Elering prepares to lease Kiisa plants after €1.8 million upkeep bill

Maintaining the Kiisa emergency power station cost €1.8 million last year, and Elering expects a similar bill this year, ERR reported. Elering has begun preparations to lease the station’s two gas-fired power plants, which have a combined capacity of 250 megawatts.

The move follows new guidance from Energy and Environment Minister Erkki Keldo. In April last year, the government backed a proposal by then-minister Andres Sutt to prepare the plants for sale.

The plants’ value to the state and Elering is expected to decline in a few years. An exemption granted by the European Union that allows them to take part in the Baltic frequency reserve market when needed expires in 2028. After that, they would be limited to their original role: operating during grid disruptions or when there is not enough capacity.

Elering covers the station’s fixed costs from revenue from its regulated activities. The plants’ participation in the frequency reserve market is not intended to pay those costs, Elering communications specialist Kätlin Klemmer told ERR. She said it reduces costs for electricity consumers because Elering can buy less reserve capacity from the market.

Some market participants have criticised the arrangement, saying Elering is effectively buying a service from itself. Consumers pay for reserve capacity through a balancing capacity fee, which is €3.73 per megawatt-hour this year. For a household using 250 kilowatt-hours a month, that amounts to an additional €1.20 on its monthly bill. Previously, Elering paid for reserve capacity using congestion revenue.

The financial terms of the lease are still being worked out, Klemmer said. Elering plans to reduce the Kiisa-related costs included in its network fee by the amount of rental income it receives. A tenant would not automatically qualify for support currently linked to keeping the plants in reserve; eligibility would depend on the terms of any future support measure.

The Kiisa plants’ upkeep costs are lower than those of Eesti Energia’s oil shale power plants, which run to tens of millions of euros. Their costs are now covered by consumers through a security of supply fee, set at €7.58 per megawatt-hour this year before VAT. Under an agreement with Elering, maintaining 1,036 megawatts of generation capacity for island operation can cost up to €59.5 million a year.