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Electricity Prices to Stay Higher in Estonia Than Finland for Several Years

The average annual electricity price for Estonian businesses and households will remain higher than in Finland for several years to come. However, according to Timo Tatar, undersecretary for energy and mineral resources at the Estonian Ministry of Climate, Estonian wind power production will also treble, bringing prices more in line with those of its northern neighbor.

Finland’s average electricity exchange price on Thursday is €1.44 per megawatt-hour (MWh), while Estonia’s is €159.47 per MWh. According to NordPool data, the average electricity price in Finland this August was €66.44 per MWh, while in Estonia it was €94.38 per MWh.

Speaking on Vikerraadio show “Reporteritund,” Timo Tatar, undersecretary for energy and mineral resources at the Estonian Ministry of Climate, said, that although the current price gap between the Baltic and Nordic countries is primarily due to a broken cable between Lithuania and Sweden, the blame cannot be placed solely on such connections, or the lack of them.

“It has taken us a long time to get the investments in new power generation capacity going in Estonia,” Tatar said, adding that at the end of the day, it will be the new cleaner forms of power generation that bring prices down.

In Finland, the major wave of investment in wind farms began a few years ago, while in Estonia  are only seeing these kinds of investments happening now. Once these investments have been made and the projects get off the ground, the Tatar said, that there will be so many new projects that it will soon become almost impossible to count all the wind farms in Estonia.

“Then we will also be in a situation where the price gap with the Nordic countries is really not what it is today,” he said. “So, interconnectors and certainly additional capacity on top of that, are our main priorities. To get new investment there, that’s precisely what we’re working on.”

Asked how much longer Estonian companies and households will have to pay a much higher prices for their electricity than their Finnish counterparts, Tatar said that this summer there was already enough solar energy generation and, on some sunny days, prices were close to zero. However, when it comes to average annual prices, we could see a narrowing of that gap within two to three years.

“In the ministry itself, we’ve looked at the fact that in approximately three years’ time we should have a threefold increase in wind power production in Estonia. That means, we’ll be up to about 1,000 megawatts, and I think from there onwards the growth will accelerate rather than slow down. So we need to have a little patience, and then the wind farms that are being built today – the first ones are already up and running – will come on line,” he said.

According to Tatar, we will then also see a reduction in the price difference between Estonia and Finland in winter and spring, with Estonia’s prices becoming closer to those in Finland.

Radars delayed investment

Asked, why Estonia dos not currently have the amount of wind farms it needs to cover its energy needs, Tatar said the main reason for the long delay in investment was concerns regarding radars. In fact, only 15 percent of Estonia’s territory was deemed suitable for wind farm construction.

According to Tatar, between 2019 and last year, a number of decisions were taken to alleviate the problem.  With investments are now being made in radars, he said the situation will soon be reversed, so that in the future only around 15 percent of Estonian territory will not be able to host a wind farm.

The undersecretary admitted that, in hindsight, it took far too long to resolve the issue. However, the reason was that one radar costs €30 million, and a large number of them were needed.

“In a situation where electricity prices were very low, at the time nobody understood what problem we were solving,” he said.

Tatar also pointed to the additional problem of societal attitudes, which meant that when electricity prices were low, nobody wanted wind turbines installed near their homes. Now, a financial compensation scheme has been developed to avoid this.

“A lot of these small steps, all of which have helped to get us to where we are today – the portfolios of wind farm developers are already quite substantial – have now been taken, and now we are at a point where they are starting to bear fruit,” said the undersecretary for energy and mineral resources at the Ministry of Climate.

He added that, in hindsight, Estonia would be in a slightly better position if everything had been done in double-quick time. However, now the major issues have been resolved and we are beginning to see results in terms of investment.

According to Tatar, the challenges in relation to Estonia’s target of covering 100 percent of its total average annual energy consumption with renewable electricity by 2030 have been mapped out, and the numbers are quite impressive. The total amount expected to be produced by Estonian renewable energy developers in projects likely to be completed by 2030 is around 4,000 MW.

Source : ERR

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