While Estonia's projected solar and wind output should be enough to cover domestic consumption next year, neighboring countries must step up their solar power capacity to bring back cheap prices, said Mihkel Härm, CEO of Estonian network operator Elektrilevi.
Solar power has been booming in Estonia for a while, with Eesti Energia subsidiary Elektrilevi receiving dozens of applications from micro-producers looking to join the grid every day for up to 200-300 weekly.
The grid has close to 13,000 electricity producers today.
Peak solar output came to 400 megawatts this summer, while the Eletrilevi grid holds around 450 MW worth of total solar capacity. The latter will exceed 500 MW by next summer, while 600 or even 700 MW are not out of the question, Härm suggested. "We have been underestimating people's interest in setting up micro-production from one year to the next, as well as that of companies to build larger solar farms," he said.
Härma suggested that having a larger share of solar will favorably affect electricity prices. The effect should be greater in the next spring-summer.
"We have seen lower electricity prices follow sunny weather already. Estonia consumes around 800 MW in summer months. If we can produce 500 MW of solar power and 300 MW of wind power, that's demand covered."
However, there is a caveat. Estonia is not alone in the region or cut off from its neighbors, and the price of electricity is also affected by how the latter generate power.
"Things now depend on our neighbors. Estonia has more solar plants than Finland, Latvia and Lithuania put together. If they take that step, if the micro-production boom takes off there, power will be virtually free on sunny days," Härm said.
Elektrilevi after additional €47 million in funding, €300 million needed for ideal situation
However, Estonia has its own bottlenecks keeping small and micro-producers from selling electricity to the grid. One is the grid's throughput capacity. For example, it is currently impossible for micro-producers to sell their electricity to the grid in Hiiumaa despite considerable interest.
Elektrilevi asked the government for €55 million to remedy the problem and improve the reliability of the grid. This year's supplementary state budget only holds €8 million for the company.
Härma described the sum as the necessary first step and added that Elektrilevi hopes the remaining €47 million will be allocated once work starts on the state budget strategy for the coming years.
Initial steps will see reconstruction of the existing grid by replacing open-cables with aerial and terrestrial alternatives. This should create additional throughput capacity and improve durability.
To compensate for the fact Hiiumaa is set to see very little of the €8 million in additional investment, Elektrilevi will launch construction of an undersea power cable between it and the island of Saaremaa ahead of schedule that it hopes to complete by 2025.
An ideal situation where any producer anywhere could join the grid for just a few thousand euros would require €300 million, Härma suggested. "It is another matter whether such an investment would be sensible," he said.
Hiking own investments would result in higher transmission fees
Elektrilevi has been and will continue to invest around €100 million in the grid annually. Even if Eesti Energia and Elektrilevi financials would allow for more investment, this would hike the transmission fee, which is why the company has asked for additional funding, Härm revealed.
He said that micro-producers are usually people with above average income and offering to pay for their connection to the grid from Elektrilevi's budget would raise the transmission fee for everyone.
"To hike the fee so that only some people could become micro-producers... I believe it is something in which society should contribute through taxes rather than the transmission fee," he said.
Elektrilevi received 3,218 applications to add production to the grid in the second quarter, up fourfold from the same period last year. Around 1,000 contracts were signed.
By late June, Elektrilevi had 12,808 customers contributing power to the grid in the total volume of 545.5 MW. This was used to cover over half of Estonia's need for electricity June 23-26.
Editor: Marcus Turovski