Minister of Finance Mart Võrklaev (Reform) submitted a proposal to the government to build a gas-hydrogen power plant in Narva with a battery storage system.
The planned plant would have a 100-megawatt electrical capacity, a 60-megawatt thermal capacity, and a 25-megawatt battery storage system.
The minister said the proposal has already been put to the cabinet once before and now there is a will to move forward. To do this Eesti Energia's share capital must be expanded by €114 million.
"This is to give Eesti Energia more investment capacity to invest more quickly in much-needed energy solutions," he said.
Võrklaev said the plant will help to cover electricity reserves and maintain frequency after desynchronizing from the Russian power grid in 2025.
"There are also plans to install a heat pump in the cooling duct of the Baltic power plant to improve the heat supply of the city of Narva, and then a 25-megawatt battery storage system to compensate for these possible shortcomings, both in terms of synchronization and renewable energy," the minister said.
The venture was initially planned with €20 million from the European Union's Just Transition Fund as a solution to provide heating in Narva. However, analysis showed it will only partially solve the problem.
"In the longer term, it would be more feasible to build a hydrogen-capable, gas-fired power plant and heat generation initially, as this would be a more long-term, sustainable and sensible solution," Võrklaev said.
The politician said the plant will cost €146 million plus €30 million for the battery, which will fall under Eesti Energia's investments.
"In this sense, the capital increase is less than the total investment," he said.
The power plant could start operating at full capacity in 2028 and run on LNG.
Võrklaev said the current forecast suggests the power plant would come on to the market at approximately €150 per megawatt hour.
The minister wants to increase the share capital of Eesti Energia this year as the funds are included in this year's budget.
The government is likely to discuss the proposal next week.
Editor: Barbara Oja, Helen Wright