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Influx of cheap Russian electricity behind Eesti Energia temporary lay-offs

Eesti Energia power station.
Eesti Energia power station. Source: ERR

State-owned energy company Eesti Energia is to temporarily lay off up to 1,300 employees over the summer, citing cheaper Russian electricity flooding the market, according to Baltic News Service.

A growth in cheaper electricity from Russia and Belarus on the Nord Pool multinational electric power exchange, twinned with EU carbon dioxide emissions quotas, which almost doubled over the same period, are the main factors behind the decision, the company says.

The developments "...put EU electricity producers at a competitive disadvantage, as Russian electricity producers do not have to pay €25 per tonne in quotas," Raine Pajo, Eesti Energia board member, said.

The resulting reduced load has put pressure on full-time employment, with temporary employment being the first imposed at the Eesti power plant, and other similar measures likely to arise elsewhere, as oil shale consumption falls.

Eesti Energia had already reduced its workforce, again temporarily, in April. This round of cuts will include miners, working in the company's oil shale sector.

The exact number and distribution of employees affected will be determined later on this month. The temporary redundancy period can last up to 90 days within a 12-month period, during which wages may be cut to the minimum rate in effect (€540).

As a preliminary measure, employees will be able to use vacation allowances in the first instance, the company says.

According to Eesti Energia, the number of people employed in oil shale extraction and energy generation from that source has fallen by 400 since the beginning of 2019.

To preserve jobs, the market distortion arising from differences in taxation on either side of the EU/Russian Federation border needs to be resolved, Eesti Energia says.

Whereas eight energy production units are being held in reserve, three, using the latest technologies, have entered the market since the beginning of 2019, the company says.

Future developments

The company says market conditions will be the main guide in the lay-offs schedule in future.

In any event, the trend is for a move away from oil shale burning in electricity generation, and towards renewable and oil shale co-generation, Pajo said.

"Focusing on the co-generation of electricity and oil is supported by the projected capacity and good level of reliability achieved at the Enefit280 oil plant. However, expanding oil and electricity co-generation of is a more long-term solution. In order to improve the current situation, Eesti Energia is closely cooperating with state representatives to find solutions to help ensure income for the state, and jobs in the energy sector," Pajo continued.

Minister of Economic Affairs and Infrastructure Taavi Aas (Centre) had already said on Monday that increases in the price of carbon dioxide emission credits may result in up to a thousand people becoming jobless in Ida-Viru County, the principal area affected. 

Around 500 people have already received redundancy notices, it is reported, and according to unions over 6,000 people may lose their livelihoods if the bleakest scenario materializes.

Eesti Energia reported a record turnover of €282.6 million for Q1 2019.

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Editor: Andrew Whyte

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