"The oil shale power plants are in hot water /.../. But looking at the bigger picture, the overall energy economy globally and also in Estonia is undergoing a major change, and this is one part of what we are seeing," assessed Andrus Durejko, speaking broadly about the changes occurring in the energy sector on ETV's "Esimene stuudio."

Commenting on an overview published in Wednesday's Eesti Ekspress about Eesti Energia's economically weak position due to the devaluation of oil shale plants, Durejko said that this means the assets in which Eesti Energia has invested are no longer competitive in the market.

"This is actually good news for the consumer because it means that electricity prices have come down. But it's bad news for the company because we have to take very serious steps to increase our competitiveness," acknowledged the company's CEO.

Investments need to be made profitable

According to Durejko, Eesti Ekspress most significantly pointed to the company's cash flow: "Our investments last year were €779 million, which is a very large sum. But today, not all of them have gone into production and do not secure us cash flow – in that sense, yes, we are very dependent on the execution of these investments, their deadlines and whether they work. Only then can we ensure better cash flow for the company. In this respect, 2024 is full of challenges for the company."

Durejko stated that Eesti Energia is investing in renewable energy production, such as wind and solar parks, distribution networks and the completion of a liquid fuels plant, and cannot afford to neglect these. Ongoing investments must be quickly completed to start generating revenue, he emphasized.

"Take, for example, the Auvere liquid fuels plant; this investment is over €300 million and has been under construction since 2020 – meaning the company's money has essentially been tied up for three and a half years," explained the head of Eesti Energia. "So, in that sense, we are at the limit of our investment capability, and we must be able to emerge from this situation by getting these investments to work," Durejko noted, acknowledging that his ambition to invest would have been even greater, but currently, he is executing investments that are already underway. "Once we start earning, then it provides the opportunity for those investments that we still need to make to operate in the energy market," he said.

In response to the question about what the undervaluation of oil shale power plants means, Durejko stressed that the plants are still there and are maintained based on the need for supply security.

"But it shows that the company won't earn back the money invested in them as a whole. This means that in today's market situation and future projections, we are unable to earn enough money to recoup what has been invested in the company. The Estonian and Baltic power stations, as well as the Auvere Power Plant – all stations producing electricity from oil shale – were undervalued," he said. "But this doesn't mean that our operations with oil shale will end – oil shale still has great value, we valorize it, our production of liquid fuels and raw materials for the chemical industry is what keeps our oil shale usage at the current level. Our goal is to use oil shale in the same volume, earn profit from it and also pay dividends," he affirmed.

Oil shale will have a role to play

According to Durejko, even the company's newest Auvere oil shale power plant, which was an investment of over €600 million but is now valued at €25-30 million, has its role: "The Auvere Power Plant has played a very important role over the years. It was particularly crucial during the electricity crisis and also during COVID, when prices rose. Auvere and other power stations prevented the highest price peaks for us."

Additionally, oil shale plants have a role when disconnecting from the Russian grid, he emphasized.

"We do not know what situations will arise, these stations have a very clear role, and they will be needed in the future as reserve capacities. They will certainly not intervene in the market in the same way, especially considering their prices. Although valued at zero, they work and play a role in ensuring our supply security," said the company's head.

Durejko highlighted that there is currently no alternative in Estonia to these stations for ensuring reserve capacities in a 10-year perspective. However, investments must be made in them to continue operating the electrical system. "Today, this obligation has been placed on Eesti Energia, and we are fulfilling it, but we also clearly see that today, the combination that was expected, that oil shale power plants are marketable, earn enough from the market to cover the reserve capacity component – that is no longer the case."

Durejko admitted that he included this message in his letter to the Riigikogu Economic Affairs Committee.

"We wanted to say with the letter that if we look at today's reserve capacity regulation, it places an expectation on the market capability of oil shale power plants until the end of 2026. We wanted to say, this time has arrived earlier and we need to deal with this problem, find solutions for ensuring supply security and reserve capacities. Otherwise, the electricity network is not sustainable – that was what we aimed to achieve with this letter. We can no longer assume that oil shale power plants are in a market position to earn that money and serve as reserve capacities at the same time. Keeping them as reserve capacities costs about €40 million a year," he explained.

Furthermore, Durejko also raised the question of whether Estonia needs to keep all of these stations' blocks with a total capacity of 1,380 megawatts on standby. "The question is whether we are being too cautious and could instead find a compromise and manage to save these costs – that was also the intent of the letter," he said.

Government's offshore wind decision necessary in the conditions of energy shortage

Commenting on the government's decision to more vigorously support the establishment of offshore wind farms, Durejko referred to the calculations of the Ministry of Climate and the energy shortage in Estonia.

"I wouldn't oppose offshore wind farms to other wind farms. We actually have an energy deficit, looking at last year and also today's situation. We need more energy production capacity. 45 percent of the energy consumed in Estonia came from imports, meaning that almost half of our energy is bought from abroad. In this light, it has been understood that the energy needed for boosting the economy, industry and business will not happen without such schemes. Certain subsidies need to be added so that we can meet Estonia's renewable energy goal by 2030. I believe that this decision will bring us the energy volume and if we have enough energy in the market, then also the price that has been mentioned – 6.6 cents per kWh – is the estimated level we could reach," he said.

Durejko also stated that he would not contrast onshore and offshore wind, as Estonia needs both to produce a sufficient amount of renewable energy. However, he acknowledged that the government's plan means intervening in the market.

"It is certainly an intervention in the market. But on the other hand, its purpose is to stimulate the economy – today, these capacities have not emerged. And looking at the speed of emergence in 2024, when we have 500-600 megawatts of parks under completion, then how to achieve 100 percent renewable energy production?" he asked.

Durejko noted a very clear correlation between the creation of solar parks and subsidies, and the same should occur with the new scheme.

This gives wind farm developers certainty for their investments, and investment certainty is very important, its impact on developers is significant, he emphasized.

"It's positive that we have set a direction and now let's do it, let's not talk too long, otherwise, we'll just keep talking," said the head of Eesti Energia.

Commenting on the topic of building a nuclear power plant in Estonia, Durejko said that it's necessary to understand the price it offers, and in his opinion, a new nuclear power plant should preferably be large and shared among the three Baltic states, and a former project should be considered (Durejko likely refers to the construction of a new, Western-standard nuclear power plant in Lithuania, where a Soviet-era nuclear power plant was located, a project that was abandoned despite previous plans – ed.).

Durejko also emphasized that not everyone considers nuclear energy as renewable: "Nuclear energy has a slightly negative connotation and is not suitable for everyone."

"Renewable energy has marketing value for the business environment," he concluded.

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