Priit Koit: Estonia's economic engine will be offshore wind energy
Estonia must produce the majority of its energy from renewable sources in order to maintain its economic competitiveness, and without substantial investments in wind farms, particularly offshore wind farms, Estonia cannot achieve this, Priit Koit writes.
The economic competitiveness of Estonia is under threat. We are geographically adjacent to a warring aggressor nation, our labor costs are converging with the rest of Europe and our energy prices have soared to an all-time high. We are also increasingly competing on the carbon footprint of Estonian products, i.e. the amount of energy used in their manufacturing processes, in addition to conventional pricing.
Soon, the fact that the most of our electricity is derived from fossil fuels will render our products ineligible for the Nordic markets or force us to sell them at much lower prices than our competitors that use renewable energy.
Thus, in the coming years, Estonia will need to invest heavily in energy. Because resources are always in short supply, investments must be made with caution. We should decide where we want to fit in. Do we see ourselves as a part of today's Europe, do we want to remain integrated into the Nordic economic area, sharing the same values, to grow together with it?
If we invest now in older generation technologies, we will have to do it all over again in a few years' time. By investing strategically in renewable energy we will build a future-proof energy industry and a modern system that will last for decades and serve as the foundation for economic development.
100 percent renewable electricity
In the case of electricity, the Riigikogu has decided that, by 2030 at the latest, at least the amount of renewable electricity consumed annually must be produced. In order to accomplish this, total consumption of 9.8 terawatt-hour (TWh), or at least 7TWh more renewable electricity will will be needed compared to today.
It is likely that the actual amount required will be larger, because a fully decarbonized electricity supply will provide an incentive for faster adoption of electric vehicles and will also be used in the heating sector, where achieving carbon neutrality is likewise important.
So the national target for the share of total renewable energy increased to at least 65 percent. These are lofty goals that will not be met simply by installing solar panels, co-generation plants or even onshore wind farms. We can only reach this volume in this time frame if we build additional offshore wind farms.
The main advantage of offshore wind farms over onshore wind farms is that the wind speed at sea is stronger and more stable. Wind turbines have a steep output curve, which means that at medium wind speeds, each additional meter per second (m/s) of wind makes a significant difference in the amount of electricity produced. This improves the stability of the power supply.
Estonia has ideal offshore wind farm conditions. We have many shallow seas with favorable wind conditions, which means that wind farms are less difficult to maintain and wind turbines will be operational 97-98 percent of the time. Not to mention the fact that the technology is already a reality, not just an idea.
In Europe alone, more than 5,000 offshore wind turbines have been built so far and offshore wind farms play a significant role in the electricity generation of the United Kingdom, Germany, Belgium, the Netherlands and Denmark. In the wake of the global energy crisis, offshore wind farms are booming in Europe, Asia and the Americas, and offshore energy generation will is only rising in the coming years.
Reserve capacities are needed
The required new capacity could be built in five years if state and local governments work effectively with developers. 100 wind turbines of 15 megawatts are sufficient to build 1,500 megawatts (MW) of high-efficiency offshore capacity. As this technology is rather advanced, by doubling the current number of onshore wind turbines, i.e. adding just 145 turbines, the total capacity of onshore wind turbines could be quadrupled.
Offshore wind farms can thus produce large volumes while maintaining stability, but dispersed onshore wind farms are also required to help load the grid more evenly.
Solar panels are a useful addition in the summer, and it is good practice that we built them considerably faster than our neighbors. However, due to grid capacity constraints, solutions that work in both summer and winter conditions should be preferred in the future.
According to the modeling, the need to compensate for longer periods between generation and consumption varies from year to year, but it is estimated that the shortfall in electricity from renewable sources in Estonia could be reduced to approximately five percent of total annual consumption if additional generation capacity were added.
Estonia has external connections with a capacity greater than its total wintertime electricity usage. Notably, in addition to imports, these connections can also be used to export Estonian electricity to other nations. With a diverse production portfolio, we will be able to help other countries in the region when the wind is blowing and it is quiet elsewhere, and vice versa should the situation change.
Even where connections exist, however, it is prudent to have backup generation capacity on-site. In the future, biomethane-based or cross-sectoral technologies could replace oil shale boilers (to produce hydrogen, heat, recharge car batteries, etc. from green electricity.. Similarly, the requirement for reserves is not limited to renewable energy solutions; any combination of power producing capacity must maintain certain capacities in reserve.
It should be also noted that if there is a lot of renewable energy capacity on the market, it will be the first to enter the market and crowd out other generation sources. So we still need standby plants, but if we have to build new ones, we should choose ones that are inexpensive to build and to integrate into our system, since they will probably not have much hours of use. In this decade, we most certainly will manage to add storage capacity to help balance generation.
Renewable electricity is the cheapest form of electricity
If we build enough new power generation and produce 95 percent of electricity from domestic renewable sources without importing or using backup connections, the price for the end consumer will be set, while the price elsewhere will not be as important.
International Renewable Energy Agency (IRENA) in collaboration with Lazard, a financial advisory and asset management firm, reported that the production cost of onshore wind energy is between €30 and €40/MWh, whereas offshore wind energy costs about €60/MWh. While maintenance and limited use of spare capacity will incur additional costs, this will have no significant impact on the total cost of the production.
Wind farms help the economy and generate tax revenue for the state; beginning next year, a levy based on wind farm output will be channeled to local governments and, through them, to local residents.
Estonia's total annual final electricity consumption is close to 10TWh. As renewable electricity is the least expensive kind of electricity, every year that wind farm building can be accelerated will contribute to a reduction in our electricity expenses. And the sooner we restore economic competitiveness, the better.
So perhaps it isn't that difficult: adding sufficient renewable power plants creates a competitive and future-proof energy system. In exchange, Estonia will once again be an energy exporting country, either directly through cables or as a component of competitively exported goods.
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Editor: Kristina Kersa