TSO Elering turnover doubles, profits triple in 2022
Estonian transmission system operator (TSO) Elering had a successful year last year: turnover nearly doubled while profits more than tripled, reaching €387 million and €17.4 million, respectively. The company's collected congestion revenues likewise more than tripled to €228.7 million, although it does not count this as a profit.
The TSO's costs rose at the same rapid pace as its sales revenues. Elering director Ain Köster told ERR that the company's revenue growth was driven directly by the impact of electricity price increases on its balance service, i.e. the purchase and sale of technical electricity necessary for the operation of the power grid, which at higher electricity prices translates to increased turnover.
Nonetheless, according to yet unaudited data, Elering has managed to boost its annual profits on year from €5.1 million in 2021 to €17.4 million last year.
The company saw an explosive increase in collected congestion revenues as well — from €65.5 million in 2021 to €228.7 million last year. Elering doesn't count most of this income as profit, however, instead retaining the balance as a fund for financing future investments.
Elering earns congestion revenue on the difference in Estonian and other market area exchange prices, primarily between Estonian and Finnish exchange prices.
If, for example, the market price of electricity is €100 per megawatt-hour in Estonia and €50 per megawatt-hour in Finland, electricity from Finland is then sold in Estonia at the Estonian market rate, and the difference is split between the two countries' respective TSOs — i.e. €25 per megawatt-hour to Elering and €25 per megawatt-hour to Finnish TSO Fingrid. Revenue earned this way is meant to be used by grid operators to build new transmission capacities.
The construction of a new undersea transmission cable between Finland and Estonia could reduce this price disparity.
Köster confirmed that work is underway to build EstLink 3, but it won't be ready for another decade.
Elering brought in €228.7 million in congestion revenues last year, the majority of it from its border with Finland. By comparison, EstLink 2 cost €320 million.
Elering applied part of this exponentially increased income toward covering network losses. Each year, the TSO requires some 400 gigawatt-hours of electricity to cover network operating losses, and as electricity prices rose, the grid operator had to pay more for these losses.
In agreement with the Competition Authority, Elering allocated €60 million in congestion revenues to cover the increase in the cost of loss electricity, Köster said.
"If we hadn't been able to do that, we would have had to raise network fees," he explained. "In other words, utilizing congestion revenues has had the effect of reducing fees."
Elering plans on using its congestion revenues again this year to cover both loss costs as well as the impact of general increased prices, the communications director said, noting that, once again, if it weren't for this opportunity, they would have to raise network fees.
The company will be hanging onto the remainder of congestion revenues for investments.
"One example is the third Estonian-Latvian connection, where we utilized congestion revenues in addition to EU support," Köster highlighted. "Not one cent of Estonian consumers' fees went toward that, essentially meaning that we didn't have to raise fees."
He added that in much the same way, consumers will be spared from fee increases in connection with power grid synchronization-related investments.
FTR sales to impact future congestion revenues
Elering has also recently begun selling financial transmission rights (FTRs), instruments aimed at mitigating the risks involved in disparities between the Estonian and Finnish price areas, part of which are coming from congestion revenues.
The first auction took place in December.
"We sold 350 megawatts of electricity capacity between Finland and Estonia for each hour of this year at a price of €17," Köster said. "If the actual price difference is bigger than that, the difference will go to the buyers of the FTRs, and Elering will be left with just €17 per megawatt."
He said that the Estonian TSO is selling monthly products as well, with a total of 650 of 1,000 megawatts being sold as FTRs.
"In other words, starting this year, FTR sales will probably have a substantial impact on how much of congestion revenues we ultimately end up with," Köster added.
Elering is likewise involved in collecting and distributing renewable energy fees.
Last year, renewable energy production in Estonia fell by 0.2 percent, totaling 2.6 terawatt-hours. Paid out renewable energy and efficient cogeneration support, meanwhile, fell by 4.8 percent to €90 million. This support was paid to renewable energy producers in addition to the price of electricity sold.
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Editor: Aili Vahtla