Veskimägi: High electricity prices an unfortunate coincidence

Elering CEO Taavi Veskimägi.
Elering CEO Taavi Veskimägi. Source: Siim Lõvi/ERR

Head of Estonian power and gas transmission network operator Elering Taavi Veskimägi said at a recent supply security conference that Estonia had no supply security problems last week and that the price spike was caused by several power plants being out of commission at the same time. Estonia needs additional production capacity in the long run.

"We were far from having to limit consumption," Veskimägi said when commenting on last week's sky-high energy prices. "Peak prices were probably caused by price-sensitive consumption that slashed demand at a certain price point."

Even though the Baltic and Baltic Sea regions have enough production capacity according to Veskimägi, a cold winter means little in the way of backup power, with peak consumption and breakdowns coming together as high prices.

Veskimägi said that the currently high price is the result of several unfortunate aspects coinciding – cold weather, little wind, low water level at reservoirs, as well as natural gas and CO2 quota world market prices. The largest power production capacities in all three Baltic countries are undergoing repairs at the same time.

Power generation must become more environmentally friendly

Even though Estonia is not looking at supply security problems over the next decade, additional production capacity is needed beyond 2030, especially in the form of wind and solar power and energy storage solutions.

The latter is important to reduce environmental damage and comply with the Paris Agreement targets.

In terms of ensuring network capacity, Veskimägi said that the goal is to detach from the Russian power system and join the mainland Europe system by late 2025. This would require renovation of power lines in southern Estonia as the current ones are nearly 60 years old.

Work has also started on the third undersea power link to Finland, Estlink 3. "Transmission capacity constraints have caused price differences between the Estonian and Finnish price areas," Veskimägi said.

He added that power plants must be able to change production in mere seconds in the future to balance consumption for which the creation of a rapid reserves market is planned.

The Estonian government has established a security of supply standard that allows for a continuous assessment of the level of security of supply. If the continuous analysis shows a decrease in security of supply below the standard in a 10-year time frame, Elering will implement a strategic reserve as a quick measure to maintain the firm capacity in Estonia at a level of at least 1,000 megawatts. In addition to firm capacity, emergency capacity and, for a significant part of the time, renewable energy solutions also contribute to security of supply.

As the strategic reserve, meaning the additional capacity booked for a subsidy, constitutes an administrative intervention and means an additional cost for the electricity consumer, it is important to create preconditions for adding market-based production capacities to the market, which in addition to everyday amounts of energy are also able to provide the reserves necessary for the management of the electricity system, Elering said.


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Editor: Marcus Turovski

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