A historic event is approaching – the Baltic States are breaking free from Russia’s electricity grid

By journalist Ain Alvela.

On February 9, the Baltic States will disconnect their electricity grid from the Russian and Belarusian networks and join Europe’s unified energy system. This means that going forward, Estonia, Latvia, and Lithuania will have to manage the balance between electricity production and consumption within their own grids.

Preparations for this so-called desynchronization have been underway for a long time, and at least the Estonian government assures that consumers are unlikely to even notice the switch. However, it is still recommended to be prepared for the event, as unexpected situations can always arise. Residents are advised to stock up on at least a week’s supply of food, drinking water, candles, and fully charged communication devices. It is also suggested to have a battery-powered radio, a ready-to-use generator, and other essentials for coping without electricity.

The Baltic States will begin managing the frequency of their electricity grid independently

The Baltic States have remained in the Russian electricity grid until now because the frequency of their grid was regulated using energy from hydroelectric power plants on the Volga River in Russia. This helped maintain the balance between electricity production and consumption within the required frequency range of 50–60 Hz. After disconnecting from the Russian grid, the electricity networks of the three Baltic States will be synchronized with the Continental European grid.

For Estonia, which has relied on oil shale energy for decades, the biggest concern with the disconnection is maintaining grid frequency. The country lacks sufficient controllable electricity generation capacity, which is crucial for quickly responding to fluctuations in consumption.

Electricity generated from oil shale combustion has become so expensive due to high emissions allowance prices that it rarely competes in the electricity market. Additionally, Estonia has committed to gradually reducing oil shale-based power generation, in line with European Union climate policies.

At the government level, it has been determined that the most effective way to regulate the electricity grid’s load in the short term is with natural gas-fired power plants. However, Estonia currently lacks such plants. The only existing facility is a 250 MW gas power plant in Kiisa, which is designated for emergency use only. Even if the Kiisa plant were allowed to be used for frequency regulation, an additional 600 MW of controllable capacity would still be needed. To address this, a public tender has been announced to find developers for additional natural gas power plants. Until these facilities are built, the state-owned company Eesti Energia will ensure the availability of 1000 MW of controllable capacity using its oil shale power plants.

Estonia’s new energy development plan still has some contradictions

Alongside desynchronization, other debates concerning energy development plans are stirring up in Estonia. In the last months of last year, the government introduced the Energy Sector Development Plan for 2035 (ENMAK 2035) to the public. By now, the third version of the plan has been completed, and the fourth is in preparation. The development of the plan is led by the Ministry of Climate, and the main objective of this strategic document is to ensure that Estonia’s energy supply security, energy security, and access to competitively priced electricity for industry are guaranteed in the future.

ENMAK 2035 has been revised multiple times in the past couple of months. For example, the planned production capacity for onshore wind farms was significantly reduced, as the government was forced to acknowledge that, due to strong and widespread opposition from the population, it is unlikely that the planned number of wind turbines can be built on land. As a result, offshore wind farms will need to be brought into the mix.

The electricity consumption forecast was also revised. Initially, it was projected to be 15 TWh by 2035, but it has now been reduced to 11 TWh. The expected increase in energy consumption from the current 8 TWh is now primarily based on the addition of energy-intensive industries in Estonia. According to the vision, by 2035, Estonia should have 5600 MW of renewable electricity production capacity and 1250 MW of controllable capacity. By the same time, the Ministry of Climate expects the construction of energy storage systems with a total capacity of 1500 MW. The hope is that the increasing share of renewable energy will help lower electricity prices for consumers. Additionally, Estonia has set a goal to cover the entire electricity consumption with electricity from renewable sources by 2030.

In any case, ENMAK 2035 predicts that in ten years, the electricity price for consumers will be 14,9 cents/kWh, which is 2,5 cents lower than last year’s average price of 17,4 cents/kWh. However, this forecast contains some contradictions, as it does not account for the potential increase in network fees. According to Estonia’s distribution network operator, Elektrilevi, the distribution network will require investments of 1,6 billion euros over this period to make the lines more resistant to weather conditions. The government declares that the main principle of ENMAK 2035 is to ensure affordable electricity prices for both household consumers and industry. The development plan is scheduled to be adopted by the end of 2025.

A small electricity grid can operate successfully within a larger system

The energy issues of the Baltic States are well summarized by Arvi Hamburg, Chairman of the Energy Council of the Estonian Academy of Sciences, who notes that to balance the electricity system of the Baltic States,  characterized by relatively small, deficit-prone, and weather-dependent power generation, proportionally more reserves, flexible system services, and skilled management are needed compared to larger electricity systems. This, however, comes at a significant cost. Hamburg points out that strong interconnections with a larger system allow even a small system to take advantage of the benefits of the larger system. This was the case with the Russian system and will be so with the Continental European system. “We have operated smoothly, and there has been no need for frequency regulation, as the larger system handles this for its own consumption, while we have been using ancillary services,” he explains.

“As an EU member state, we have long been preparing and decided to integrate our electricity system with the Continental European frequency area within the European value space,“ Arvi Hamburg

“Automatic frequency regulation is provided by the Russian system operator. The system operators of Estonia, Latvia, and Lithuania maintain an hourly cross-border energy balance near the agreed minimum using manually activated frequency restoration reserves. Now, as an EU member state, we have long been preparing and decided to integrate our electricity system with the Continental European frequency area within the European value space. From the consumer’s perspective, nothing will change, except for the risk of malicious interference from our eastern neighbor.” However, Hamburg believes that the risks associated with the Baltic States’ electricity system switch have been mitigated, and the system operators are trained to work in the new synchronized area. They are capable of meeting the challenges of maintaining and restoring frequency.

The Baltic States’ electricity systems are faceing an upcoming test

The academic describes the upcoming process as follows: “On the morning of February 8, the Baltic States will begin disconnecting the lines connected to Russia. The Lithuania-Kaliningrad connection will be the first, and the Estonia-Russia connection the last. This will be followed by a 24-hour period of independent, mutual parallel operation of the Baltic States’ electricity systems, known as island operation. To prepare for this, we will reduce the capacity of major supply sources, such as the Finland-Estonia and Lithuania-Sweden high-voltage direct current (HVDC) connections, and internal power production sources by 400 MW, to mitigate the impact of possible emergency shutdowns and ensure the rapid activation of necessary reserve capacities. During island operation, the Lithuania-Poland AC interconnection will be placed on standby, which is the test for coping. If the test reveals a risk of failure, we will interrupt the test and reconnect to the Continental European electricity system. However, this is unlikely. After successfully completing the test, we will synchronize with the Continental European IPS/UPS frequency area through the Lithuania-Poland AC connection and restore standard power flows through the interconnection HVDC links.”

Arvi Hamburg emphasizes that the Baltic States must be prepared to operate in island mode in case the Lithuania-Poland AC connection is interrupted for any reason. Unfortunately, with the currently available controllable production and transmission capacities, the system capability of the Baltic States in island mode will only be covered until the end of 2026.

“With regard to rapid frequency reserves, the Baltic States depend on HVDC connections to neighboring systems. Therefore, we need investments in the development of controllable production capacity and storage,” Hamburg notes. “According to supply security standards, by 2030+, it will be necessary to ensure around 1200 MW of controllable production capacity, which could be covered by four to five oil shale blocks. Additionally, about 20 GWh of storage capacity will also be required.” He acknowledges that ensuring the capacity of the electricity system and maintaining reserves is a cost that consumers will inevitably have to cover.

The energy development plan aims to provide favorable electricity prices for industry

Irje Möldre, Head of Strategic Planning at the Ministry of Climate’s Energy Department, confirms that ensuring the competitiveness of industrial enterprises is crucial for Estonia’s economic development. She notes that the government is aware that energy-intensive production requires electricity prices that are comparable to neighboring countries, especially Finland, where the high share of nuclear and renewable energy ensures lower and more stable industrial electricity prices.

“The more electricity consumption there is, the lower the associated costs per unit of electricity,“ Irje Möldre

Estonia’s electricity price has been lower than in Latvia and Poland over the past five years, but significantly higher than in Finland. “In the development plan, we forecast an electricity price of 49 euros/MWh by 2035 (Finland’s electricity price in 2024 was 46 euros/MWh),” Möldre describes. “Achieving this requires several key investments, including, first and foremost, on- and offshore wind farms, storage capabilities, and the third connection to Finland, EstLink3. Additionally, the more electricity consumption there is, the lower the associated costs per unit of electricity.”

She adds that it is difficult to assess the electricity needs of industry 5–10 years from now (including in neighboring countries), the necessary addition of production capacity, and the distribution of electricity system costs between different consumers. Estonia’s economic policy plan sets a goal of doubling GDP by 2035, but it does not specify which economic sectors are expected to grow or how energy-intensive they will be.

“Possible solutions require societal discussion. At the national level, expanding tax incentives, reducing renewable energy and grid fees are potential solutions to lower the end price for large industrial consumers,” says Irje Möldre. “This needs to be further discussed in society as part of the drafting of the ENMAK 2035 proposal.”

GOOD TO KNOW: What increases the total price of electricity?

• The island operation fee will apply immediately, estimated at 35 million euros per year, which, when distributed across 8 TWh of consumption, adds 4,4 €/MWh, or 0,44 cents/kWh.
• The frequency reserve fee with a six-month delay is, according to Elering’s forecast, 5,31 €/MWh for both producers and consumers. It is expected that the producer will pass their obligation onto the consumer, so we should anticipate a price increase of 10 €/MWh, or 1 cent/kWh.
• In the future, likely between 2027 and 2028, the fee for reserves purchased through the ongoing tender will be applied, estimated at 60 million euros per year. This will add 6 €/MWh, or 0,6 cents/kWh, to the total electricity price, based on an expected annual consumption of 10 TWh. With the implementation of this price increase, the sizes of the first two components will also change.
• Therefore, we must anticipate an increase of up to 1,5 cents in the final electricity price.
• Additional costs will include grid reinforcement to accommodate wind and solar power in the electricity system, 50% solidarity coverage of connection fees, and renewable energy charges.
• The electricity market price is determined on the larger market, and while it may decrease in our price region, due to the additional components, we should not expect a reduction in the total electricity price.

Sources: Arvi Hamburg, Estonian Ministry of Climate

The electricity price in Finland is considerably cheaper

The average annual electricity price (€/MWh) of NordPool in Estonia, Latvia, Poland, and Finland from 2020 to 2024.

Sources: NordPool, Estonian Ministry of Climate