Within five to six years, it will be more expensive to keep old oil shale plants running than to build new ones, Kilk said.

He noted Elering is implementing the national energy plan approved in early January. One obligation is procuring new controllable power plants to replace outdated oil shale facilities, requiring more than 1,000 megawatts of additional capacity.

Critics argue that gas plants with 900 megawatts of output are not needed at that scale.

"In reality, that 900 megawatts amounts to about half — or even less — of what we actually need. In 10 years, we will need more than 2,000 megawatts of firm capacity in total. Based on current knowledge, clearly less than 1,000 megawatts of that exists," Kilk said.

The latest security of supply report published by Elering last fall is based on new assumptions reflecting the current geopolitical situation, where cross-border connections were previously trusted far more. As a result, required capacity volumes have increased.

"In a situation where we could assume that interconnections are available as they normally are technically — 97 percent of the time — we might not need as much domestic firm generation. But in today's situation, we cannot rely on those connections. In our models, we have significantly reduced their reliability, which simply means Estonia must have more power plants," he explained.

In practice, gas-fired plants are currently the most flexible and fastest option. Hydropower capacity cannot be built up significantly in Estonia, and while battery storage could work in some respects, it would face capacity limitations. Kilk said gas plants are intended both for system start-up and for ensuring supply security.

Building 900 megawatts of capacity is expected to cost around €1 billion.

"Previously, we had a very tight timeframe during which we were allowed to make payments to plant owners. That came from a European derogation that gave us only eight years. If investments are spread over a shorter period, the annual cost naturally becomes higher. Now we can choose a sufficiently long period over which to compensate plant owners. We currently believe 15 years would be reasonable. We estimate that building 900 megawatts would cost about €1 billion. In that case, the annual payment over 15 years would be a little over €100 million. That's slightly higher than what we currently pay to keep 1,000 megawatts of oil shale plants operational," Kilk explained.

He confirmed oil shale plants will not be shut down before replacements are in place. Current estimates suggest they can be kept running for a little over 10 years.

"From a technical standpoint, Enefit specialists have confirmed that with sufficient investment they could be kept running even longer than 10 years, but the cost becomes enormous. We see that in five or six years, keeping old plants running could cost as much as providing financial guarantees for new plants of the same capacity. Financially, it doesn't make sense to keep patching up very old equipment for too long," he said.

Some believe that due to developments around the Strait of Hormuz, Estonia should immediately increase electricity production from oil shale. However, Kilk said the issue is not gas availability, but the price impact of the conflict.

"There is also a significant psychological component. Since LNG is a global commodity, it can be supplied from many different locations. If one particular source becomes unavailable, others will step in to replace the shortfall. Prices will rise somewhat — that's how global markets work. For us, gas risk is primarily a price risk, not a supply risk. This also applies to potential gas-fired peak plants in Estonia in the future," Kilk explained.

"If we compare the start of winter to now, when gas prices have roughly doubled — from €25 to €50 — the cost of electricity produced by these plants would have increased much less, from about €100 to €150. We remember that average market prices in January and February were around €150. So even with today's higher gas prices, these gas plants would have actually lowered market prices," he added.

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