The Environmental Board has granted temporary exemptions to two heat producers — Enefit Power in Narva and Utilitas in Tallinn — allowing them to replace natural gas with shale oil from November 1 this year to April 30, 2027. Shale oil is cheaper, but consumers will also bear the costs of procurement, transportation and handling.

Winter district heating prices are forecast to stay high, with natural gas prices elevated on the global market and other fuels such as wood chips also having risen in price.

Estonia wants to keep its oil-shale sector alive, but the EU's emissions trading rules are set to cut free allowances and hike the cost of polluting.

Narva was last heated with shale oil four years ago, when gas prices were extremely high. Enefit Power was then allowed to use it for the whole heating season. Producers want to ensure continuity of district heating and reduce the risk of gas supply disruption. Shale oil is cheaper than gas but causes more air pollution, and the permit does not necessarily mean it will be burned. The board is attaching conditions because the exemptions must be precisely regulated.

Enefit may burn 23,000 tons of shale oil over the winter; Utilitas 20,000 tons. Erik Kosenkranius, the board's deputy director general for environmental use, said the board assesses the technology while the Ministry of Climate assesses the gas market. Producers must monitor quantities and operating hours, notify the board when they start and stop, and carry out additional checks and sampling. "We want to know very precisely how emissions change," he said. "They must comply with existing limit values for air quality outside the production site."

In October the Competition Authority approved maximum district heating prices of €84/MWh in Tallinn and €137.69/MWh in Narva. Shale oil could reduce prices, but compliance costs, production, procurement, transport, handling and environmental charges could cancel the savings. Enefit board chairman Raine Pajo said the cogeneration plant offers cheaper heat — "€74/MWh plus VAT" — and would be used when prices are higher, reducing oil volumes. "When prices are low, the unit cannot be started, cogeneration is not possible and we cannot use oil shale and wood chips. In that case, there must be a backup plan that provides consumers with heat at a reasonable price."

Utilitas board chairman Robert Kitt said gas prices have doubled in a year, creating both price risk and supply risk. "The permit is very recent, and we are still clarifying the details with the Environmental Board, including what quantities must be nominated in advance," he said. "We will use it as little as possible, but as much as necessary." Shale oil and gas cannot be burned together, and three of Utilitas's four Mustamäe boilers are covered by the permit, two of which may not run simultaneously.

VKG has proposed a permanent right to switch to shale oil when gas is expensive. Technical director Raivo Attikas said it is strange that domestic fuel is available but producers must apply for a permit each time prices rise. "Currently, we sell five percent of our oil on the domestic market, while 95 percent is exported, where it is used mainly as marine fuel," he said. "Because our shale oil has a low sulfur content, it is a highly valued product."

Prices of almost all heating types are rising this winter. Natural gas has more than doubled in a year, wood chips are dearer, and costs at the Iru power station just outside Tallinn are up. Utilitas is pinning hopes on a Paljassaare heat pump plant and shale oil to curb further increases.

District heating involves hot water piped in to apartment blocks in larger settlements, for heating purposes only. Heating season is taken to run October to March inclusive.

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