No. 48



For Security Reasons, Every Country Should Be Able to Produce the Electricity It Consumes. Could Estonia Do This and How?

14 December 2023


RiTo No. 48, 2023

Electricity exchange price of 97.94 EUR/MWh in Estonia during the third quarter of 2023 was 2.5 times higher than the 2020 price of 39.18 EUR/MWh.  Finland’s electricity price of 46.76 EUR/MWh was two times lower than in Estonia, having fallen to the 2019 level of 47.66 EUR/MWh. Electricity generated to Estonia’s grid covered only 60% of consumption, even though domestic production is subsidised annually by 100 million euro from the renewable energy charge.

The legislator has decided that by 2030, 100% of the electricity consumed will be covered by domestically produced renewable energy, or mainly wind and solar energy. In reality, it is not possible to meet such a target. Even with 3500 MW wind farms in operation, which is 10 times more than today, together with 1500 MW of solar farms, the electricity produced without combustion will cover the total consumption during 45% of the hours per year. In order to ensure security of supply, 500–1200 MW of controlled oil shale electricity generation will have to operate in 30% of the hours per year.

There is a political decision to end the use of oil shale by 2035. There is an obvious contradiction here. Without a nuclear power plant, it is not possible to give up oil shale electricity while at the same time ensuring electricity security with domestic production.

To resolve the contradiction, it is necessary to make a long-term decision as to whether, from a security point of view, Estonia’s own electricity production should cover the majority of its consumption. The decision to ensure supply security with the domestic product means that it must be price competitive on a large market. To achieve this, the legislation regulating electricity market and taxation policies need to be radically changed.

On the electricity market, producing with competitive price means cogeneration of non-polluting but more expensive and non-controllable wind-solar electricity with polluting but cheaper and controllable oil shale electricity, so that the overall price is competitive on the market and at the same time, pollution is as minimal as possible. This means taxation of combustion pollution and using it to support investment in non-combustion production.

Today, the pollution charges on oil shale electricity is taken into the state budget through the emissions trading scheme, and used to support sectors that have nothing to do with the electricity market. It is as if politicians and officials were the producers of this value. This is the reason the production of non-combustion energy is so insignificant. In 2021, 2.1% of the energy consumed was non-combustion energy and 92% of the renewable energy was combustion, of which 93% was wood combustion.

Reducing air pollution means first and foremost reducing combustion, not just replacing oil shale with wood combustion, declaring wood a polluting renewable energy.