5. ELECTRICITY
Figure 5.8 Electricity prices in Estonia and in selected IEA countries, 2008-17
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Industry |
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Households |
140 |
USD/MWh |
300 |
USD/MWh |
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120 |
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250 |
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100 |
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200 |
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80 |
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150 |
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60 |
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100 |
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40 |
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20 |
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50 |
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0 |
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0 |
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2008 |
2010 |
2012 |
2014 |
2016 |
2018 |
2008 |
2010 |
2012 |
2014 |
2016 |
2018 |
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Estonia |
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Finland |
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Sweden |
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Poland |
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IEA 2019. All rights reserved.
Source: IEA (2019c), Prices and Taxes 2019, www.iea.org/statistics.
Market structure
As mentioned above, the Estonian electricity market was fully opened to all consumers in the beginning of 2013, creating the preconditions for the entry of new sellers into the market. Since 2013, household and commercial customers have been able to buy their electricity, either through a contract made directly with a supplier or from the distribution system operator under the framework of a universal service (when the consumer has not sellected a seller). Consumers are able to switch suppliers with a 21-day notice, and this will be shortened to 7 days in the second half of 2019. In 2017, 84% of Estonia’s consumers had supply contracts; however, only 3% of consumers switched suppliers during that year (Competition Authority, 2018).
Wholesale and distribution market
There were 16 companies selling electricity on the Estonian wholesale market in 2017. Eesti Energia AS is the biggest electricity seller, with nearly 60% of the wholesale market in 2017, compared to around 72% in 2013. The other major wholesalers are Elektrum Eesti OÜ (10.6%) and Scener OÜ (9.6%), with the remaining market share divided among the 13 other wholesalers.
In 2017, there were 34 distribution network operators in Estonia, with Elektrilevi having the largest customer base (87%), followed by VKG Elektrivõrgud OÜ (3%) and Imatra Elekter AS (3%). Estonia has a rather large number of small network operators, as evidenced by the remaining 7% covered by the 31 other companies. Network operators are responsible for maintaining and expanding their networks, measuring the electricity consumed, maintaining metering equipment, and repairing breakdowns.
Starting in 2016, Elering AS launched an IT platform allowing electricity sellers to submit their invoices jointly with the network service provider, further promoting competition through transparent pricing.
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5. ELECTRICITY
All electricity consumers have smart metres since 1 January 2017, allowing consumers to choose a dynamic electricity tariff linked to the wholesale market price. Estonia has made progress in making information available through digitalisation (Box 5.1). However, no significant demand-side response has yet appeared as a result of the mass deployment of smart metres and the potential for variable pricing that they offer.
Box 5.1 Digitalisation in Estonia’s electricity market
Since the deregulation of the electricity market in 2013, Estonia has developed a digital environment. An important feature is the Data Hub, a web portal where all producers and suppliers have access to their own consumption volume measurement data (remotely readable in hourly data). The Data Hub information system, administered by Elering AS, ensures principles of equal access to electricity consumption volumes and quick supplier exchange procedures. Moreover, by adopting both smart and remotely read metres, Estonian consumers are able to access hour-based, real-time price signals.
Substantial improvements in efficiency and customer satisfaction have already been noted by distribution system operators. Elektrilevi, the largest distribution system operator in Estonia, reports that network losses in 2017 were 4.73%, a 30% decline from 2010, and customer inquiries reduced by ten-fold, from over 305 000 in 2012 to some 31 000 in 2017, with surveys showing a significant increase in customer satisfaction.
The digitalisation of the energy system has not only led to a consumer-centred system in the electricity market, but has also made it possible to cut down on any unnecessary costs for exchanging information between energy sellers and consumers. For instance, renewable energy producers can follow production data and submit applications for renewable subsidies. Ongoing developments from smart metres include measuring voltage quality, allowing for better investment decisions and the possibility to avoid electricity interruptions by renovating devices based on precise data.
Sources: Elering (n.d.), Data Exchange, https://elering.ee/en/data-exchange; Elering (n.d.), Smart Grid Development, https://elering.ee/en/smart-grid-development#tab1; Elering (2018a), Security of Supply Report 2018, https://elering.ee/sites/default/files/public/Infokeskus/elering_vka_2018_web_trc_ENG_v4.pdf; Elektrilevi website, https://www.elektrilevi.ee/en/avaleht; Agan, K. (2017), Digitalization of the Energy Sector: The Case of Estonia, www.wec-france.org/DocumentsPDF/Evenements/6-Forum-Europeen- Energie/K.Agan.pdf.
Interconnections
The Estonian electricity system belongs to the large synchronously operating joint system BRELL (Belarus, Russia, Estonia, Latvia and Lithuania), comprising the neighbouring countries Latvia and Russia, connected with Estonia through alternating current (AC) lines. They, in turn, are connected to their neighbours Lithuania and Belarus. The connection with Russia is through three 330 kV overhead lines (two lines go from Narva to St. Petersburg and Kingissepp, and one line from Tartu to Pskov) and with Latvia through two 330 kV lines (one between Tartu and Valmiera, the other one between Tsirguliina and Valmiera). Estonia is connected with Finland through two direct current (DC) submarine cables (EstLink 1 and EstLink 2). Transfer capacities for meeting peak load on these lines are 1.02 GW to Russia, 0.82 GW to Latvia and 1.05 GW to Finland.
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5. ELECTRICITY
Figure 5.9 Electricity infrastructure in Estonia
IEA 2019. All rights reserved.
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5. ELECTRICITY
A third AC line between Estonia and Latvia is being developed and is expected to be completed in 2020. This will be a continutation of the 330 kV overhead transmission line of Harku-Lihula-Sindi, linking from Kilingi-Nõmme to Riga (Latvia). After completion of this line, the entire mainland of Estonia will be covered with a 330 kV network and the western (Pärnu) consumption region in particular will have a better connection to the electricity transmission system (MEAC, 2017).
In 2017, Estonia had an interconnection level of 63%, substantially higher than the 10% target for 2020 set for all European Union member states (EC, 2017). The completion of EstLink 2, in 2014 substantialy suplemented the high-voltage DC interconnection between Estonia and Finland. This tripled the electricity transmission capacity between the Baltic and Nordic countries (to 1 GW), eliminating the trade bottleneck that had previously existed between the two power markets, and effectively transforming Estonia and Finland into a single market region where the day-ahead price of electricity was the same over 95% of the time in 2018.
Additionally, the NordBalt interconnection between Lithuania and Sweden that became operational in 2016, and the Litpol Link between Lithuanina and Poland, in operation since 2015, have effectively ended the isolation of the Baltic countries and integrated them with the rest of Europe (EC, 2017). The Baltic electricity system is now integrated with the Nordic countries’ power exchange, Nord Pool (EC, 2017).
Synchronisation with continental Europe
The long-term goal of the Estonian system operator is to achieve greater independence from the Russian integrated energy system, by disconnecting the Baltic electric nework from the north-east Russian grid and synchronising it with the continental Europe synchronous grid, in 2025.
The synchronisation of the Baltic states with continental Europe has been under preparation since 2009, starting with the signature of a joint declaration of principles. In June 2018, the Prime Ministers of Estonia, Latvia and Poland and the Presidents of Lithuania and the European Commission signed a joint political roadmap, which is to connect the Baltic states to the continental European network through Poland by 2025. The countries agreed to analyse options for synchronisation which would result in a high level of security while being carried out in a cost-efficient manner, taking into account both capital and operating expenditures. On 21 September 2018, a formal merger procedure was initiated; the Polish transmission network operator submitted to the relevant regional group of the European Network of Transmission System Operators (ENTSO-E) an application for extension of the continental European networks to the Baltic states. The agreement entered into force on 27 May 2019. The Baltic states also jointly submitted an application to the Connecting Europe Facility for co-financing of the investments made during the first phase (EU, 2018).
The synchronisation project is part of the wider Baltic Energy Market Interconnection Plan (BEMIP), whose primary objective is to achieve an open and integrated regional electricity (and gas) market between EU countries in the Baltic Sea region, ending the energy isolation of the Baltic countries. The initiative's members are the European Commission, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland and Sweden. The Estlink, Nordbalt and LitPol links are key electricity infrastructure projects under the BEMIP.
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