Eesti Energia CEO: Baltic gas plants staying off the market was unexpected

Hando Sutter.
Hando Sutter. Source: Priit Mürk/ERR

Several blocks of the Narva Power Plants were undergoing maintenance during a period of peak prices because there was no warning Latvian and Lithuanian gas plants would be staying off the market and the company could not imagine the entire Baltic region's power would depend on Estonian thermal power stations, Eesti Energia CEO Hando Sutter said.

One of the reasons for Estonia's record high electricity price on Wednesday evening was the fact several energy blocks of the Narva Power Plants were undergoing maintenance. The blocks have a combined output of some 1,300 megawatts, while only a little over one-third of that was available on the market on Wednesday.

Sutter told Vikerraadio's "Uudis+" program on Thursday that Eesti Energia is carrying out maintenance to prepare for what will be a very tough winter, while a few unexpected disruptions were also thrown in the mix.

"When drawing up maintenance plans, we did not count on the possibility of Latvian and Lithuanian gas power plants staying off the market even at yesterday's high price point. There was also no warning this would happen. Had we known the entire Baltic region's power needs were on our thermal power plants... It is something that needs to be looked into, and an investigation has been launched, in terms of why our neighbors' gas plants did not add their power to the market," he said.

Sutter added there should be plenty of production capacity once the price exceeds €500-600 per megawatt-hour, and that Eesti Energia was not prepared for the whole system to rely on their plants.

Asked why the company's newest Auvere Power Plant is near constantly undergoing repairs, Sutter said that the plant's reliability has been improving every year and that it has been modernized to boost its competitiveness. Auvere is scheduled to come back online Thursday or Friday, while it is scheduled to undergo more major work during four weeks' downtime this fall.

Eesti Energia's theoretical total production capacity is 1,200 MW, which should drop to 1,000 MW should one of the company's units fall out of commission. This level of production was kept on the market between late winter last year and this spring. Normally, neighbors' gas plants have compensated for the gap in output created during summer maintenance.

Better solutions than second Auvere plant

Former MP, Member of the European Court of Auditors Juhan Parts has suggested that Estonia should construct another two Auvere plants.

Sutter noted that Eesti Energia does not determine policy but simply executes politicians' decisions. He added that looking at different technologies and considering the fact a new plant could not be completed before five years, there will be better ideas for how to get cleaner and cheaper energy by then.

Eesti Energia plans to quadruple its renewables capacity in the coming years. By 2030, the company must be able to generate enough renewable energy to cover Estonian consumption. Sutter said that Eesti Energia's soaring profits, that are disgruntling customers forced to pay high prices, will make these investments possible.

"Investments require profits. To make sure nothing like what we have already endured and will see this winter happens again, the only course of action is to invest colossal sums in new production capacity. Eesti Energia has vowed to invest €2.5 billion in five years. It is an astronomical sum for us," the CEO said.

He added that the company invested far beyond its profit over the last six months, with total investment volume needed to hit the 2030 goal at €4 billion.

People should not get their hopes up over universal service price

The government is planning to start offering electricity at a universal price that will be approved by the Competition Authority from October 1. Sutter said that the system will initially be confusing for companies and home customers and suggests people wait until questions are answered.

"People's expectations for the service have been driven quite high. I'm afraid I do not have encouraging messages as we will regulate the price based on oil shale production capacity that has considerable carbon emissions, with the quota price currently at €100 per ton," he said.

Adding up all the costs of turning oil shale into electricity, the price will be quite high, Sutter said.

"I would cool these expectations. I believe that what we currently offer our customs in fixed-rate packages will be quite competitive compared to the future regulated price."

The Eesti Energia CEO said that we are living in extraordinary times as 2,500 MW of electricity usually provided by Russia will not be available this winter and neither will gas for the most part. A big part of production capacity that could fill that 2,500 MW is also based on gas.

"It is a completely new situation, and if we add further unfortunate circumstances, like an extremely dry summer in the Nordics that has a lot of hydro energy and extremely warm weather in Europe that hikes power consumption – it's a perfect storm," Sutter said.


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Editor: Marcus Turovski

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