Grid distributor Elering, which is responsible for securing Estonia's energy supply, published a report on Tuesday, which provides an overview of the situation in the country regarding electricity security.

Speaking at a press conference to introduce the report, Elering CEO Taavi Veskimägi said, that according to the standard set by the government, there may be up to nine hours per year when market-based generation does not completely cover all (electricity) consumption. This is based on the assumption that there should be around 1,000 megawatts (MW) of dispatchable generation capacity in Estonia, meaning that if the Narva power plants were removed from the market in 2027, the standard could not be met.

Liive: Cost of creating strategic reserve should be clarified

"This year's security of supply report is certainly the most realistic so far," said Fermia Energia Board Chair Sandor Liive. "While up to now, Elering's security of supply reports from have tried to lull us into a false sense of security, by suggesting that the connections are there and that they will provide us with electricity at all times, in my view, they are now talking about the actual issues," he said.

"First of all, Elering has very clearly said, that it might be necessary to reduce consumption this winter," Liive added.

The Fermia Energia Board Chair went on to stress the need for a long-term strategy to manage electricity consumption, rather than simply dealing with the consequences after the fact by sending SMS messages to people telling them that they need to cut down on energy use.

"What we really need is for consumption management to essentially be a day ahead of the market. Elering and the ministry have been doing work toward this for the last two to three years," Liive said.

"If we look at the example of the United Kingdom, the local system operator has brought in a market mechanism where people are also paid money if they are prepared to reduce their consumption upon being requested to do so. So, I believe, that when it comes to consumption, this year, it is really important to think in terms of proactive, preventive measures," he added.

According to Liive, Elering's report also shows that both Tallinn and Tartu are now seeing the need for additional network investments to cover the increase in consumption.

Liive again cited the U.K. as a positive example to follow. "In London, there are big problems with electric cars. They are trying to solve this by managing consumption in a way that means electric cars are not charged at peak times in the evenings, thus allowing them to address the network investments needed," he said.

"Over the next decade, the electrification of transport and heat generation moving away from gas to heat pumps - all of this will increase electricity consumption. This additional consumption is actually controllable consumption, which it is possible to shift over time in response to different signals. Ultimately, that is very good for the system," Liive said.

Speaking about the establishment of the strategic reserve, Liive said, it is important to put out a call for tenders quickly in order to find out the costs involved as soon as possible.

"Elering is saying, that it believes there will be more onshore and offshore wind farms in the future, and I am very much of the opinion that more 'wind' must be brought to Estonia. However, when calculating the price of 'wind,' we cannot only take into account wind farms' own production costs," he said.

"I think Elering has made it very clear, that if we are going to rely mainly on wind farms for the generation of new capacity in the future, we will also have to have a strategic reserve. So, the actual price of wind energy will be reached after adding together the price of electricity generated by wind farms and the (cost of the) strategic reserve," Liive explained.

Sutter on creation of strategic reserve: A radical change in rhetoric

"This is really a very radical change of rhetoric from Elering," said Hando Sutter, in relation to the establishment of a strategic electricity reserve.

"Two years ago, Taavi Veskimägi said that Estonia's security of supply was guaranteed without the Narva power plants. That was a very clear message. However, in the meantime, things have changed in the world and if the system operator sees the need for such a reserve, we are ready to provide it," Sutter said.

"We have said, that older oil shale power plants can also continue to operate freely after 2026. The topic for broader discussion may be whether we need to guarantee capacity in reserve using 1970s technology for an additional network fee, or if perhaps we have better ideas in Estonia. For example, building an offshore wind farm by 2028, so that maybe we don't need this reserve," Sutter said.

Sutter was then asked what the cost would be of maintain the older energy units in reserve on standby, ready to be brought into action in cases of urgent need.

"It depends on the circumstances, how long before they need to be ready to operate and how long they need to operate for," Sutter said.

"Either we keep it fully operational, or, for example, we keep it running for two weeks at the cost of overtime (paid to) people from other power station blocks. To put it very simply, keeping an old power station block running properly, carrying out the necessary maintenance, keeping it staffed at a minimum level, and testing it so that it is still able to go when it needs to, would cost €5-7 million a year. If we're talking about four old power plant blocks, that number would be multiplied by four," Sutter said.

Elering is working on the assumption that by 2027, electricity prices will have fallen once again, and CO2 prices will have increased to the extent that there will no longer be a place on the market for power plants, which burn fossil fuels.

However, according to Sutter, the price outlook is rather unclear. "Today, the price of electricity is still very much driven by gas, and the price of gas is driven by the terrible ongoing war in Ukraine. If somebody was able to tell us when this war might end, we could make more accurate predictions about what will happen to these prices," he said.

"We perhaps ought to be thinking in terms of whether we want to burn oil shale to produce electricity, bearing in mind the low efficiency and a pretty large  environmental footprint (of doing so). After all, in Estonia today, we have much better technology and much better ideas about what to do with oil shale. So, it could be a last resort, so that we don't rule it out completely before we have a new plan in place. We'll keep it, but use it as little as possible and only as much as necessary, because it's really expensive, and by that time (2027), we may have better options," Sutter said.

Eesti Energia has previously stated that it aims to stop generating electricity using oil shale by 2030. However, Elering believes oil shale power plants may still be used to provide a strategic reserve and has factored the capacity of oil shale plants into its calculations until 2037.

"If the system operator sees that it is necessary to keep it as a reserve and if and is willing to cover the costs for its maintenance, then we will certainly do that," Sutter added.

Veskimägi on shale electricity: No other tools available today

In the 2019 report, Elering CEO Taavi Veskimägi said, that Eesti Energia's oil shale power plants had no role to play in ensuring Estonia's security of supply. Now, however, Veskimägi explained that due to the current global situation, views on the role of the plants have altered significantly when it comes to guaranteeing Estonia's electricity supply.

"The environment around us has changed significantly. Today, we are at war, and we certainly have to use all the tools that we have available. The oil shale power plants are there to keep the lights on for the people of Estonia, and so, we have to use them." Veskimägi said.

"For several years, Elering has been saying that we need 1,000 megawatts of secure capacity in Estonia. There are no other tools available today to provide this 1,000 megawatts, so we have to do it using oil shale plants. It is as simple as that," he said.

Veskimägi explained that in designing the strategic reserve, Elering foresees that the power plant must be able to go online in around 20 hours. "Enefit Power has told us, that the Narva stations are able to come online within 20 hours, and, at the moment, we are satisfied with that," Veskimägi said.

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