Elering opens consultation on long-term power capacity support

Elering has begun a public consultation on a long-term support mechanism for power capacity to help secure Estonia’s electricity supply after 2033, ERR reports. Elering says the plan would not add new charges to consumers’ bills.

Estonia’s electricity supply is currently secure, but in the next decade more dispatchable generation capacity is expected to leave the system than the market builds. Electricity consumption is also set to grow, while risks include the loss of connections with neighbouring countries and prolonged periods of calm, cloudy weather when wind and solar output is low.

Estonia has agreed that it is acceptable for demand to go unmet for up to eight hours a year. Elering’s supply security report from last year warned that this standard may not be met in future. EU electricity market rules allow a country in such circumstances to introduce a capacity mechanism open to all technologies.

Elering board member Erkki Sapp said revenue from electricity sales alone does not give investors enough certainty to build a power plant or storage facility that may be needed only for a few hours each year. Without further incentives, capacity could be unavailable when it is most needed.

Under Elering’s proposal, the required amount of firm capacity would first be calculated. Providers would then compete in an auction, with the lowest-cost bidder agreeing to keep capacity available. Winners would receive a payment for capacity in addition to revenue from the electricity market, and would face penalties if they failed to meet their obligations. Capacity payments could be reduced if a provider’s market revenue exceeded an agreed threshold.

The mechanism would be open to any qualifying resource that can contribute to supply security, including power plants, energy storage and demand-management solutions. Elering says it does not intend to favour a particular technology.

The first auctions are planned from 2028. Before then, public consultations must be held, legislation changed, state aid approval obtained from the European Commission and the rules agreed.

Estonia already has state aid approval for a strategic reserve through 2035. Elering says that arrangement is not sufficient because power plants in the reserve cannot trade on the electricity market. A market-wide mechanism would allow both existing and new resources to compete and provide longer-term revenue certainty. An analysis commissioned by Elering found it was the only solution that would provide a long-term investment signal for new capacity while helping prevent operational plants from closing early.