Expert's calculations put 2035 electricity price at 18 cents per kWh

Speaking on ETV show "Terevisioon," energy expert Arvi Hamburg said that according to his calculations, the final price of electricity in 2035 will not be 14.9 cents per kilowatt-hour (kWh), but in fact 18 cents per kWh.
"There are two myths here. One is the general story that electricity will get cheaper. And then there are these exchange numbers... Estonia may be full of wind turbines, but we don't set the price, the price is set on the big market, where the numbers are at least twice as high," said Hamburg.
"The stock market price will decrease, but all the components needed to make this electricity available 24/7, everything will have to be done, starting with rebuilding the grid. The next thing is the existence of reserves – whether these reserves are fixed generation or in storage. Storage is certainly a very important element, and is, in any case, cheaper than generating managed capacity. Add all these components together and the math tells us nothing other than that the total cost will be around 18 cents (per kWh). I can't get 15 from anywhere," Hamburg said.
"I'm basing this on two things. What Elering has now calculated could be in this reserve price. The government has declared an insular price. I've put them all together. Half of the connection fee will be paid jointly and in several parts by the consumers. You put a few components on top of that, add them all up and you get 18 – there is nothing you can do about it," he added.
Hamburg also commented on the latest version of the energy agreement, which calls for low bids of two terawatt-hours for both offshore and onshore wind farms.
"What does this mean for the consumer? The first thing is that we should have an objective that we want to achieve. The first objective should be that we have our purchasing power and a competitive price for the consumer. And then of course, there is security of supply, which certainly has a price, and the same price for the environment. The fundamental focus should be on the total end price for the consumer, not the exchange price at any given point in time. And if we discuss it like this, we ought to look at how it would be possible to meet these three objectives and at the same time monitor prices. Offshore wind is three and a half times more expensive than onshore wind. Just because of the investments needed, because of the fact that we need to build more grid infrastructure around it – build more interconnection capacity so that the wind turbines can be connected to the grid," Hamburg said.
"Terevisioon" host Reimo Sildvee added that it is expensive to build wind turbines offshore, it is expensive to run an electricity cable to them, and it is expensive to establish an on-land connection.
"Our electricity grid has been built from east to west for 60 years. Now we are going to build the grid the other way round and concentrate production in the west. But when we are talking about wind farms, we are going to disperse these wind farms all over Estonia, so there will not be this kind of really widespread rebuilding of the network or concentration of production," Hamburg said.
"And now there is the question, which has been discussed a lot, of whether there is a need for offshore. My answer would be that you could use third grade arithmetic and reading skills for this. You have to look at the same analyses that have been produced for all our finances and that Elering has published," Hamburg said.
"We take the capacity of the wind turbines that are working today, and add to that the capacity for which Elering has already built the connection – all the costs have already been paid for in the grid. And the third component is the one for which connection negotiations are ongoing. If we add them all together, we get somewhere around 1,900 megawatts. Exactly the same as we are doing now with solar – we have over 2,000. Now we are looking at how much the generation from them could be. Let's take what we have today as a basis. The capacity utilization factor of the wind turbines is 0.28. We multiply that out, we get that the wind turbines that are all prepared today and produce somewhere in the region of 5.2 terawatt-hours, plus solar at two terawatt-hours. We have also had bioenergy all along, and its production over the years has been somewhere around 1.2 terawatt-hours. If we add them all up, we have something like 8.3 terawatt-hours," calculated Hamburg.
"Now we'll add two more wind turbines, so then we'll have ten. Now, how could these on-land windmills provide the two. After all, the RMK (State Forest Management Center) has introduced a construction permit, and the construction permit is bought by the wind turbine owners – there's then a limit of 1,000 megawatts for these wind turbines. If that reaches capacity, or even if it does not may, there will be an extra two terawatt-hours. It's already over ten. Now we add to that what we need to cover the backlog. Today and tomorrow, it is as there is no more shale, we then assume very conservatively that it will only operate for one-sixth of the year – just 1,500 hours. From there, we get somewhere around one terawatt-hour. Now we put in what is needed in any eventuality, this peak load. Whether we buy it ourselves or it comes from a gas station somewhere, we also get somewhere around 0.7. We then just add everything up. So, we would have 13.15 terawatt-hours of production in 2030. In no-one's lifetime will we have that much consumption," Hamburg continued.
Could this surplus be sold?
"The question when selling is always how much the buyer will pay. If there is wind, there is wind everywhere and so the price is very cheap. And if there is no wind, then of course the price is expensive. In a market where there is overproduction, the market is not economically viable and you should always look at the volume that is still consumed domestically," Hamburg said.
According to a forecast by the Ministry of Climate the final price of electricity in 2035 is estimated to be 14.9 cents per kilowatt-hour (kWh).
Prime Minister Kristen Michal (Reform) told ERR on Thursday that the ministry would have to explain how it reached this figure, however, all calculations in the energy sector are based on a number of assumptions.
"What amount of investment, over what period of time it will be made, how the economy will change and how the needs of consumers will change. So they can estimate it from that.
As time goes by, the needs of the network can also change. If we have new generation or new consumers somewhere, then it may even change. So it will definitely be refined over time, but the climate ministry will explain it," Michal said.
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Editor: Aleksander Krjukov, Michael Cole