Security of supply guaranteed for the short and long term despite uncertainty

According to Elering, security of supply of power is guaranteed this winter as well as for the next 10 years despite the increased uncertainty about the adequacy of generation capacities and energy policy choices.

The analysis carried out by Elering indicates that the Estonian power system with the international connections is sufficient to cover power consumption now and in the next decade with the support of local and regional production, storage and consumption management capabilities. “However, the situation in energy economy is changing fast and if any of the low risks materialised, we’d be immediately ready to take the prepared measures to secure security of supply to Estonian consumers in terms of system management and adequacy alike,” said CEO of Elering Taavi Veskimägi.

The risk of the premature and unplanned separation of the Baltic States from the Russian power system, for example, has increased. It’s also possible that although the transition from power stations using fossil fuels to renewable energy is going to take decades in Europe and the rest of the world alike, some old power stations may be closed sooner than expected due to the lack of economic viability.

“However, the analysis carried out by Elering does not indicate a possible shortage of generation capacity in winter 2021/2022 and until 2030 for ensuring power supply to Estonian consumers,” said Veskimägi. “The number of plants on the market has not decreased and, due to high electricity prices, interest in investing in power generation has increased significantly during 2021. We will need new power plants in the region in order to guarantee security of supply in 2030 and thereafter. Although the high electricity prices cause a lot of concern, the increase in interest is a necessary change for investments in power plants, storage equipment and consumption management.”

According to Veskimägi, Estonia has enough power plants to cover peak consumption in Estonia even without international connections over this winter and although Europe is suffering from a shortage of gas supplies, the Incukalns gas storage facility is well filled with gas belonging to European market participants.

Veskimägi explains that the Estonian government has established a security of supply standard, which makes it possible to routinely assess the level of security of supply. Although constant analysis indicates that security of supply has dropped below the standard in the 10-year view, Elering applies a strategic reserve as a quick measure to keep the volume of secure generation capacities in Estonia at least at the level of 1,000 megawatt. In addition to secure capacities, emergency capacities as well as renewable energy solutions also contribute to security of supply.

As the strategic reserve or the additional capacity that can be reserved for a subsidy required administrative intervention and means extra costs to power consumers, it’s important to establish the preconditions for the addition of market-based production capacities on the market, which in addition to daily energy quantities can also offer the reserves required for the management of the power system. One such option is the establishment of three Baltic markets for the purchase of fast reserve capacities to connect to the continental European electricity system, which should provide additional profitability for power plants and hopefully also bring new investment in leading power generation, storage and consumption management solutions.

Security of supply needs to be achieved in a climate-neutral manner and in a way that is affordable for consumers and supports the competitiveness of the Estonian economy. We are moving towards climate neutrality through the development of onshore dispersed generation, the development of large offshore wind farms in the Estonian coastal waters, the implementation of storage and consumption management options, energy savings and the transition of the transport sector to carbon-free fuels.

However, security of supply achieved in a climate-neutral way must increase the well-being of the Estonian people. The green transformation offers the opportunity to implement new technologies and business models. “We can look at the decarbonisation of the energy sector as an opportunity, not a threat,” said Veskimägi. “There are enough companies and enterprising people in Estonia who can take advantage of the trend of decarbonising the energy sector to create new jobs and economic prosperity, and export their products and services to the globalising energy market.”