Giving up oil shale would cost Estonia €1 billion per year

VKG plant in Ida-Viru County.
VKG plant in Ida-Viru County. Source: VKG

Giving up oil shale would cost Estonia up to €1 billion per year and 13,000 jobs in Ida-Viru County as well as lead to higher electricity prices.

Some 1,000 Estonians have signed a petition to support the country's exit from oil shale energy, dubbed PÕKSIT (after põlevkivi, the Estonian word for oil shale), which would cut the production of greenhouse gas emissions in Estonia by approximately 90%. Reducing the ecological footprint, however, would also bring about reduced tax receipts in the amount of €700 million-1 billion annually, Northeastern Estonia-based oil shale mining and oil shale energy company Viru Keemia Grupp (VKG) estimates.

The state currently receives this amount in taxes, money paid out in employee salaries by contractors, and subcontractors' purchases of materials and services, VKG spokesperson Irina Bojenko told BNS on Monday. The consumer will be the one footing the cost of the renewable energy subsidy to be added to their energy bill — a fact no one yet dares to tell them.

A hurried exit from oil shale would also mean a loss of export revenue reaching €100-150 million for Estonia.

"Of domestic energy consumption, the share of oil shale is 7 terawatt-hours per year," Bojenko said, adding that if oil shale is abandoned, this amount of energy would have to be imported, meaning €300-350 million leaving the country annually.

According to the VKG spokesperson, however, the biggest issue with the proposal was that a narrow interest group has made a radical and irresponsible suggestion without explaining the impact of such a decision or offering any actual solutions.

Shale oil significant source of export growth

Jelena Derbneva, spokesperson for the Estonian state-owned energy group Eesti Energia, said that supply reduction always increases the market price, citing Latvia and Lithuania as examples, where the price of electricity exceeds that of Estonia's by €6-18 per megawatt-hour this year.

Just over one million tons of shale oil per year is currently produced in Estonia, based on which PÕXIT would lead to €350-400 million in lost export revenue. Tõnu Mertsina, chief economist at Swedbank, has likewise noted that two thirds of this year's export growth comes from shale oil products.

According to Bojenko, increasing the share of renewable energy would result in an additional burden of up to €160 million per year on consumers. "The current share of renewable energy accounts for 16% of Estonia's total consumption, while the subsidy paid by consumers is roughly €80 million per year," she said. "Doubling or tripling the production with the help of subsidies could therefore mean about €80-160 million in additional support for renewable energy."

Alexela Grupp CEO Andreas Laane said that using earth deposits for industrial purposes is a normal practice all over the world, adding that producing shale oil is nothing out of the ordinary so long as oil shale is not shoveled into furnaces in order to produce electricity.

"It's one possible technology that is used in Estonia; in America they crack oil underground," he said. "I don't know if this is better or worse. It depends how you look at it."

Alexela CEO: Not everyone can be retrained

According to Laane, not all of the 13,000 people involved in the value chain of the oil shale industry would be able to undergo retraining and find a job that pays as well as their previous one. Abandoning oil shale would not influence young people too much, but the generation currently working in the industry would have nowhere to go, he said.

Due to the high market price that has gone up with the global price of oil, all oil shale processing companies are currently producing as much shale oil as possible, he noted.

Compared to Estonia, he continued, electricity prices in Belgium, for example, are twice as high due to lack of supply. Coal-fired power plants were closed down as people expected renewable energy to take over, but certain promises were not delivered on, Laane said, adding that subsidies are also a very expensive solution to the issue. 


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Editor: Aili Vahtla

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