bring electricity prices down during peak load periods.
The possibility of bringing the Kiisa power plant to the market was also discussed if an analysis carried out in cooperation with the Ministry of Climate and Elering confirms that the decision will bring down prices for the consumers. The analysis will be available in March 2025.
At the end of last year, the Ministry of Climate submitted a support plan for the establishment of wind farms to the government, which will result in the addition of 1,350 MW of onshore wind farms in Estonia by 2029 and 1,000 MW of offshore wind farms by 2033. The government has also submitted a proposal to the Riigikogu to build longer direct lines, which will offer more affordable network charges for industry, and has developed more favourable conditions for large-scale producers and consumers to connect to the grid.
The connection to the electricity system of continental Europe is on track. Regardless of the EstLink 2 failure, the Baltic States will be the last EU Member States to be disconnected from the Russian electricity system as soon as on 8 February. Then, on 9 February, Estonia, together with Latvia and Lithuania, will join the continental European frequency range via Poland.
Looking ahead, there is also active work going on to prepare for the deployment of nuclear energy, with the Nuclear Energy Steering Group set up by the Minister of Climate preparing a draft Nuclear Energy and Safety Act, analysing the possibilities for establishing a nuclear regulator, and a proposal to the Government of the Republic to launch a special national planning process for the selection of potential sites for nuclear power plants in February.
The government will continue to discuss energy issues in the near future.
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