The Focus of the Energy Sector Development Plan Should Be on a Competitive Electricity End Price

According to the Chamber, the draft of the Energy Sector Development Plan until 2035, prepared under the leadership of the Ministry of Climate, does not sufficiently detail what the state plans to do to ensure that the end price of electricity in Estonia will be competitive by 2035 compared to other EU countries or our neighboring regions.

The Ministry of Climate has prepared a draft of the Energy Sector Development Plan until 2035, which sets goals and actions for transitioning to climate-neutral energy production in the fields of electricity, natural gas, liquid fuels, and district heating.

The general goal of the development plan is formulated so that Estonia has a secure energy sector aligned with climate policy objectives. The Chamber pointed out that the general goal lacks a reference to the fact that Estonia’s energy sector should enhance the competitiveness of the Estonian economy.

For ensuring the competitiveness of businesses operating in Estonia and the economic well-being of residents, energy independence and long-term security are not enough; the end price of electricity is also critical. If the end price of electricity is higher than the average in the EU or our neighboring regions (Finland, Sweden, Latvia, Lithuania, Poland), it will not ensure the competitiveness of businesses.

Ministry’s Calculations on the End Price of Electricity Are Not Clear
The draft of the development plan states that the end price of electricity, including taxes and fees, will be 154 EUR/MWh in 2035 compared to 179 EUR/MWh in 2023. However, it remains unclear how the Ministry arrived at this calculation and what assumptions were used. The description of the assumptions and calculation methodology for the electricity price forecast must be very easy to follow and understandable for society, but this is not the case now.

Additionally, the development plan does not thoroughly address taxes and various fees, whose adjustment could help make the end price of electricity competitive. For example, the Chamber has previously proposed exempting industrial consumers or large-scale consumers from paying the renewable energy fee and compensating this amount to renewable energy producers through the state budget. Alternatively, it is worth considering setting a cap on the renewable energy fee, which would somewhat reduce the end price of electricity for large-scale consumers. Additionally, it is possible to introduce exceptions in network fees for industrial/large-scale consumers.

The Chamber also proposed adding a separate metric to the development plan for the end price of electricity for industrial/large-scale consumers.

Uncertainty Regarding Wind Farm Subsidies
The draft of the development plan states that by 2035, Estonia is expected to have 3,000 MW of onshore wind farms and 1,000 MW of offshore wind farms. To boost the development of new production capacities, the state plans to organize tenders between 2025 and 2027 for onshore wind energy with a volume of 4 TWh/year and offshore wind energy with a support volume of up to 2 TWh/year, aiming to bring 4 TWh of energy produced in offshore wind farms to the market.

The Chamber finds it unclear why the planned wind farm support measure is not technology-neutral and instead distinguishes between onshore and offshore wind farms. The draft of the development plan does not provide explanations for this.

You can learn more about the draft of the Energy Sector Development Plan until 2035 here.