The energy sector development plan through 2035 (ENMAK), which is scheduled for adoption at the end of next year, envisions the country ceasing oil shale electricity production by 2035 and at least tripling renewable electricity production.

In its feedback to the draft plan, the Estonian Chamber of Commerce and Industry stated that significant revisions are needed, starting with the overall goal. The plan's objective is currently worded as ensuring a secure energy sector in line with climate policy goals, but it lacks any reference to improving the competitiveness of Estonia's economy.

The plan also states that Estonia's energy independence is the foundation of economic well-being, business competitiveness and energy security. However, it does not address the importance of the final price of energy. The chamber highlighted that if Estonia's electricity prices are higher than the European Union or regional averages, it would not ensure competitiveness for businesses.

The chamber also raised questions about the electricity price assumptions in the plan. ENMAK notes that last year's average electricity price was €91 per megawatt-hour, with a forecasted price of €66 per megawatt-hour by 2030. By 2035, the price is projected to drop to €49 per megawatt-hour with the addition of offshore wind farms, foreign grid connections and storage facilities.

"ENMAK 2035 also refers to a memorandum on electricity prices in 2030 and changes to renewable energy fees, where one scenario suggests the final price of electricity, including taxes and fees, will be €154 per megawatt-hour by 2035, compared to €179 per megawatt-hour in 2023," said Mait Palts, the head of the chamber.

Palts noted that it is unclear how the ministry reached these calculations and what assumptions were used. He emphasized that the assumptions underlying electricity price forecasts should be transparent and easily understandable to the public.

"For example, it remains unclear how the absence of additional large-scale electricity consumers by 2035 would affect final electricity prices. Would this significantly increase renewable energy fees for consumers compared to current forecasts?" Palts asked.

The chamber also pointed out the lack of clarity on how developments in neighboring countries' electricity markets were considered in the forecasts, as well as the absence of information on the estimated electricity prices in the region by 2035.

"Furthermore, it is unclear what other scenarios the ministry has calculated and their outcomes. For instance, we would like to know what the final price of electricity would be if the planned offshore wind farms were fully replaced with onshore wind farms," Palts said, requesting that the necessary calculations be included in the plan.

The chamber suggested that the development plan includes a general price metric. The current target, which specifies that the average annual price for end-users should remain below the EU average, does not meet businesses' expectations, is insufficiently ambitious and reflects electricity prices without including taxes and fees. Separate metrics for households and large consumers are also needed.

Another issue raised by the chamber concerns support measures for wind farms. It questioned why the proposed measure is not technology-neutral and instead differentiates between onshore and offshore wind farms. The chamber also inquired about the level of support provided by neighboring countries for new wind farm projects and the number of wind farms constructed without subsidies. They questioned why Estonia does not prefer a market-based approach.

The chamber proposed that conditions for renewable energy auctions should ensure support is granted only for electricity consumed on an hourly basis within Estonia.

Additionally, the organization criticized the assumption in the plan that electricity production will increase to 18.4 terawatt-hours by 2035, deeming the forecasted doubling of electricity consumption unlikely.

It also asked for clarification on why the development plan is not technology-neutral and excludes oil shale energy production, even in the event it becomes carbon-neutral and price-competitive.

Lastly, the chamber recommended removing references to the climate law from the draft, as it has not been passed by the Riigikogu and its future remains uncertain.

VKG: Offshore wind support scheme justified through unrealistic forecast

Viru Keemia Grupp (VKG) provided extensive and critical feedback on the draft energy sector development plan. VKG pointed out that the state plans to provide the largest support to wind energy, guaranteeing revenues of up to €3.56 billion for producers. However, the company questioned how this support would contribute to the growth of the Estonian economy.

"In addition, real obligations are being imposed on consumers to support renewable energy producers based on abstract assumptions of consumption growth," said Ahti Asmann, CEO of VKG.

According to VKG, the projected growth in electricity consumption is unrealistically high and appears to be used as justification for the need to subsidize offshore wind farms. The final electricity price, or total cost to consumers, is also based on unsubstantiated assumptions.

Asmann described the ENMAK 2035 draft as an ideological and theoretical vision document, created with the underlying assumption that the price of energy is not important. He noted that the plan fails to answer why it is beneficial for Estonia to act faster than the rest of Europe in implementing changes.

VKG also criticized the lack of explanation for why exiting oil shale energy production at all costs is a good decision, as well as the risks associated with increasing the tax burden on taxpayers.

The company argued that significantly expanding wind energy production using renewable energy fees collected from Estonian consumers would reduce the country's economic competitiveness compared to other Baltic states and Finland.

Replacing oil shale-based dispatchable capacities with imported natural gas-based power plants, VKG stated, would negatively impact Estonia's trade balance. Additionally, the complete phase-out of oil shale by 2040 would harm the state budget and create social challenges in the Ida-Viru region.

VKG proposed that the use of retort gas in electricity production should not be ruled out until 2050 and suggested discontinuing state support for overproduction of wind energy.

The company also recommended linking renewable energy subsidies to investment support for energy-intensive industries and conducting an analysis of the price of electricity produced by natural gas-based dispatchable capacities. Specifically, it urged an assessment of how often such gas plants could access the market, determining whether they would operate merely as reserve plants or if they are expected to generate revenue under market conditions.

VKG also requested clarification on the expected impact of the planned €2.4 billion investment in energy storage facilities on the energy system.

Estonian Cell: Price of electricity prioritized in Finland

Major consumer Estonian Cell emphasized in its feedback on the development plan that the ambitions for renewable electricity should be aligned flexibly with the development of economic competitiveness, rather than racing ahead of the EU's overall goals or the ambitions of neighboring countries.

"In Finland, the priority is finding a balance between electricity prices and increasing the share of renewable energy, with affordability at the forefront. Finnish energy policy places energy efficiency at its core to achieve climate neutrality by 2035, while simultaneously lowering energy prices, protecting vulnerable consumers and ensuring security of supply," said Siiri Lahe, member of the management board and CFO of Estonian Cell.

Finland also has energy policy programs specifically targeted at industrial consumers to jointly achieve carbon neutrality.

Like the Estonian Chamber of Commerce and Industry, Estonian Cell highlighted the importance of competitive electricity prices, an issue it noted is inadequately addressed in the development plan.

"ENMAK lacks an analysis of electricity prices from the perspective of business and industrial consumers and competitive economic growth. The target electricity price set at 2023 levels provides no opportunity for industrial growth, as in comparison with other European industrial nations, the total electricity price for industrial consumers in 2023 was not competitive in export markets," Lahe stated.

She also pointed out that the economic perspective requires distinguishing the electricity price for large consumers. Given ENMAK's ambition to attract major industries to Estonia, considerably more effort should be made to determine a competitive price level.

Academy of Sciences: Price of electricity to remain higher than in the Nordics

The Estonian Academy of Sciences, which had previously criticized the energy sector development plan, stated in a letter to the Ministry of Climate that its energy commission believes Estonia has already exceeded the renewable energy targets agreed upon within the European Union. This, they argued, could hinder energy security and economic competitiveness.

Therefore, they emphasized the need to carefully evaluate state-created support schemes for new production capacities, as implementing such schemes could significantly distort the energy market and impede the adoption of new technologies.

"The planned development of the electricity sector in ENMAK 2035, primarily driven by the ideological goal of covering 100 percent of Estonia's total domestic final consumption with electricity from renewable energy sources by 2030 – along with the unnecessary support scheme for offshore wind power – does not ensure the sustainable operation of the electricity system or the achievement of any of the objectives set in ENMAK 2035," the academy noted.

According to the researchers, the final price of electricity is unlikely to decrease due to the additional costs of strengthening the grid, balancing the system and renewable energy fees. As a result, prices will remain higher than in the Nordic countries.

The academy also highlighted that the electricity price calculations are based on assumptions of a twofold increase in electricity consumption over the next 10 years and a threefold increase by 2050. Should this growth fail to materialize, the costs of subsidies and support schemes would disproportionately burden existing consumers, negatively impacting Estonia's economic competitiveness.

Additionally, they pointed out that the nearly fivefold increase in solar and wind production capacities would result in multiple instances of overproduction during favorable wind conditions, for which no economically viable market exists. The required investment volumes are deemed unrealistically high, the planned subsidies for electricity production excessively interfere with the market and the plan relies on economically questionable technologies for energy use.

The academy also criticized the plan for omitting the transport sector, even though transport accounts for one-third of Estonia's energy consumption.

Wind energy producers less critical

The Estonian Wind Energy Association provided significantly more positive feedback, praising the ambition of the development plan. However, they emphasized that it is necessary to better demonstrate to the public how increasing the share of renewable energy will reduce electricity prices for end consumers.

Vindr Baltic, an onshore wind park developer, also commented on the plan. They criticized the metric setting the goal of keeping the average annual end-user electricity price below the EU average, noting that it lacks a meaningful basis for comparison. They suggested it be revised to compare prices with Estonia's neighboring countries.

As one solution, Vindr Baltic proposed delaying auctions for planned onshore and offshore wind projects with Contracts for Difference (CfD). Instead, they suggested first building projects that do not require subsidies and can operate on market terms.

"The absence or reduction of CfD costs on electricity bills will have a clear impact on lowering the final electricity price for consumers," said Marko Viiding, a board member of Vindr Baltic.

The Wind Power Association highlighted the lengthy planning and permitting processes required for wind park development as a significant issue. The Estonian Renewable Energy Association agreed, noting that these delays impact not only wind parks but also biogas and biomethane plants. Renewable energy producers called for amendments to the Planning Act to eliminate unnecessary steps in planning and permitting procedures.

Additionally, the association stressed that if the state plans to establish offshore wind farms with a production capacity of 1,000 megawatts, capable of producing nearly 4 terawatt-hours of electricity by 2035, an offshore wind energy auction must be organized for a volume of 4 terawatt-hours per year.

"Otherwise, the construction of offshore wind farms with such production volumes is unlikely, and achieving the 1,000 megawatt offshore wind energy capacity by the deadline set in the development plan is unrealistic," said Silver Sillak, the organization's director.

The association also argued against setting a goal of achieving full climate neutrality in the energy sector by 2050. They believe excluding biomass usage after 2050 is neither realistic nor reasonable. Instead, they suggested allowing the sector's minimal remaining greenhouse gas emissions to be offset through the LULUCF sector (land use, land-use change and forestry) by capturing emissions.

The Renewable Energy Association also recommended that the draft explicitly address the preservation of existing hydroelectric plants in Estonia and ensure their continued operation. They added that increasing hydroelectric production does not necessarily have to come at the expense of the natural environment.

Renewable energy advocates expressed dissatisfaction with the draft's assessment of nuclear energy. They criticized the minimal negative impact attributed to nuclear waste in the scenario analysis, arguing that evaluations should consider not only the volume of waste but also its hazardousness.

--

Follow ERR News on Facebook and Twitter and never miss an update!