The Nord Pool power exchange should be made far more transparent, and the exact reasons why the price of electricity spikes so dramatically on any given day should be explained, said Sandor Liive, former board chair at Estonian state-owned energy group Eesti Energia.
"Before jettisoning the Nord Pool system and reverting to a planned economy, I'd like to see more transparency in it," Liive said on Vikerraadio's "Vikerhommik" morning program on Tuesday.
"In light of Monday's record electricity price, for instance, I would like to know the location of the power plant with the highest production costs," he explained. "After examining the statistics released by Nord Pool, where the bids have increased so incrementally, I got the feeling that there isn't such a power plant at all — that it's just an alternative bidding strategy."
The former board chair said that greater transparency leads to a higher level of trust.
"Ultimately, not only Estonians but also people in Latvia, Lithuania and the Nordic countries are currently footing the enormous electricity bill," he said. "And then we go on saying that we won't name those who are responsible for the price hike, because it's how our market operates. We still don't know where this record-breaking price last December came from and whether this [price hike] was, in fact, honest, transparent, and lawful. Perhaps Nord Pool's methods should be made more transparent before the system is discarded."
Although Liive himself is a believer in the marketplace, he supports the new government's coalition agreement to find a cost-based regulated price for Estonian people and businesses by October.
"Without a solution, many individuals and companies will not survive the winter," he said.
He added that the competition authorities in countries within Nord Pool's price zone should increase oversight over the system.
Three causes for current high electricity prices
Liive named three major factors that are responsible for the current increase in electricity prices.
"First, there is a dearth or absence of cheap generation capacity," he said. "Estonia has its own oil shale plants that could supply Estonians with cheap electricity, but Nord Pool shows that more than a thousand megawatts of Estonian production capacity is undergoing repair rounds, including both scheduled and unscheduled maintenance. They, indeed, have to be serviced throughout summer, as they will be utilized even more this winter. This is one reason why there are few affordable production capacities or they are not operational at the moment."
Another reason, he continued, is that natural gas is expensive. "Both electricity and natural gas cost 10 times more today than they historically cost in the past," he highlighted. "This is madness."
The third reason is the ending of cheap electricity imports from Russia.
"A year ago it used to be about 2,500 megawatts in the Baltics and Finland, which is the same as the current Baltic total," Liive said. "This supply has ended."
He added that two of these three factors affecting the price hike are linked directly to Russia, which uses its gas taps as weapons.
"Russia is at war with Ukraine, but it is also at war with the entire Western world, including us, via gas and other energy sources," he stressed."
Green transition not to blame for high electricity price
Liive said that he would not attribute the price increase to the green transition, and that if he did, it would be via Germany.
"Germany has shut down its very well maintained nuclear power reactors," he said. "The remaining three are still in operation, and it is being debated at the moment whether they should be shut down this year or not. I hope that doesn't happen. Moreover, there have been so few green developments in Estonia, Latvia and Lithuania that the green transition cannot be really held responsible for the price increases. The problem is that Germany withdraws 5,000 megawatts of electricity from our region practically every day."
The former board chairman noted that in the Baltic Sea region, Estonia, Latvia and Lithuania all import electricity, as does Finland.
"Sweden is the only country that exports [electricity] regularly," he said. "Norway on a frequent basis as well. Denmark imports when it's not windy, but also when it is. Germany also draws 5,000 megawatts from the same region. In comparison, on the coldest winter day, the three Baltic states use a combined 4,500 megawatts of electricity."
Asked what could be done to combat increasing energy prices, Liive acknowledged that there is no viable alternative to what the coalition agreement proposes.
"That they will work out a cheap way of supplying electricity to the Estonian people at the expense of Narva's power plants," he said. "This is a short-term solution, but the long-term solution is to invest in electricity generation."
Liive worked at Eesti Energia from 1998 to 2014, first as chief financial officer and management board member, and from 2005-2014 as chair of the management board.
Editor: Kristina Kersa, Aili Vahtla