Estonian energy sector urged to diversify energy mix

– by Mihkel Härm, WEC Estonia

Estonia must work harder to diversify its energy mix, a conference held by WEC Estonia in Tallinn was told.

Estonia ranks 35 out of the 94 countries assessed in the World Energy Council’s recent Energy Sustainability Index, a rise of three places from the previous year.  The Index assesses countries based on their performance of the three dimensions of the energy trilemma – security of supply, environmental impact mitigation, and social equity.

According to Einari Kisel, WEC Senior Fellow for European Policies & Partnership Development and former Estonian Deputy Secretary General for Energy who presented the findings, while Estonia’s energy policy has balanced the three trilemma aspects well in the few years the Index was compiled, its “relatively good” position on the Index masks the country’s poorer performance as measured strictly by energy-related indicators.

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Einari Kisel presents the findings of the World Energy Trilemma report

The Index rankings are weighted to countries’ contextual performance in terms of political, societal, and economic strength.  If Estonia were assessed only on energy-related indicators, then it would have performed “far worse” – somewhere in the second half of the list – Mr Kisel told delegates.

Almost all of Estonia’s neighbours are ranked higher in the Index: Latvia (37), Lithuania (31), Finland (5), and Sweden (1).

These remarks were made at WEC’s Estonia’s annual conference on energy policy on 29 January.  This year’s conference, titled “Energy Trilemma – Estonia’s position in the world”, focused on the findings of the WEC’s 2012 Energy Sustainability Index, and was attended by more than 200 participants from the Estonian Parliament, ministries, and other industry experts.

The key to improving Estonia’s ranking lies in diversifying its electricity production, according to Keit Pentus-Rosimannus, the Minister of the Environment. “We have been focusing on one resource – oil shale – for a very long time. This must change.” However, she added that any shift must not be “totally to the other extreme”, referring to a significant reduction in oil shale usage and increasing the share of renewables.  She urged delegates: “If we speak about our energy portfolio, then diversification must be our goal.”

Juhan Parts, Minister of Economic Affairs and Communication, said that in balancing the energy trilemma, Estonia – a country rich in oil shale resources – must make its unique policy decisions based on its unique national circumstances. “We have oil shale, our border with Russia, and strong infrastructure in place, all of which make us strong in the energy security dimension.” He added that policies must also strive to ensure affordable energy for consumers.

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Keit Pentus-Rosimannus, Minister of the Environment, and Juhan Parts, Minister of Economic Affairs and Communication, in a debate

Sandor Liive, CEO of Eesti Energia and the Chairman of WEC Estonia, proposed higher resource taxes for oil shale to enable profits to be shifted from companies to the government. He also suggested for a fund to be set up which would invest the income from national resources into both Estonian and foreign assets, as Norway and Denmark have done. This would help Estonia prepare for the time when oil shale – and therefore revenues from selling natural resources – run out.

Einari Kisel agreed with this proposal, but cautioned that the government should also have a plan of what to do if there is no income from the country’s oil shale resource. He cited that common Nordic electricity market might reduce the Estonian sector’s competitiveness and reduce government revenues.

Speakers agreed that a long-term energy plan is needed, but many also emphasised the need to remain flexible and open to new alternatives.

Ando Leppiman, Deputy Secretary General for Energy in the Ministry of Economic Affairs and Communication, said: “We must have a long-term strategy, but … we mustn’t limit ourselves to certain technologies and we mustn’t set ourselves unnecessary restrictions.”

“We should be ready to support offshore wind farms if this is the best option available or nuclear if this should happen to be the best technology on the market,” Mr Leppiman added.

Juhan Parts agreed with this view, adding that the country is “not rich enough to experiment with immature technologies.”

Speakers also expressed the importance of greater regional integration and innovation.

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Sandor Liive, Chairman of WEC Estonia, proposed higher resource taxes for oil shale

Martin Kruus, head of the Estonian Wind Energy Association, said that an integrated system would allow Europe to use the strengths of each country to all countries’ benefit.  This also makes sense given that cross-border transmission lines are already in place.

Ando Leppiman pointed out that the ministry has plans that are dependent on the regional and European context.  This includes the export of its surplus renewable energy to wider Europe, which is seeing increasing demand for clean energy to fulfil carbon reduction targets.

Raul Kotov, Board Member of Eesti Gaas, said that energy plans must enable competition between energy sources and technologies to encourage innovation. “The government shouldn’t subsidise energy sources but instead should invest into R&D to find new and better ways to fuel our development,” he said.