Decoupling from the Russian system might lead to even higher energy prices
Estonia's upcoming disconnection from the Russian electricity grid could increase consumer electricity bills – though the exact amount will only be clear after the disconnection takes place.
Erki Sapp, a member of the board at Elering, told ERR that the electricity market price should not increase as a result of desynchronization from the Russian grid. "Since production capacities and transmission capacities remain largely the same, there should be no impact on the day-ahead market price," he explained.
On the other hand, Armen Kasparov, head of energy trading at Eesti Energia, suggested that the electricity market price might rise during certain hours after desynchronization. It all depends on how much production capacity Elering reserves to maintain the required frequency.
"If power plants are put into reserve, there will be less supply in the market, and a smaller supply means a higher price. I believe that within the first three months, it will become clear how the system will function independently and how many plants we will actually need to keep in reserve," Kasparov added.
However, the cost of maintaining reserve capacity could have a greater impact on consumers and electricity producers.
Keeping power plants on standby is estimated to cost around €60 million per year. Initially, the plan was to collect the reserve capacity fee from both consumers and producers. However, the Ministry of Climate has since set this plan aside, and discussions are now focused on a six-month transition period or relief measure, during which Elering would cover the cost of keeping power plants on standby.
Sapp mentioned that various options are still being considered, with one possibility being to temporarily use congestion revenue to cover the costs. This revenue comes from the transmission capacities that system operators profit from.
Elering has calculated and revealed that if such a relief measure is not implemented, the additional cost for consumers and producers would increase the end consumer's electricity price by roughly 2-3 percent, or more precisely, €5.31 per megawatt-hour.
Kasparov predicted that a relief measure would likely be implemented: "Most likely, yes, because nobody wants to pay that €5.31, and our producers would be at a disadvantage compared to Latvian, Lithuanian and Finnish producers. Our consumers would also be worse off."
According to Kasparov, it is crucial for the system operators of the three Baltic states to agree on how to share the reserve capacity cost.
"This is very important because it primarily affects our renewable energy developers and any other developers who want to enter the Estonian market, even those planning to build dispatchable power plants. If you know that your cost in Lithuania is zero but €5 in Estonia, you simply won't come here to build – you'll do it elsewhere," Kasparov explained.
Estonia plans to disconnect from the Russian electricity grid starting next February.
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Editor: Marcus Turovski