Eesti Energia must ensure 1,000 MW dispatchable capacity until end of 2026
At a meeting on Thursday, the government extended Eesti Energia's obligation to guarantee at least 1,000 megawatts of dispatchable electricity generation capacity until the end of 2026. Previously, the state, as the owner of Eesti Energia, had required the company to produce that capacity until 2023.
The government confirmed that Eesti Energia is expected to ensure at least 1,000 megawatts of dispatchable electricity generation capacity in Estonia until the end of 2026, irrespective of water levels in the Narva River and reservoir, except during maintenance, repairs and emergencies.
Eesti Energia is also required to maintain at least 900 MW of dispatchable energy in the so-called cold reserve, which must be possible to activate within 24-hours, between November 1 and February 28, and at least 600 MW from March 1 to October 31.
Until now, the expectation had been for Eesti Energia to provide 1000 MW of reserve capacity until 2023.
Andres Vainola, head of Enefit Power, a subsidiary of Eesti Energia, told ERR in the spring that if the obligation to maintain reserve capacity is to be extended beyond 2023, the decision should be taken as soon as possible to allow Enefit to make the necessary preparations.
Minister of Finance Keit-Pentus Rosimannus told radio show "Uudis+" on Friday that the decision had been delayed due to the constantly changing situation, with details needing to be ironed out right up until the last minute.
"In general, the previous owner's expectations left some room for interpretation," said Pentus-Rosimannus. "In essence, expectations in the past were (focused on) preventing the dismantling of old production equipment. This was essential, but there were no precise requirements in writing regarding the state of readiness that the 1,000 MW (of backup power need to be in) at any given time," she explained.
According to Pentus-Rosimannus one important addition to the previous document is the requirement for at least 1,000 megawatts of capacity to be guaranteed, regardless of the Narva River's water levels. The power plants in Narva draw their cooling water from the Narva River. However, the river's water level can depend on the will of Russia, which, if it wishes, could open the sluice gates of the Narva reservoir, lowering the water level be several meters and consequently leaving the power plant without cooling water.
Pentus-Rosimannus said, that the issue had already been discussed by the cabinet in the spring.
"It is a work in progress, and I believe that the company has to make the necessary preparations so that the risks are mitigate, there is no other way. Risks have to be mitigated, because it does not depend on us, but on Russia, whose behavior can be very unexpected and not benevolent," the minister said.
Hando Sutter, chairman of the board of Eesti Energia, told ERR that the company has made a risk assessment and planned appropriate measures to ensure it meets the requirements.
"We have made a risk assessment, as we are a provider of a vital service. We have also planned the appropriate measures. We are ready to work even if the natural water supply is not sufficient for what we need, technologically," Sutter said.
Sutter: we do not need any support from the state
For many years, Eesti Energia paid out in order to maintain its reserve capacity because low electricity prices meant power plants running mostly on oil shale, could not access the market and so remained idle. However, the situation has changed significantly in the last year and the plants are now turning over a profit. According to Sutter, this means the company does not expect state subsidies to maintain its reserve capacity.
"What is bad news for consumers is good news for us. Electricity prices are such that even our oldest hale-powered generation units are able to earn the money they need to repair and maintain themselves. We made those repairs this summer so that they can continue to serve us. Some have been finished, some are still in progress. We will be able to earn that money (back) from the market ourselves with each unit (sold)," Sutter said.
"Repair and maintenance costs are also tied to the number of hours worked: if there are more hours, we make money; if there are fewer, costs are lower. At the moment, I think by 2026, we will be able to make the money we need," he added.
Eesti Energia does not have any plans to make major investments in order to maintain its reserve capacity.
"I hope that the insane electricity prices will not remain like this all year round, that we will have periods when the plants can be shut down. Then they won't be running for so many hours and there will be time to maintain and repair them. We do not foresee a one-off large-scale modernization of these older plants. Instead, there will be refurbishments of the newer facilities, but we would have done that anyway as they are planned on the basis of the market " said Sutter.
Pentus-Rosimannus also added that the government expects equipment needed to ensure capacity will work. "Eesti Energia has to meet the expectations that have been set. The equipment has to be maintained in the best possible way to ensure that it is operational," she said.
Eesti Energia is also required to halt any unethical business relations with Belarus and Russia, with Sutter confirming that no such relations any longer exist.
"We have behaved in compliance with all the rules and sanctions that have been imposed and found substitutes for all suppliers in the sanctioned countries. This was guaranteed by us before and we don't need to change our behavior," Sutter said.
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Editor: Michael Cole