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Shale oil energy must be replaced by equally controllable power – Timo Tatar

Journalist’s Ain Alvela interview with the deputy chancellor for energy at the Ministry of Climate Timo Tatar.

By the end of the year after next, Estonian shale oil power plants will provide the electricity capacity under control, and starting from 2027 onwards, new generation capacity is expected to be on the market to provide a rapid response and contribute to frequency management in the Baltic states to ensure energy security in the respective countries.

The state, as the owner, expects Eesti Energia to provide at least 1000 MW of controllable electricity power to the market. This ownership expectation is currently set until the end of 2026, after which a strategic energy production reserve will be launched, which in broad terms means keeping the controllable shale oil power plants operational. They are rarely needed, but they do exist and are ready to be activated, if necessary, while the fixed costs of the system are paid by the system manager – directly by the state company Elering; but ultimately this cost is still borne by the consumer.

Only in a year’s time, is Estonia’s electricity network expected to be desynchronized, meaning disconnection from the Russian grid, which leads to a need to regulate the frequency of the network and to balance production and consumption. This also needs on-site controllable power.

The need to adjust the frequency

The deputy chancellor for energy at the Ministry of Climate, Timo Tatar, confirms that as long as Elering needs controllable power, it will be kept available in the form of the current shale oil plants.

Presently, Estonia’s supply security is essentially guaranteed by the owner’s expectation that Eesti Energia will ensure the continuous availability of 1,000 MW of controllable power until the end of 2026; the Ministry of Climate has sent draft legislation of the supply security package to Parliament, which among other things stipulates the need to maintain a strategic reserve.

“Of course, shale oil stations will not exist forever, especially since some of these stations are already very old. The next step for the procurement of controllable power will be a tender for frequency reserves, which Elerging will launch next year” says Timo Tatar, describing the current situation and future prospects. “The procurement is expected to provide 250–400 MW of controllable power to the Estonian market. This is largely caused by the desynchronization of our electricity grid in 2025; Elering will need to buy more frequency reserves from the market, which is electricity power that needs to be activated quickly, for example, if something should happen to the Baltic countries’ electricity system or its connections.”

Supporting renewable energy production also requires reserves. Managed reserves, whether they are based on old shale oil plants or new ones being added, which are mainly gas-powered, are needed to ensure a balance between electricity production and consumption, which in other words means maintaining a stable frequency in the grid. Reserves need to be operational at all times, and this readiness means being able to react within a matter of seconds if, for example, a power plant should suddenly stop. The balance of production and consumption must be in balance, and while until now it is organized with the help of hydroelectric power stations on the River Volga, in Russia, in the future the Baltic countries will have to manage the balance on their own. Elering has announced that Estonia, Latvia and Lithuania need in total up to 1000 MW of frequency-controlled reserves. First of all, this can be done either with powerful recorders, which will not be available anywhere in the near future, or with the help of quick start-up power plants. This is most realistically achieved by using gas-powered plants; however, tenders for the construction of a pumped hydroelectric plant or any other type of production or storage capacity will also be accepted.

Strategic reserve package in Parliament

According to Timo Tatar, the electricity market is showing that market participants are willing to invest in plants that have low fixed costs and can be commissioned quickly in order to catch the most expensive price peaks. Perhaps the most widely publicized of these is Eesti Energia’s plan to build a natural gas, biomethane and, possibly in the future, hydrogen turbine plant on the site of the Baltic power plant. The existence of such low-cost stations would help to depress electricity prices somewhat, while the ability to react quickly to price spikes allows the company to offset these waiting costs commercially.

The emergency gas station located in Kiisa is not directly included in this calculation, which will continue to be a so-called emergency option for those cases when supply cannot meet demand. In the case where, for example, Estlink 2 no longer transmits power at some point and it is necessary to quickly replace this power.

“Any controllable power plant that can be quickly loaded up and start producing electricity is helpful in maintaining the frequency”, says Tatar. “As small as it may be, it still offers a contribution. But, the mentioned 250–400 MW would still be some new production capacity that will be created over the next few years in Estonia. We certainly don’t want to accept the assumption that we are going to import it.”

And so we are now living in the knowledge that if Parliament approves the strategic reserve package in the nearest future, then from 2027 the ownership of the capacity reserve that Eesti Energia has had until now will be replaced by ownership of the strategic reserve power plants, meaning that the two shale oil energy units at the Narva power plants that are still in operation but are obsolete will be excluded from the strategic reserve, as the costs of operating them would be unreasonably high. At the same time, Timo Tatar believes that some of Enefit Power’s energy units, such as Auvere, where wood pulp is used as fuel, or Estonia’s SEJ Unit 8, which burns waste gas from oil production, will certainly remain on the market in 2027 and beyond.

Connection with Central Europe is renewed

In Estonia, there are about 6000 MW of renewable energy projects in various development stages, mainly related to onshore and offshore wind farms. About 2,400 MW of these projects are scheduled to be completed in 2030.

Tatar says that although wind energy is not controllable, its existence is becoming increasingly predictable, which, in turn, also allows for more operational planning of the controlled capacity needs.

“The more renewable source electricity that enters the market, the fewer operating hours are needed for the controlled stations. This in turn needs other mechanisms in addition to the market to keep them”, he says.

Increasing renewable energy production also requires good interconnections with the electricity grid in neighbouring countries and Central Europe. Estonia is connected to Latvia by three high-voltage lines, the newest of which, built specifically for desynchronization, was completed in 2021. Other connections are also undergoing major renovations, with the last of them, from Ida-Viru County to Northern Latvia, being completed later this year. Taking the influx of wind energy into account, another connection between Estonia and Latvia, and from there on to the European electricity system, may be necessary in the distant future.

“However, the connection between the Baltic states and Poland is important for the synchronization of the Estonian network with the Central European network”, says Tatar. “Initially, the frequency will be transmitted by Lit-Pol Link 1, which is a two-way parallel link between Lithuania and Poland. In the long term, we still want to synchronize in such a way that there is an additional connection between the Baltic states and Poland – Harmony Link.”

At first, the plan was for it to run from Lithuania to Poland through the Baltic Sea, and around the Kaliningrad region belonging to Russia, but in light of the events that took place in the Gulf of Finland last year with the Baltic Connector, all parties realised that creating such a connection would be very risky. In addition, according to the plans at the time, it was only a direct current cable, which would have enabled the organization of electricity trade, but would not have been suitable for synchronization.

“At the end of last year, an agreement was reached between the Baltic states, Poland and the European Commission, according to which it was decided to connect via the so-called Suwalki corridor with an underground cable”, says Timo Tatar, describing the additional connection establishing process. “This connection will not be completed by February 2025, and it is currently expected to be commissioned in 2028; therefore, for a couple to three years, the frequency will only be maintained through Lit-Pol Link 1.”

Importing only would increase the security risk

According to Timo Tatar, the restrictions set by the Ministry of Defence on the height of wind farms will begin to disappear this year; in general, it is planned to remove the restrictions in three stages. In total, all conservation restrictions should be lifted by the end of 2026. This means that around 80% of Estonia, both on land and at sea, will be free of height restrictions. To achieve this, the state has invested € 140 million to purchase and install new radars.

Tatar confirms that the more connections we have with the rest of the world, the safer it is for us to manage in times when there is not enough wind and solar energy, thus additionally ensuring security of supply; it is also good from the point of view of exporting renewable energy produced here.

Theoretically, it would also be possible to give up the power that we control and rely on electricity imported from our neighbours, especially since connections with neighbouring countries are continuously improving. However, Timo Tatar believes that it would not be a sensible risk to take in a situation where we have no electricity of our own production, thus relying on others to suddenly produce it.

“This is purely a question of supply security and energy security”, he says.

Estonia has set a goal that in 2030, at least the same amount of electricity as the annual consumption here will be produced from renewable sources. This does not mean that only green electricity is consumed in Estonia throughout the year. Tatar estimates that, in addition to renewable energy sources, we will also need 30-35% of electricity annually from controllable sources, which in five years’ time will obviously not be running entirely on green fuels.

Offshore wind farms are largely counted as the success of renewable energy. The investment required to build them is significant, which is why a number of countries have set out to make their business environment as favourable and attractive as possible for companies by paying large subsidies for renewable energy, be it under the name of price difference or some other category.

Cheap electricity should produce expensive things

Some countries motivate renewable energy producers by the fact that the country has large electricity consumers who want to buy green electricity on a stable basis. As a small country, Estonia has realised that it is not reasonable to compete with other countries in the abundance of support schemes.

“We have set a target for renewable energy production to develop in line with electricity consumption growth. This is based on the Finnish experience, where investments in renewable energy are made primarily on the basis of local demand”, explains Timo Tatar. “It means creating a favourable business environment for industries with high electricity consumption. When such an industry makes its own investment decision, it will also sign a long-term supply contract with a wind farm or a nuclear power plant, which will provide the energy producer with the necessary cash flow to ask the bank for financing for its project.”

This approach is reinforced by the fact that Estonia has the potential to produce many times more renewable electricity than we currently consume. Thus, Tatar believes that already in the near future we will have quite a large number of wind farm developments with building permits, which can be built quickly. This, in turn, he says, should attract large industries to set up production in Estonia.

“Above all, it is an expensive product produced from cheap electricity that adds value to the economy. Electricity, however, is not a profitable source of exports; rather, we are looking for companies that will produce a more expensive product from this cheap electricity in Estonia and then export it”, says Timo Tatar, describing the national plan for the future of energy.

“We have set a target for renewable energy production to develop in line with electricity consumption growth. This means creating a favourable business environment for industries with high electricity consumption,” Timo Tatar.

Estonia’s current external electricity connections

400 MW controllable power must be used in Estonia after disconnecting our electricity grid from the Russian system in order to ensure the balance of production and consumption.

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