Security of Supply for Consumers is Ensured by Combination of Production and Interconnections

According to the security of supply report that was published this week, the completion of new external interconnections will ensure the security of electricity supply in the Baltic states even if the capacity of local power stations only reaches 80 percent of the three states’ peak electricity consumption.

Looking at production and interconnection capacities as a whole, Elering considers the requirement to maintain sufficient generation facilities to cover 110 percent of peak load to be burdensome for the consumer, as well as technologically unnecessary. “Considering the external interconnections currently under construction and those being planned, it is enough for the Baltic states as a whole to maintain a production capacity of 80 percent of the region’s peak consumption. Estonia is too small a part of the regional electrical system to assess that number separately on a single-country basis,” explained Taavi Veskimägi, Chairman of the Board of Elering.

The most important investment from the viewpoint of regional security of supply is the construction of a third interconnection between Estonia and Latvia. This would enable the unification of production and consumption in the Baltic states into a single whole with insignificant transmission limits. This would also provide access to export and import opportunities via the external interconnections of the other Baltic states (Lithuania-Poland, Lithuania-Sweden).

According to current assessments, achieving generation capacity levels that would cover 80 percent of peak consumption in the Baltics (which is 5150 megawatts) by 2030 will require the construction of additional power plants with a combined capacity of 800 megawatts. “The question is what these plants will be and who will build them. With the current uncertainty in the European energy economy and its low electricity prices, nobody in Europe dares to invest in the required new production facilities on a market basis. At the same time, we believe that there is still enough time until the moment when new power plants will be required alongside existing production facilities, and the necessary capacity will be constructed on a market basis,” predicted Veskimägi.

In order to provide the security of investment that is necessary to construct new traditional power plants that would keep the electrical system operational, Europe is considering the creation of a capacity market in addition to the electricity market. The capacity market ought to ensure the existence of a sufficient amount of reliable production capacity in the system.
While security of supply does not necessarily require that local production capacity must completely cover demand, this does not mean that Estonia and the Baltic states cannot have power plants that exceed local consumption many times over. “Electricity exports could be a pillar of the local export sector, with access to the Nordic electricity markets, and in the future, hopefully Russian and Central European ones as well,” said Veskimägi.

The creation of a joint Nordic-Baltic electricity market along with the necessary interconnections has so far been the preeminent strategic goal of Estonia’s energy economy, ensuring a long-term security of supply for consumers at the best price. The next goal is the de-synchronization of the electrical systems of the Baltic states from Russia’s unified power system, and synchronization with Continental Europe.

According to the main scenario of Elering’s projections, electricity consumption in Estonia will grow by an average of 2.4% per year, reaching 12.5 TWh by 2030. Peak load will grow slower than consumption, reaching 1800 MW by the same time.

Electricity consumption in Estonia reached 8.14 terawatt-hours in the previous year, with peak consumption during the past winter reaching 1517 megawatts.

The 2013 Security of Supply Report is available here (in Estonian).