Elering, which is responsible for ensuring the security of Estonia's electricity and natural gas supply, released a report Tuesday providing an overview of the current state of Estonia's security of power supply.

The TSO highlighted in the report that by 2027 already the market could turn in such a way again that Estonia's oil shale-fired power plants will no longer be competitive on the electricity market. At the same time, it's necessary for ensuring Estonia's security of supply that we have several oil shale blocks' worth of fixed capacities.

"It is precisely in order to maintain these capacities in a situation where doing so may not be commercially viable for Eesti Energia that Elering is proposing the implementation of a strategic reserve," states the report signed by Elering board chairman Taavi Veskimägi. "On the basis of the strategic reserve, sufficient production capacity to ensure security of supply would be maintained in Estonia even when it would not be economically viable based on the energy market."

According to the report, Estonia has sufficient electricity to cover peak demand, but Russia's aggression in Ukraine has significantly increased the risks, and emerging as particularly serious risks are potential gas supply disruptions this winter as well as the possibility of the power going out altogether, should Russia disconnect the entire Baltic power grid unplanned.

The report acknowledges that fear and uncertainty persist in Estonian society, however measures implemented over the past nine months have reduced risks. Nonetheless, many risks remain that are impossible to fully mitigate.

First and foremost among these are risks related to attacks on physical infrastructure, Elering said, citing the attack on the Nord Stream pipeline earlier this fall, cyberattacks such as those launched on Ukraine's power grid, restrictions on gas and coal supply, but also power plant reliability, as illustrated by failures at the 3rd reactor at Olkiluoto Nuclear Power Plant in Finland.

"We're living in unprecedented unpredictability in the energy sector," the TSO acknowledged. "So we have to be prepared for anything."

Nonetheless, Elering currently believes it unlikely that consumption will be restricted. Should any risks materialize, the company confirmed that consumption will be reduced in such a way as to least impact consumers.

While the key issues in energy today are currently security of supply and cost, the report highlighted that in the long term, reducing carbon emissions is necessary to combat climate change, as the energy sector accounts for 70 percent of global CO2 emissions.

Charge for unused capacity

Elering considers its network very reliable and confirms that Estonia's transmission network in its current state would already allow for the connection of capacities equivalent to at least double the country's peak consumption.

"By fall 2022, Elering has built a total of 5,000 megawatts worth of network connections, and an additional 6,000 megawatts of connection capacities are currently at the connection offer or contract fulfillment stage," the company announced. "Compared with Estonia's energy consumption, which is in the 500-1,600 megawatt range, and an external connection capacity of up to 2,000 megawatts, then it can be stated that it is possible to connect to Estonia's power grid at a significantly higher capacity than actual market capacity at any given time."

According to the report, due to the high volume of requests to join the grid, it must be ensured that all network connections are put to use as well, not left to hinder the plans of those who actually want to build a production facility.

Thus Elering has proposed establishing a new measure that would charge fees for all network capacities that are not used to supply electricity to the grid within a two-year period.

Elering cited as one of the biggest changes compared with 2021 the fact that in early August, the Estonian government confirmed the results of the state's fourth renewable energy reverse auction, which will bring 540 gigawatt-hours of electricity produced from renewable sources to the electricity market.

The green electricity reverse auction had initially been announced for 450 gigawatt-hours of green electricity, but the volume of the reverse auction was increased to the maximum limit, i.e. 540 gigawatt-hours, in response to significant interest as well as the need for rapid growth in renewable electricity production. Successful tenderers must begin producing renewable electricity by the beginning of 2026 at the latest.

New owner's expectations for the Estonian state-owned energy group Eesti Energia have extended the company's obligation to guarantee at least 1,000 megawatts of dispatchable electricity generation capacity through the end of 2026. This includes the capacity to activate at least 900 megawatts of dispatchable energy between November 1 and February 28 and at least 600 megawatts between March 1 and October 31 from cold reserve — i.e. possible to activate and make available for service within 24 hours.

Fermi chief critical of report data

Commenting on social media regarding Elering's report on Tuesday, Fermi Energia CEO Kalev Kallemets noted that the report listed Latvia's hydroelectric capacity at 500 megawatts, but over the past two weeks, which have been cold and seen no precipitation, de facto generation has stood at 200 megawatts.

"That's a difference of 300 megawatts," Kallemets said. "The same goes for Lithuania's hydroelectric capacity, which was reported to be approximately 400 megawatts, while de facto production in November 2022 averaged 34 megawatts, i.e. a change of 366 megawatts."

He also noted that Latvia and Lithuania's natural gas capacities through 2037 had been cited as constant, which would require significant investments by owners that are very difficult to make in fossil fuel production. Both this year and last have shown that Latvia and Lithuania's natural gas plants aren't 100 percent reliable.

The Fermi Energia CEO highlighted that despite the fact that Elering's report listed the firm capacity of oil shale as more than 1,000 megawatts, in reality there haven't been very many days this year on which Enefit Power's oil shale-fired power plants have actually produced at least 1,000 megawatts of electricity.

"Even today, when the daily average price is €380 per megawatt-hour, production is at 867 megawatts of an installed capacity of 1,370 megawatts," he continued. "Thus three blocks aren't currently working, and it's difficult to prove that Eesti Energia could in reality fulfill its owner's expectation to guarantee a firm capacity of 1,000 megawatts."

Kallemets also pointed out that Elering is currently talking about storage as a solution for ensuring security of supply, but wind energy production in recent weeks has been so modest that there is practically nothing to store, meaning that in reality, that cannot help ensure security of supply in winter.

"Taken together, these shortcomings paint a pretty problematic picture," the Fermi CEO concluded. "It's still crucial to base things on factual and real-life data."

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