National Audit Office: Clarity needed over payment of energy subsidies

Electricity lines at the Narva electricity plant.
Electricity lines at the Narva electricity plant. Source: Rene Kundla/ERR

According to the National Audit Office's latest report, the Estonian Ministry of Climate, in cooperation with Elering and Elektrilevi, ought to update its plans to ensure the continuity of the country's electricity systems. The ministry should also clarify the conditions under which financial support will be provided and to whom, in the event of persistently high energy prices.

The National Audit Office (NAO) says that the Ministry of Climate needs to make improvements when it comes to monitoring risk assessment and ensuring the continuity of essential services. The ministry also needs to update its continuity and risk assessment plans.

The NAO's audit states that both Elering and Elektrilevi need to update their business continuity risk analyses and business continuity plans. It is also necessary for Enefit Power to make improvements to its plans.

In addition, the NAO recommends action plans for the prevention of large-scale disruptions to the continuity of electricity systems and the resulting emergencies should be practiced on a regular basis. Potential emergencies include interruptions to external connections, unplanned desynchronization, and a drop in water levels at the Narva reservoir, for instance.

The audit showed that current contingency plans in the event of a large-scale blackout contingency plan are not up to date and do not meet the necessary requirements. However, updates have been repeatedly delayed.

Current plans do not account for the action to be taken by the climate ministry in the event of an  emergency disconnection of the Baltic countries from the Russian electricity grid. Nor does it address potential attacks on electricity infrastructure, or the roles of the ministry, the Estonian government and critical service providers in instances where a response is required to an emergency caused by a power outage.

The Ministry of Climate agreed with the National Audit Office's criticisms and stated in response, that the monitoring of critical service providers can be improved. However, to do so, additional resources need to be found within the Ministry of Climate.

The NAO additionally said that the Ministry of Climate ought to develop a plan to identify which consumers require long-term protection from the impact of high electricity prices. Doing so would avoid the need for future state support measures to mitigate high electricity prices, that could result in the state spending taxpayers' money on consumers who do not require assistance.

Similarly, when proactively designing measures to mitigate high electricity prices, the price sensitivity of consumers and impact of possible subsidies on both electricity consumption and peak volumes could also be analyzed.

However, the climate ministry disagreed with this suggestion, saying that the current emergency plan is working well. Under existing legislation, vulnerable households are able to apply for subsidies from the local municipality to cover energy costs, the ministry said.

However, the Ministry of Climate Action is analyzing the energy crisis and plans to periodically review its emergency plans and update them in the first half of 2024.

In its latest audit, the National Audit Office assessed whether the availability of electricity to Estonian consumers can be ensured in the long term, at the required times, in the required quantity and at an acceptable price. The audit also sought to establish the level of preparedness of the Estonian electricity system for an emergency synchronization with the continental European grid, as well as for mitigating a range of risks, including those that could arise in relation to IT systems and sabotage.

In order to mitigate the risk of power outages, the Baltic countries agreed this August, to connect their electricity systems to the continental grid by February 2025 rather than by the end of 2025, as had previously been agreed.

The National Audit Office identified risks in relation to generation capacity, which, among other things, has an impact on electricity prices. In under four years' time, it may no longer be economically feasible to produce electricity from oil shale in Estonia. A combination of unfavorable circumstances may therefore mean an insufficient generation or transmission capacity to meet market-based electricity consumption demands.


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Editor: Michael Cole

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