Electricity generation adequacy report: electricity consumption is covered by production in the short term, but problems will worsen in the long term

The Estonian TSO Elering has stated in its annual report on the adequacy of electricity generation that there is no risk of electricity shortages this winter. However, as the economy recovers during a cold winter, record consumption can be expected.

Electricity consumption is growing at a long-term average rate of 1.7% a year. Elering estimates that the economic recovery may combine with rising electricity consumption and a cold winter to set new electricity consumption records. The electricity consumption forecasts are based on the long-term economic forecasts of the Ministry of Finance.

The report finds that there is sufficient technically usable generation capacity to cover domestic consumption needs for the next five years. Estonian electricity production will fall significantly in 2016 when six blocks in the Narva power plants will be closed or mothballed due to significantly stricter environmental standards, cutting production in Narva by around 42%, or 950 MW. This is around half of the capacity needed to cover Estonian peak consumption.

Chair of the Elering board Taavi Veskimägi said that in order to meet demand for electricity from domestic production in the future, investment decisions need to be taken today. “Long-term financing decisions concerning electricity generation can be taken only if there is a long-term guarantee of a fair and transparent price for electricity. One key issue here is the electricity coming from third countries, particularly where the lack of environmental taxes and the lower safety standards can create unfair competition in the market. Investments in electricity generation take a very long time to be profitable, but the market gives short-term price signals, and without clear rules that allow the behaviour of the electricity market to be reliably predicted, nobody will invest in new production capacity”, said Veskimägi. Veskimägi says it is therefore the right time to start discussions on whether our ambition is to maintain the current policy whereby Estonia must have enough production capacity to cover peak consumption, or whether we are willing to accept a situation where we have connections to neighbouring systems and part of our consumption is covered by electricity imports from producers in the other countries that participate in the Nordic-Baltic electricity market.

Elering’s most likely scenario estimates that between 2011 and 2016, investment in new production capacity will be around 355 MW. To this can be added the emergency stations being built by Elering, which will have a capacity of around 250 MW but will only be switched on in an emergency and will not participate in the electricity market. The generation adequacy report highlights that the security of supply will be increased significantly by the completion of EstLink2 in 2014, which will allow electricity to be imported from the Nordic countries if there is insufficient supply and any possible shortages in the Baltic region to be balanced.

Elering produces a report annually on 1 November on the adequacy of electricity generation, giving an assessment of Estonian electricity production at that moment and in the future.

The assessment of the amount of production capacity needed to meet the consumption demand of the Estonian electricity system can be found at: www.elering.ee