2. GENERAL ENERGY POLICY

Estonia is an open, market-based economy that has a well-skilled workforce and a business-friendly environment. In 2017, the industry sector, including construction, accounted for just over 28% of gross domestic product (GDP), while the service sector accounted for just over 69% and the primary sector for only 3% (OECD, 2019). Estonia’s per capita GDP at USD 30 895 in 2016 is 27% lower than the OECD average. Estonia’s economy is highly integrated in global trade. In 2017, total trade (imports plus exports) accounted for 152% of GDP, compared to the EU average of 86% (World Bank, 2019a). Its main exported goods are electrical machinery and equipment, oil shale products, wood products, and miscellaneous industrial goods. Overall, low and medium valueadded products dominate exports (OECD, 2017). Around 70% of exports go to EU countries, with the main exporting destinations being Sweden, Finland, Latvia and Germany.

Estonia is notable for its pioneering digitalisation of public services; an area in which it is more advanced than most OECD countries (OECD, 2017). The rate of Internet use (79.5%) and the number of mobile broadband subscriptions (145.9 per 100 habitants) are among the highest in the world, and are the key reasons behind the fast development of e-governance in Estonia (EC, 2018). The dissemination of electronic identification cards (ID) to the entire population allows for convenient and secure access to e-governance services. Estonia installed 100% smart metering in the electricity sector by the end of 2016, allowing for more accurate metre readings that significantly improved network management and generated cost savings of around 30%. The savings have been passed back to customers through decreased network tariffs.

Unlike most IEA member countries, Estonia’s population has been declining in recent decades. Population fell from just over 1.56 million in 1991 to 1.32 million in 2015 (World Bank, 2019). The decline was due to falling birth rates and increasing net emigration. In the past few years, the trend has halted, and the population has increased slightly since 2015, as the government has facilitated the hiring of highly qualified foreign workers. Unlike in many other IEA member countries, energy demand in Estonia has not yet shown a clear decoupling from population. Although energy demand and emissions have shown some decoupling from economic growth, both demand and emissions have been rising since 2015.

Energy supply and demand

Estonia’s energy supply is unique among IEA member countries, with its strong reliance on domestically produced oil shale that can be either burned for heat and power generation or used for producing liquid fuels (Box 2.1). In 2018, oil shale accounted for 72% of Estonia’s total domestic energy production, 73% of total primary energy supply (TPES)1 and 76% of electricity generation. Estonia also has large domestic biomass resources. Bioenergy and waste accounted for 27% of domestic energy production and 19% of TPES in 2018 (Figure 2.2).

1 TPES is made up of: production + imports – exports – international marine and aviation bunkers ± stock changes. This equals the total supply of energy that is consumed domestically, either in transformation (e.g. power generation and refining) or in final use.

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ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Shale oil is unconventional oil produced from oil shale by pyrolysis, hydrogenation or thermal dissolution. In IEA statistics, shale oil is categorised under primary oil as “other hydrocarbons”. Shale oil can be used directly as a fuel or upgraded to meet refinery feedstock specifications by adding hydrogen and removing impurities such as sulphur and nitrogen. The refined products can be used for the same purposes as those derived from crude oil. Estonia does not have refineries to produce refined oil products, and all its produced shale oil is exported.

Oil shale and the shale oil produced from it should not be confused with light tight oil (sometimes also referred to as shale oil), which is produced from shale formations, often together with shale gas in hydraulic fracturing. This is not done in Estonia.

Source: Based on IEA (2019), World Energy Balances 2019, www.iea.org/statistics; IEA (2013), World Energy Outlook 2013, https://www.iea.org/publications/freepublications/publication/WEO2013.pdf.

Energy production and self-sufficiency

In line with the domestic energy demand, Estonia’s TPES dropped rapidly in the early 1990s, and has since varied around 5-6 million tonnes of oil-equivalent (Mtoe). In 2017, TPES was 5.7 Mtoe, roughly the same as a decade earlier (Figure 2.3). However, annual fluctuations have increased significantly because of more electricity trading with other countries in the region. Regional electricity prices have strongly been influencing Estonia’s supply of oil shale for power generation since it joined the Nordic-Baltic power market in 2013.

Figure 2.3 TPES by source, 1990-2018

IEA 2019. All rights reserved.

After a big decline in the early 1990s, TPES in Estonia has been generally stable, with bioenergy and waste steadily increasing and oil shale fluctuating due to electricity trade.

*Oil shale includes minor shares of coal and peat.

**Not visible on this scale.

Notes: Mtoe = million tonnes of oil-equivalent. Supply data for 2018 are provisional. Electricity trade is not included in the chart.

Source: IEA (2019), World Energy Balances 2019, www.iea.org/statistics.

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ENERGY INSIGHTS