6. NATURAL GAS

gas supply and the low-carbon energy transition. The Estonian government recognises that biomethane has substantial energy potential in Estonia, particularly in the transport sector, and estimates that there is a total production potential of up to 370 mcm a year (mcm/y). Estonia has a set a goal to reach 15 mcm/y of biomethane production by 2020, and further increase the production level to 40 mcm/y by 2030 (MEAC, 2018a).

To meet these targets, Estonia has been promoting domestic biomethane production, mainly through measures such as subsidies (see section below on prices and tariffs). In 2018, two biomethane production units were established in Estonia, with a total capacity of around 62.5 gigawatt hours per year (6.5 mcm/y) (see section below on infrastructure). The total output of domestic biomethane production was around 4.5 mcm in 2018, only a fraction of the total gas consumption level and less than one-third of the goal set for biomethane production in 2020.

Market structure

Unbundling of the gas network

Estonia underpins liquidity and competition of the domestic gas market as the primary measure to sustain security of gas supply. The Competition Authority oversees the market, including transmission and distribution regulations and pricing. The Estonian gas market has been fully liberalised since 2007 and Estonia made amendments to the Natural Gas Act in June 2012, which underpinned the unbundling of the transmission system from the producer and/or seller via complete ownership unbundling, to comply with the EU’s third energy package of 2009.

The Estonian gas market used to be dominated by a single vertically integrated company, Eesti Gaas, whose biggest shareholder was Gazprom.2 At the time of the last IDR in 2013, Eesti Gaas was still the only gas importer and trader in the country, although legislation had encouraged open competition. The 2012 amendment to the Natural Gas Act obliged AS Eesti Gaas to separate its gas distribution utility by January 2013 and divest its ownership of transmission services by 2015. The ownership unbundling was finalised in March 2016 and the current Estonian TSO is publicly owned via Elering (formerly EG Võrguteenus AS before 20153).

Wholesale

Eesti Gaas AS was the only wholesaler on the Estonian gas market until 2015, when other companies began to compete on the wholesale market. The availability of competitive gas supply from the Lithuanian GET Baltic exchange, which added the possibility of virtual gas trading in Estonia in 2017, has facilitated the emergence of new gas suppliers.

In 2017, three companies imported gas into the Estonian market: Eesti Gaas AS (still the dominant importer, representing 88% of total 2017 imports), Elektrum Eesti OÜ (8% of imports) and Eesti Energia AS (4%). Following the expiration of its long-term contract

2Others included Germany’s E.ON, Finnish utility firm Fortum and Latvia’s Itera.

3Before 2015, EG Vorguteenus AS was an independent system operator (both transmission and distribution) that leased Eesti Gaas’ assets for providing transmission services.

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ENERGY SECURITY