No relief in sight for high electricity prices in Estonia

Lamp. Source: Siim Lõvi/ERR

Electricity prices in Estonia are likely to remain high for months to come. Prices going up, however, haven't seen a reduction in electricity consumption.

According to Jaanus Uiga, director of the Energy Department at the Ministry of Economic Affairs and Communications, there is no relief in sight for the high electricity prices Estonia is seeing.

"At the end of last year, we still thought that the price would come down this spring, and true, it did indeed start to drop in February, but it's summer now and prices are higher," Uiga said. "I think it's reasonable to anticipate that prices won't be getting cheaper and we should consider whether it would be possible to fix prices."

According to the ministry official, the state plans on introducing a universal service package.

"The state is developing a universal service package with a fixed price for household consumers," he said. "We want to implement it starting October 1 already. We're working toward that. We have to come up with it and send it to the Riigikogu by mid-August already, as it will require legislative amendments."

In order for electricity prices to go down, production capacity for cheaper electricity must be increased. This requires investments and takes time, however.

"We currently have a lot of [power] plants that are 40, 50, 60 years old, and whose maintenance is increasingly complicated," said energy expert Einari Kisel, a member of the supervisory board at the Estonian state-owned energy group Eesti Energia.

"And at the same time, we've been in a situation in recent years where there was practically no need for them and many of them were slated to be closed down, due to which they have not been invested in," he continued. "Now that demand has unexpectedly increased, they've started repairing more of these plants this summer in order to be ready for winter."

Increasing energy prices nonetheless have not seen a reduction in electricity consumption volumes. Last year, electricity consumption in Estonia increased by nearly 7 percent, and according to Kisel, some growth in consumption can be expected this year as well.

Neighboring countries' electricity consumption has increased as well, which has a direct impact on electricity prices in Estonia.

"As the most expensive capacities are currently in Latvia and Lithuania, where the deficit is also likewise biggest, then that determines the price level for electricity on the current market," the energy expert explained. "In other words, we need to invest more in new production capacities and power plants. Estonia has done a lot on its part, but we should see more investments in Latvia and Lithuania, because that is where the bottleneck is biggest."

It's not just Estonia and the Baltics in an electricity deficit, however.

"I wouldn't blame the Latvians and Lithuanians," said Arvi Hamburg, chair of the Energy Council at the Estonian Academy of Sciences. "I'd say that we in Estonia haven't seen any new additional manageable capacities either. If we look at the Baltics as a single region, then all of us in the Baltics are in a deficit, including Estonia.

"We in the EU as a whole, in the Baltic Sea region as well as in the Baltics lack a regional development plan or master plan regarding where to produce electricity and from what — an electricity production capacity development plan," he continued. "We put too much faith in the market and in the market regulating everything, but under deficit conditions, the market is distorted and we cannot expect any sort of regulation here."

Estonia's day-ahead prices on the Nord Pool electricity exchange can be viewed here.

All times on Nord Pool are noted in Central European Summer Time (CEST), which is one hour behind Estonian time (Eastern European Summer Time, or EEST).


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Editor: Aili Vahtla

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