The Riigikogu deliberated “The future of the Estonian energy sector 2035” as a matter of significant national importance at the initiative of the Estonian Reform Party Group

The Minister of Climate Kristen Michal stated that the whole world was moving towards cleaner energy. “Even if we have been lucky now and the winter has been a little cooler, the whole planet on the average has warmed up. We need to deal with its root causes, and energy is one that is in the reach of the humanity to keep our planet in a better shape, to conserve our nature, to live longer and better ourselves, and to bring growth to our various economic sectors,” he explained.

The Minister said that Estonia’s wind capacity had increased and would continue to do so. In 2023, wind capacity increased by one third, by the end of 2024 it would double, and by the end of 2025 – triple. Talking about options in renewable energy, Michal evoked the goal of covering 100 percent of Estonia’s gross power consumption from renewable sources. “We have long discussed different options, also in the government together with energy experts and market actors, to identify the next possible development stage in Estonia,” he added.

This development stage has several preconditions. “One precondition is that our economy grows, that we have the ambition to grow it. We need to make decisions to allow the economy to grow, to attract industries and services that use clean energy and are able to export from this premise,” he said.

A whole range of options has been discussed, including a technology neutral six-terawatt reverse auction which had been included in the coalition agreement, where it was expected to include an offshore wind farm. “In comparison to the current plan – the current plan is more affordable for the consumers. And indeed, it is important to draw attention to the fact that even a smaller volume can cost more to the consumers if they cover the whole volume of production and then add price guarantees separately. Although the current decision made by the government cabinet has a higher volume, it includes a clause that there will be no separate storage price guarantee because it takes into account the energy consumed on the domestic level,” he explained.

The Secretary General of the Estonian National Committee of the World Energy Council Priit Mändmaa focused his report on the consumer side, balance in the energy system, energy consumption here and abroad, and increased consumption. Mändmaa emphasises the balance between three indicators to allow the energy sector to support the economy in long term and with sustainability. “This is the energy trilemma, a triangle whose first point is supply security, because if we are unable to ensure 24/7 power supply, it is impossible to build up the economy. The second point is affordability, because energy we cannot afford is useless to us. And the third point is sustainability, because we must still think long-term and consider our future,” he explained.

The growth of power consumption can support Estonia’s economic growth. “It goes without saying that this energy consumption must create added value, instead of just heating your outdoor pool, which creates none. And if it involves renewable energy, we also would not have to worry about how much we use because it has no direct impact on the environment,” the Secretary General said.

Mändmaa concluded with a reference to richer countries consuming more energy because the rich countries have more energy intense industry that refines local resources. In Estonia, energy consumption per capita is low and we need to shape a competitive environment to increase consumption that creates added value. “One option is a social contract to make common consumers contribute to creating a competitive environment that favours entrepreneurship. And finally, a good energy system that supports sustainable economic growth conforms to the principles of a balanced energy trilemma,” he concluded.

The Chairman of the Board of Elering AS Kalle Kilk spoke about the joys and challenges of energy from the point of view of the company, both in closer and further perspective. “Our network can connect large industries in quite a significant volume. Providing we all understand that industry is what brings us wealth, that even if we produce something useful with the help of electricity here and then export this useful product – this is what can bring in wealth to us as a country. Today, our network allows us to connect this kind of industry without major problems in quite high volumes, around 40–50%, we have no network problems,” the Chairman of the Board said.

Estonia’s future plans clearly state that Estonia needs to become an exporter with regard to electricity. “And in that case, it is important for us that in those moments when we have something to export, we would also have the market for it and that it would bring in the money. And that in those moments when we have nothing to export ourselves, we can import from the most affordable place in Europe,” he explained. This means that in ten plus years we would still like to see the volume of consumption in Estonia grow but also create a capability for the very same power generator to find larger markets.

Member of the Riigikogu Andres Sutt started by calling clean energy a competitive edge for the Estonian economy. Our capability to grow social wellbeing over the next decade depends largely on how successful we are in making investments because without offering clean energy in sufficient quantities, Estonia would stall in its development. “In order for our GDP to grow over the next ten years from the current nearly EUR 28,000 to EUR 50,000, for example, the average nominal growth of economy should reach 6 percent and the real growth around 4 percent. As new clean energy generation capacities and new industrial consumers are added, this faster development is something that is actually achievable. And if the whole renewable energy potential is realised, we can achieve even more,” he explained.

The availability of clean energy in sufficient volumes and the capability to build new production capacities in response to the increase in demand support the competitiveness of every business in Estonia. “The reason is very simple: regulations in banking and financial sector more broadly, but also because the expectations of the owners make the financial institutions increasingly turn to grounding climate risks and reducing the environmental footprint in their risk management and financial products pricing – i.e. loan margins and everything else,” the Member of the Riigikogu clarified.

Providing financial services and funding to sectors or businesses who exceed a certain CO₂ emissions or environmental impact level is either excluded or the price of money is considerably higher. “For example, the interest rates of loans that are linked to sustainability might be tied to whether the borrower has met their previously defined environmental goals. In other words, the cleaner you are and the smaller your environmental footprint, the lower are your financing costs,” he said.

During the debate, Riina Solman (Isamaa Parliamentary Group), Rain Epler and Martin Helme (Estonian Conservative People’s Party Group), Yoko Alender and Mario Kadastik (Reform Party Group), Igor Taro (Estonia 200 Parliamentary Group), Lauri Laats (Centre Party Group), and Jevgeni Ossinovski (Social Democratic Party Group) took the floor.

Verbatim record of the sitting (in Estonian)

Photos (author: Erik Peinar, Chancellery of the Riigikogu)

Video recording will be available to watch later on the Riigikogu YouTube channel.

Riigikogu Press Service
Eleen Lindmaa
+372 631 6456, +372 5551 4433
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Questions: [email protected]