The link is planned for Saaremaa, in the neighborhood where most offshore wind farms are planned for.

According to state grid distributor Elering, the connection is needed to import cheap electricity from Latvia and further south to Estonia, going forward.

Elering is going ahead with plans to build the fourth electricity link, from north to south starting in Paide in central Estonia, passing through Saaremaa before reaching Ventspils on the Latvian coast.

The entire project is expected to cost both countries €1.2 billion combined, with Estonia covering about €700 million of that.

Elering estimates that up to three-quarters of the link could be funded via EU money in any case, while the remaining portion is planned to be covered by "congestion charges."

These congestion charges are essentially Elering's investment financing instrument, which accumulate funds when electricity prices differ between Estonia and either its neighbor to the south or with Finland to the north.

According to researchers from Tallinn University of Technology (TalTech), however, the electricity connection in its current guise is not particularly rational.

Professor Einari Kisel, an expert in energy policy, stated that now that the government has slowed up its support for offshore wind farms, the connection is more needed by Latvia than by Estonia.

For this reason, it would be more beneficial for Estonia to first build an Estonia-Finland or Estonia-Sweden connection, Kisel said, so that cheap electricity could be transmitted further south and not vice versa.

In his view, the Estonia-Latvia connection would not serve to reduce electricity prices in Estonia in any way.

"Currently, even if cheaper electricity is produced in Estonia, it simply flows to Latvia or Lithuania. This brings us into a unified price area, but it does not help lower electricity prices in Estonia," Kisel said.

The professor acknowledged that for Elering, an Estonia-Latvia electricity connection would be economically attractive in acting as the middleman, which it can profit from.

"For Elering, the ability to bring more electricity from Finland and Sweden and transmit it further to Latvia and Lithuania is economically quite attractive," Kisel continued.

"For every kilowatt-hour that moves via Estonia, Elering has the opportunity to earn additional revenues. This is what allows Elering significantly to boost its profits," he continued.

A 330-kilovolt electricity connection would, in terms of scale, Kisel said, be comparable to a highway extending from Sõrve, the southern peninsula of Saaremaa, to the mainland.

According to Kisel, this "highway" would be needed if the country proceeds with the plan to support the construction of a 1000-megawatt offshore wind farm near Estonia's largest island.

For instance, Saare Wind Energy is planning an offshore wind farm of this size off the western coast of Saaremaa.

Meanwhile, Utilitas and Enefit Green, together with Sumitomo Corporation, are planning a large wind farm in the Gulf of Riga, to the south of the island.

"For other projects, a transmission line of that length would not need to be built. This also raises the question of whether constructing such an extensive connection for one project with EU funds, while not doing so for others, gives that project a very clear competitive advantage," Kisel added.

Professor Alar Konist, also of TalTech, said that now, with no offshore wind farms currently under development, the question arises whether Saaremaa actually needs such a high-capacity electricity connection.

Konist said that ahead of constructing the power line, it would be reasonable to prepare an energy sector development plan and to provide precise justifications for why exactly this level of transmission capacity is necessary.

He said: "If there is a need to renovate the existing line, we should consider whether lower capacities — 220 kilovolts or perhaps even 110 kilovolts — could suffice. We should also look beyond the main grid. Distribution networks have often been bottlenecks for us."

"There are companies that have wanted to engage in energy production but say they cannot start because the grid connection fees are so high. We need to examine the distribution network and what investments are needed to facilitate the connection of smaller producers," Konist went on.

Konist stated that, ultimately, the government must conduct calculations to ensure that consumers receive the greatest benefit from the investment.

Spending such a large sum on a major new electricity connection to Saaremaa may not be the most reasonable use of money from the consumer's perspective, Konist added.

"In the end, the decision must be made from the consumer's point of view, based on what benefits them the most. If we build one excellent power line, but doing so leaves less money for the rest of the grid, then perhaps it is not the wisest option," he said.

Elering: In the future, Lithuania will have more cheap renewable electricity

Elering's CEO, Kalle Kilk, argued that a fourth electricity connection between Estonia and Latvia is certainly required.

International connections are typically planned well in advance, and instead of focusing on the current or past situation, it is worth considering what the electricity market will look like in 10 or 20 years, was his rationale.

"Whereas today we believe that the only place which has electricity surpluses, where prices are lower than ours, is the Nordic countries, in 10–15 years, this will no longer be the case," Kilk said.

"We are already seeing how Lithuania and Poland are building up vast amounts of renewable electricity generation capacity. We can already see that when Lithuania has a lot of wind and solar energy at hand, cheap electricity actually tends to flow northward and not just southward," he continued.

According to Kilk, Lithuania already has twice as many renewable electricity-generating power plants as Estonia, and has 1500 megawatts of wind power compared with 700 megawatts in Estonia.

In terms of solar power plants, Lithuania has around 2000 megawatts, whereas Estonia has about 1200 megawatts, he explained. "Lithuania is significantly ahead of us, and their pace is actually much faster than ours."

In response to Kisel's criticism that the electricity connection with Finland should be completed ahead of building a connection to Latvia, Kilk said in reality the planning of the Estonia-Latvia electricity connection is still ongoing.

Elering believes that it is wise to complete all preliminary work in advance so that when the time comes to make a decision, preparations do not have to start from scratch, Kilk added.

The final decision on whether and at what pace to proceed with construction will be made in three or four years, once the planning is complete, he added.

"During this planning process, it will become clear what technical solution can be used to build the line, and from that, the cost will largely be determined. Then, we can assess whether it seems most beneficial at that time to proceed in one direction or another. The investment decision will be made in 2027 or 2028."

Kilk: Most reasonable route for Latvia connection is via Saaremaa

Kilk outlined that Elering has compared multiple electricity transmission line routes, with the most logical option still being to build the Estonia-Latvia connection through Saaremaa.

He said: "We have analyzed mainland routes, which are cheaper to set up, but they also provide less capacity as Latvia's strong wind power production is actually located near Ventspils. Additionally, there is a planned future connection between Latvia and Sweden. It would be highly logical for Estonia to be connected from the same point where the Swedish connection will be in the future, without us having to spend money on building the Sweden connection ourselves."

Kilk added that it is not feasible to build a connection between Estonia and Latvia at a lower voltage than 330 kilovolts, as international connections must operate at the same voltage.

He said: "We already have two 110-kilovolt lines to Latvia, but they are always switched off as they cannot be used simultaneously with the 330-kilovolt power line. If we were to build a 110-kilovolt line via Saaremaa to Latvia, it could not be kept in constant operation, as to do so would overload the system," said Kilk.

Elering's offshore network development manager Priit Heinla noted too that building the electricity connection through Saaremaa is the most logical choice, as it accomplishes multiple goals at once.

On the one hand, Estonia would secure a new international connection, using EU funding, and on the other, Saaremaa's local grid would also be strengthened.
"If we route it through Saaremaa, we can ensure that there will be no increase in tariffs for consumers. We can keep the tariff increase minimal or even avoid it altogether," he explained.

Heinla said building the connection through Saaremaa would also serve to strengthen the security of supply for western Estonia and the major islands, as it would create a link between the existing 110-kilovolt grid and the planned 330-kilovolt grid on Saaremaa.

The electricity grid development planning should be completed by 2026 as things stand with Elering's plans.

Thereafter, design work and agreements with landowners would start, with construction set to commence at the earliest in 2029.

A fourth electricity connection could be completed by 2033, according to Heinla.

A planned €2.6-billion wind energy support package was last month scrapped in the wake of confusion over calculations on benefits it would bring and future prices of electricity.

Another aspect to cable construction is security of supply, with both of the Estlink subsea links going offline at different times in recent months. The latest incident saw the Estlink 2 cable damaged by the trailing anchor of a ship from Russia's "Shadow fleet."

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