The national power grid operator Elering signed a 130 million euro deal with the Finnish company Wärtsilä, which will build Estonia's first quick-start power plant.
The new facility will not produce electricity on a daily basis; it will serve solely as a backup power source, allowing Elering to satisfy its requirement of supplying power within 15 minutes after major failures.
With a capacity of supplying a sixth of Estonia's peak load, the new plant would be capable of covering much of Tallinn's wintertime power consumption.
The station, to be built in Kiisa, will come in two stages of construction, the first beginning in 2013.
Currently, Estonia buys its emergency power reserve from the Latvian producer Latvenergo, but that agreement expires in 2013.