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Strategic reserve must be created to mitigate energy security risks, says Elering

The Estonia-based electricity and natural gas transmission operator, Elering, has recently completed a “security of supply analysis” which indicated that “energy supply risks have grown, above all due to Russian aggression in Ukraine.”

The report recommended setting up a “strategic reserve based on guaranteed production capacities” by 2027. In addition, “the Estonian oil shale-fired power plants may not be economically feasible and it could lead to their closure.”

“The energy crisis in Europe caused due to the Russian invasion of Ukraine has significantly increased energy supply risks in Estonia and in the entire region, but according to the analysis, security of supply is ensured under normal circumstances,” said the Chairman of the Management Board of Elering, Taavi Veskimägi. “However, the accumulation of an unusually large amount of malfunctions and accidents within the same period of time could bring about very high electricity prices in the coming winter or lead to the necessity of limiting consumption for a little while and to a certain extent. The winter will certainly be tense when it comes to the security of supply of energy.”

Analyses conducted across Europe, together with other European system operators, indicated that as of 2027, the Estonian oil shale-fired power plants may “no longer be competitive on the electricity market”. When oil shale-fired power plants are disregarded from guaranteed production capacities due to their economic infeasibility, the level of security of supply no longer meets the standard established by the Estonian government.

In order to ensure the security of supply, Estonia must ensure 1,000 megawatts (MW) of guaranteed production capacities (approximately). Elering has submitted a proposal for creating a strategic reserve to the Ministry of Economic Affairs and Communications for the purpose of ensuring such a capacity. To this end, Elering is “prepared” to implement state aid measures that comply with the EU legislation.

In 2020, Elering ordered a survey for finding the most suitable capacity mechanism for Estonia. The result was a strategic reserve. In the previous year, Elering prepared the concept of an Estonian strategic reserve that could be used as the basis for elaborating the state aid measure.

State of supply for the current winter period

According to Elering, there are sufficient production capacities in the region to cover peak consumption for the ongoing winter period. However, in the last year, the risk of an extraordinary desynchronisation from the Russian electricity system and the stoppage of the operation of the Narva power plants, due to Russia’s actions has significantly increased, and there is a possibility that the completion of the new Finnish nuclear power plant will be delayed. The availability of natural gas and other fuels has likewise decreased.

In addition to these risks, circumstances that could cause issues when ensuring the security of supply upon the accumulation of several events with a negative impact must be taken into consideration. These circumstances include an extraordinarily cold winter in the region, low hydropower reserve levels in the Nordics, adverse wind conditions in the countries bordering the Baltic Sea, and malfunctions and accidents in production and transmission capacities.

Earlier this month, the European Network of Transmission System Operators for Electricity (ENTSO-E) published a separate report, assessing the state of the electricity supply, which noted a higher “adequacy risk” compared to previous winters.

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