Estonia to announce its largest ever reverse auction for renewable energy

Wind turbines in Estonia (photo is illustrative).
Wind turbines in Estonia (photo is illustrative). Source: ERR

This February, Estonia is set to launch its largest ever reverse auction for the production of renewable electricity. The auction is expected to bring 650 gigawatt-hours of wind power onto the market, with the winners required to begin generating renewable energy by mid-2027.

The reverse auction is expected to provide an additional 650 gigawatt-hours of green electricity, which is enough to supply around 215,000 households in Estonia. Estonia's largest renewable energy produce Utilitas, is expected to participate in the tender.

"We are waiting for the conditions (to be announced). We will then analyze them and decide on that basis. We have some developments, which would enable us to participate in this reverse auction. We may also be interested in this in and of itself, as we believe that reverse auctions are necessary to bring new capacity onto the market," said OÜ Utilitas Wind board member Rene Tammist.

Utilitas is expected to complete the construction of a new wind farm in Saarde Municipality, Pärnu County this year.

Enefit Green has also begun building what will be the largest wind farm in the Baltic states. Sopi-Tootsi wind farm, in western Estonia, will double the amount of wind power the country produces.

"Enefit Green currently has the Sopi-Tootsi wind farm in Estonia, which would also partly qualify according to these conditions, or at least should qualify for the conditions that are expected. We also have new developments. It depends on exactly what the conditions are and when production has to start. Perhaps some of these new developments could end up going there," said Lauri Ulm, head of wind developments at Enefit Green.

In the reverse auction, renewable energy producers offer to produce a certain amount of green electricity, in return for an agreed share of the resulting revenues. The maximum bid is €45 per megawatt-hour (Mwh) and the winner will be, whichever company can provide the required amount of energy for the lowest price. If, however, the market price of electricity later falls lower than the amount being asked for by the winning bidders, the Estonian state will cover the difference.

"It is precisely this guarantee that is needed (to protect) against the risk of an investment being jeopardized if the price falls too low," said Ulm.

Where the previous reverse auction, to produce 540 gigawatt-hours of renewable energy, focussed on the increased production of solar farms by 2026, in this year's auction the state will give preference to developers of new onshore wind farms.

"The number of wind farms currently under construction in Estonia is the same as the total number of wind farms ever built in Estonia. So, we have 300 megawatt-hours of wind farms and another 300 megawatt-hours, which are already under construction. A large number of these investments have already been made without waiting for any state support. In fact, we see that there is less and less need for these kinds of subsidies to provide a catalyst for investments in renewable energy," explained Timo Tatar, secretary general of the Ministry of Economic Affairs and Communications.

A reverse auction for offshore wind farms will also start this spring, while the results of the reverse auction for onshore wind farms are due to be known in the summer. The Estonian state plans to organize two further reverse auctions to provide subsidies for the production of 500 gigawatt-hours of wind energy.


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Editor: Michael Cole

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