Elering published its latest report on Estonia's electricity security of supply on Friday, highlighting that the situation has become more challenging compared to a few years ago. The report emphasizes that ensuring energy security now requires more thorough preparation.

"Each successive winter underscores a clear reality for us and our Baltic Sea neighbors: while under normal circumstances, our electricity supply is reliably secured, the safety margins are growing thinner. All it takes is a combination of prolonged cold spells, low wind conditions and multiple unexpected outages in power plants or interconnections between countries, and we could face a situation where electricity consumption must be regulated," Elering CEO Kalle Kilk wrote in the foreword to the report.

A few years ago, Elering's outlook was considerably more optimistic. In the foreword to its 2020 security of supply report, then-CEO Taavi Veskimägi stated: "No analysis, whether probabilistic or assessing the availability of specific power plants, indicates that there will be issues supplying electricity to Estonian consumers in 2030."

The new report notes that the energy sector has lacked sufficient market signals in recent decades to incentivize the construction of new dispatchable power plants, while older plants have lost competitiveness and are gradually exiting the market.

To ensure security of supply through 2030, Estonia's electricity system requires up to 1,000 megawatts of dispatchable capacity, increasing to approximately 1,200 megawatts thereafter. According to the report, Estonia currently has around 1,800 megawatts of installed dispatchable production capacity, although technical limitations and reliability challenges reduce the amount of guaranteed capacity. Nevertheless, this is still sufficient to ensure Estonia's security of supply. However, the margin is shrinking year by year, both in Estonia and across the region.

"The key issue in the coming years will be maintaining 1,000 megawatts of dispatchable capacity in Estonia's electricity system. While existing capacity can meet near-term needs, supporting the addition of new capacity in the longer term will require additional measures, as such capacity is unlikely to emerge in sufficient quantities through market mechanisms alone," Kilk said.

To address this, a strategic reserve is being established for 2027, and a possible islanding reserve could be implemented as early as 2026. Additionally, Elering has launched a long-term frequency reserve procurement to attract investments in new generation and storage capacity of up to 500 megawatts.

In February next year, the Baltic states will disconnect their electricity systems from the Russian grid and synchronize with the Continental European network. At a press conference introducing the report, Kilk likened the significance of this step to Estonia's accession to the European Union and NATO, calling it a similarly landmark change from an energy perspective.

"In the past, we depended on our neighbor's goodwill to maintain balance, and there was no full guarantee that we could manage independently. However, during the transition, we have developed this capability ourselves," Kilk said, adding that the impact of the change on electricity prices should be minimal.

He explained that the cooperation agreement between Estonia, Latvia and Lithuania with Belarus and Russia for joint operation will end on the evening of February 7, and starting on the morning of February 8, all transmission lines connecting to neighboring countries will be switched off one by one.

"For a day and a half, we will demonstrate to our future European partners that we can manage independently, showing how our system operates. We have all the tools we need for this. Afterward, on the evening of February 9, we will switch on new connections between Poland and Lithuania," Kilk described the upcoming process.

Maintaining system balance to become more difficult

The report highlights that Estonia has set a goal to produce all of the electricity it consumes from renewable energy sources by 2030. Achieving this target requires significant investments, which are becoming increasingly relevant. Estonia plans to add several thousand megawatts of renewable energy generation capacity to the grid, and Elering estimates that, including dispatchable production capacity, the total connected generation capacity should reach approximately 5,500-6,000 megawatts.

"Like other countries in the region, Estonia faces challenges in maintaining adequate dispatchable generation capacity alongside the rapid development of renewable energy in the coming years. While significant generation capacity is being added to the grid, it is primarily weather-dependent. Capacity is also needed for periods when the wind isn't blowing and the sun isn't shining," the report notes.

Regarding the challenges of managing the electricity system, the report points out that the increasing share of renewable energy production, combined with the phase-out of older traditional generation facilities (such as oil shale power plants – ed.) from the electricity market, means that whereas electricity production could previously be planned with precision, it is now becoming increasingly unpredictable.

"Moreover, the characteristics of renewable energy present different impacts – while wind can blow around the clock, solar generation is unavailable at night," the report states. "This means that managing the electricity system requires new technical solutions, and decision-making must be as close to real-time as possible. Making high-quality decisions requires processing large volumes of data and utilizing tools that allow for more accurate future assessments," the document explains.

Consequently, implementing various forecasting systems to predict changes in production and consumption is becoming increasingly important.

The report also addresses the impact of cybersecurity on supply security, noting that the energy sector's dependence on Chinese technology is growing. Elering points out that a significant share of Estonia's solar energy installations rely on inverters from a single Chinese manufacturer, primarily due to their low cost.

"As the share of renewable energy in overall energy production continues to grow, the risks associated with Chinese technology also increase significantly. While the presence of such technology supports climate goals, it can also pose substantial risks to supply security," the report states.

Elering emphasizes that the current scale of Chinese technology and the generation capacities it controls in Estonia's energy system have reached levels that warrant attention and action – not only from market participants but also at the national and international levels.

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