Michal started by pointing out that while the average price of electricity was 9 cents per kWh last year, the new plan would bring it down to 6.6 cents, whereas the renewable energy fee would remain largely unchanged.

In addition, the minister emphasized that while the initial plan called for a total of 6 terawatt-hours (TWh) of both offshore and onshore wind farms to be put up for tender, which would have required the creation of a price guarantee mechanism for storage, the new, 4+4 tender no longer requires a price guarantee mechanism for storage. According to Michal, such a system is also suitable for storage capacity developers, and the storage market can begin to develop and is already developing nicely.

Michal repeatedly hinted at the Riigikogu opposition, suggesting that criticism for the new wind energy development plan is largely of political origin.

"Creating renewable capacity can ensure cheaper, more favorable energy, because political rhetoric notwithstanding – I respectfully disagree with representatives of more conservative parties, where Isamaa representative Juhan Parts has suggested that Estonia should build two [more] Auvere [oil shale] plants, while EKRE have said that oil shale energy and fixed prices are the only way for Estonia – the coalition is not on the same page. We believe renewable energy is competitive and able to bring down prices," the climate minister said.

According to Michal, the purpose of the planned scheme and support mechanism is to ensure the availability of sufficient, more affordable renewable electricity, as well as the presence of storage capacities. This gives entrepreneurs dealing with storage confidence in operating in the market and in working together with the renewable energy market. Additionally, the plan must ensure certainty for the establishment of onshore and offshore wind farms, keep producers motivated to sign long-term sales contracts, and maintain the renewable energy tariff at the same level. If today the renewable energy fee is about 1.3 cents per kWh, then the government's plan calculation also maintains it at 1.3 cents per kWh.

Estonia is also working on a transmission system reform. While all direct and indirect costs of connecting to the grid are currently paid by the connecting party, after the reform, those connecting to the grid will only pay a part of relevant costs based on a fixed price list, with the tariff used to pay for the rest. This would allow TSO Elering to develop the network in advance and expedite connections, including connecting all terrestrial, offshore and foreign generation to the grid in a timely fashion. A relevant bill should reach the government in April, a slide presented by Michal suggested.

Durejko: Good to have a plan

Andrus Durejko, CEO of national energy giant Eesti Energia, said that impending clarity on offshore power is a good thing, suggesting that "there is now a clear direction, which is something offshore developers have been waiting for."

He said that Eesti Energia subsidiary Enefit Green is planning two offshore wind farms: Hiiu and Liivi with power outputs of 1 and 1.1 gigawatts, respectively, and generation of 4.5 TWh each.

It is also good that the mechanism covers storage, because there will be motivation to consume through storage. Storage also contributes to supply security, Durejko added.

The Eesti Energia chief officer listed as problems with dispatchable generation capacity and the uncertain market outlook of oil shale power plants. Strategic [energy] reserves require further deliberation both in terms of volume and price.

Durejko also gave an overview of the situation of Estonia's oil shale power plants, activities, and costs needed to maintain them as reserve capacity. Eesti Energia's seven oil shale power blocks have a total output of 1,380 megawatts.

Rapid dispatchable generation, such as natural gas power plants, needs to be added in the future, Durejko emphasized.

As concerns risks, the CEO pointed out that the Estonian energy grid must be capable of receiving the production of the new offshore farms. Managing seasonal overproduction and balancing the grid will become very important elements.

"I'm glad there is now a concrete plan based on which we can move on, improve what we already have, and build what we're missing," Durejko said in closing.

Auditor general: Changes possibly too rapid

Auditor General Janar Holm highlighted that the plan, unveiled last week, constitutes a major shift away from recent positions.

"The National Audit Office is glad that Estonia is a small and dynamic country. Having audited this field just a few weeks ago, the things were are discussing today weren't on the agenda then. Ways to sensible solutions need to be found," Holm remarked.

To gauge what is sensible, a big picture, system components and a model need to be created, the auditor general stressed.

"While the price of electricity may be 6.6 cents per kWh, we need to look at the whole power bill when all is said and done. The market price is one thing, but then you also have the transmission fee, excise duties, various system services. It would be good to see the whole picture. It would make it possible to calculate the power bill," Holm suggested.

But a small country's dynamic nature might also prove problematic as market participants need stability, the [business] environment should be predictable, and participants should know which connections are being planned for the future, Holm said.

Hamburg hesitant

Arvi Hamburg, chairman of the Energy Council of the Estonian Academy of Sciences, presented the Riigikogu committee with plenty of data to question the government's plans.

Right now, it seems that a part of the big picture has been blown up, while changing one part will affect the entire system, Hamburg found.

As the planned generation capacity for the Baltics is several times the region's peak consumption, the system must be able to handle three or four times as much throughput.

According to Hamburg's calculations, the projected consumption in 2030 of 10.5 TWh would require an offshore wind subsidy of 1.68 cents per kWh.

The scientist's data puts the cost of offshore wind energy at €110 per megawatt-hour (MWh), while it would be just €20-40 per MWh for terrestrial wind farms, based on tender results. The cost of investment would come to €1.8 million per one megawatt for offshore and €1.2 million per MW for terrestrial wind farms.

That said, the capacity factor of an offshore wind farm is 0.435, while that of an onshore wind farm is 0.328.

Projected costs for the whole subsidy period would be €2.138 billion for offshore and €38 million for terrestrial wind farms, Hamburg showed, describing it as a massive difference.

The offshore output price forecast of €110 per MWh needs expert and effects analysis, Hamburg said, adding that a critical look is necessary.

The expert recommended developing the power system in strategic cooperation between regional partners, also using Latvian and the Nordics' reservoirs for storage capacity.

Hamburg also found that the planned subsidy mechanism would hamper the effectiveness of the electricity market, equal treatment of investors and the cost-effectiveness of storage.

Preferential development of offshore energy would lead to a one-sided energy portfolio, concentrated energy generation and grid investments. A major and urgent wind energy tender may lead to high prices, with disproportional risk management of market participants and overburdening of consumers among negative aspects.

Hamburg urged the government to keep its promise of making decisions regarding the future of the energy system based on analyses.

He also called into question the Climate Ministry's price forecast and the effect offshore wind subsidies would have on future market price formation.

Alar Konist, head of TalTech's Energy Technology Institute, said a public debate should be sought to keep the people in the loop.

"All of our neighbors south and north are betting on renewables today, while dispatchable generation has been overlooked. It is worrying, especially as existing [dispatchable] capacity is already old," he said.

Using gas-fired power plants runs the risk of gas shortages and price hikes in the future, he pointed out.

Konist also said that a considerable part of renewable energy in Estonia comes from wood burning.

Looking at changes taking place in Europe, we need to avoid putting our producers and consumers at a disadvantage. We should find an optimal solution to avoid public backlash, he emphasized.

Michal wards off Hamburg's criticism

"We agree with Mr. Hamburg and the National Audit Office in that price matters for consumers. The aim of this plan and activities in the field of energy is to arrive at a more favorable price, as we have described, while retaining a sensible renewable energy fee," the climate minister said when replying to Arvi Hamburg.

"Secondly, Hamburg's idea that the market could operate without subsidies – as a right-wing liberal, I am not opposed. But it would be a beautiful day indeed if we could manage without having to pay subsidies in the field of energy, or anywhere else for that matter. That would see no pushback from us. What we are addressing is the wider regional market where our entrepreneurs are competing with other economies," Michal said.

"As concerns tenders, the only urgency is the fact that the European Commission will wrap up relevant actions in July-August, and if we want to have feedback for our state aid request, we need to act now. The alternative is that it will be postponed by six months or a year, which would in turn postpone all other decisions," Michal said. "But either way, tendering would start in 2025 and take around six months for onshore and up to a year for offshore capacity. We are talking about quite a long time."

Keit Kasemets, secretary-general of the Ministry of Climate, supported the minister's position and also said that offshore wind power developments should not have a major effect on transmission fees.

"We have no cheaper alternative to renewables today," Kasemets said.

Minister Kristen Michal said that growing consumption is key to the whole debate. According to Michal, the minister of economic affairs will start reporting quarterly to the government cabinet on how investments are coming into Estonia and, if the economy develops more slowly, renewable energy development can proceed at a slower pace. Conversely, if the economy grows faster, as forecasted by the Ministry of Economic Affairs, then development can be accelerated.

Kasemets: Cost of connecting offshore energy to the grid €360 million

Keit Kasemets said that connecting the first offshore developments to the grid should not entail major additional expenses. System operators Elering and Elektrilevi have their own independent plans anyway, he suggested.

The cost of connecting all offshore wind farms to be created through the series of tenders to the grid is estimated at €360 million because tender conditions obligate developers to build the necessary grid elements leading to Elering's supply point themselves, the secretary general explained.

Asked by Urmas Reinsalu (Isamaa) how much electricity is projected to cost a decade from now in light of these decisions, Michal said: "The price of electricity is 6.6 cents. Perhaps the committee chairman missed it before, and I hope it has now been made clear. A renewable energy fee of 1.3 cents would be on top of that."

However, the price as reflected on power bills includes the transmission fee, renewable energy fee, the excise duty on power and VAT.

Asked by Reinsalu to provide more details and clarify whether the price as presented by the minister and secretary general includes the renewables fee, Kasemets said: "If we look at 2023, Eurostat puts the price today at 17 cents per kWh in which 9 cents is the price of electricity, while all the other components (renewable energy fee, excise duty, transmission tariff and VAT) come together as 8 cents. Models and assessment of the plan suggest we would have a price of 6.6 cents instead of the current 9 cents per kWh, with the renewable energy fee remaining more or less unchanged. We can add to that the fee for advanced grid development, which comes to 0.3 cents. Therefore, the price of electricity would be cheaper by 2 cents per kWh all told, based on this particular tender."

As concerns all other expenses, such as support schemes needed to maintain oil shale power plants, that analysis is still being put together, Kasemets added. "Right now, we are talking about how much this tender could help us lower the price of a unit of electricity and the final price," he stressed.

In other words, the Ministry of Climate has not put together a forecast on the future price of electricity for consumers at this time.

A comment by Urmas Reinsalu followed: "But this is just where the heart of the matter lies – whether we look at the whole picture, or whether we pull out a single element and only look at its isolated cost as concerns public investment schemes and price formation."

Kristen Michal emphasized once more that he is only concentrating on the wind farms plan and renewables. "That is what I have been trying to explain for some time. The price of electricity will fall, while the renewable energy charge will remain the same. Whichever other debates the committee chairman (Reinsalu) may add, we are talking about this plan's effect on the price of electricity. It will lower the price, which is the message here – if we've been unclear."

"In summary, the government has no clarity on the end price of electricity as concerns how much we need to spend on reserve capacity, which still requires additional analysis," Reinsalu remarked.

"That does not concern the renewable energy tender in question. These are independent costs. These expenses would need to be made in any case, even without the renewables tender," Keit Kasemets replied.

Michal believes opposition trying to politicize energy

The sitting took a turn for the tense when Michal suggested he considers Reinsalu's questions to be politically motivated and unrelated.

"I take issue with attempts to politicize energy, I can work with the rest! Political energy is headline hunting, which I believe mister committee chairman is trying to do here. Try to listen to the point!" Michal said after a question from Reinsalu.

Asked by Reinsalu about storage, the climate minister said relevant capacity will be market-based. "People seem to have a different level of energy know-how, which is why I will take it from the top once more. /.../ "I understand that it serves other, populist goals, but how about we try to concentrate on this renewable energy plan the aim of which is to bring down the end price for consumers, which analyses suggest it would do, where grid development expenses are modest, as described by Keit Kasemets, where the renewable energy fee will not change much, and where storage will be market-based.

Michal also said that the government's decision is based on the Ministry of Economic Affairs and its agencies' future consumption forecast of 15.5 TWh annually the meeting of which would not be possible using onshore wind farms alone. "It also depends on how quickly we believe the economy will develop. If it is slower than anticipated, we may not need the offshore capacity right away. We are keeping an eye on the situation and will act accordingly," he added.

Asked by Konist why subsidize offshore wind in a situation where it is more expensive, Michal replied that Estonia will be able to make do with just onshore power should the economy develop more slowly.

Hamburg, commenting on Reinsalu's question about storage capacity, said that the Stockholm Environment Institute has estimated that Estonia would need at least 20 GWh of storage. Considering that the energy storage facility planned to be built in Paldiski would only yield 6 GWh, Estonia would need three such facilities plus battery parks.

Kristen Michal also said that he would like a decision on nuclear energy from the parliament soon as decisions on dispatchable capacity, including oil shale power plants, depend on it.

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