"The increase in the share of Russian electricity among imports to the Baltic electricity area is very much in correlation with the price increase for the CO2 quota," Sutter said at the presentation of Eesti Energia's interim report for the third quarter.

He noted that the cause of the increase in imports is the cheaper price of Russian electricity as a result of there being no costs related to CO2 quotas.

"We are taxing ourselves out of the market to then buy energy produced in Russia," Sutter observed. "It's just like the Latvian alcohol rally: we forget that we've got competition the other side of the border. The situation is similar in Finland."

In addition to the absence of quotas, electricity generated in Russia is also made cheaper by the difference in the price of gas. Namely, Russian natural gas for Russia's own gas-powered electric power plants is cheaper than the price at which Russia sells gas to EU member states.

The price of carbon emission credits has also increased severalfold in the past couple of years and has now stabilized in the region of €20 per tonne. Eesti Energia estimates the price to stay in this range for the next couple of years. As 1.2 tonnes of CO2 is released in the production of one megawatt-hour of electric energy, half of the selling price of electricity would be paid for emission credits.

"We also have credits from earlier times purchased at a lower price," Eesti Energia CFO Andri Avila said. "If bought in the third quarter, the cost of the CO2 quota would have been €50 million." He said that the company in reality spent some €28 million, thanks to previously acquired credits.

Picture not encouraging for oil shale

In addition to the price for carbon emission credits remaining high, Eesti Energia forecasts the market price of electricity to decline over the coming year as a result of the use of Nordic hydro stocks.

"The fourth quarter and the first quarter of next year are still okay, but since electricity prices will be coming down, the picture is not very encouraging when it comes to producing electricity from oil shale," Sutter said.

The sales revenue for Estonian state-owned energy group Eesti Energia in the third quarter of 2018 totalled €199.7 million, up 26.7% on year, the company announced on Tuesday. The group's earnings before interest, taxes, depreciation, and amortisation (EBITDA), meanwhile, totalled €58.4 million, increasing 8.1% on year.

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