Energy situation in Estonia,

current and future developments

Ando Leppiman

Deputy Secretary General

Ministry of Economic Affairs and Communications

0

5

10

15

20

25

30

35

40

45

50

TJ

x 1

0000

RES, TJ

Natural gas, TJ

Liquid fuels, TJ

Solid fuels, TJ

Source: Eurostat

Energy consumption pattern in Estonia

Electricity from oil shale 18,7%

Shale oil 12,7%

Wood and Peat 3,0%

Oil shale 26,3%

Wood 11,5%

Peat 0,6%

Other domestic energy 0,5%

Gas 8,4%

Other transport fuels 13,0% Other import energy

5,2%

EXport 20,3%

Energy balance

Estonian energy policy

National energy policy

• Adopted in Parliament June 2009

• Key issues for Estonia

– Security of electricity supply, reduction of carbon intensity on power generation mix

– Future of domestic oil shale power generation

– Oil shale mining and shale oil production

– Diversification of natural gas supply sources

– Opening of electricity market

– More efficient energy consumption

– Higher share of renewable energy

– Becoming a member of IEA

• Renewal process of energy strategy initiated

– Initial phase outsourced to Estonian Development Fund (setting up expert groups, discussions)

– Seminars organized by WEC-Estonia

• Topics under discussion

– Quantitative analyses of external factors influencing Estonian future on energy matters

– Technologies, sources and locations for future power portfolio

– Future energy consumption

– Ways for energy efficiency and smart solutions

– Definition of energy security of supply for Estonia and to what extent we can afford that

– Future of the district heating and decentralised energy production

New Long-term energy market

development plan 2030+

Power market

Baltic regional electricity market

Planned

Existing

Market

volume

• Estonia got transitional period for market opening - fixed in the

Estonian accession agreement

• Preconditions were fulfilled

– Connections with other countries

– Well functioning regulative environment

– Existing power exchange

– Independent regulator

– Independent transmission system operator and functioning

infrastructure

– Existence of market participants – producers and electricity

sellers

• Possibility to change seller before or after market opening

• Agreement with seller should be signed 21 days prior to change

of the seller

• Universal service is provided by the distribution company if no

agreement with electricity seller is signed

Electricity market opening

• Knowledge on electricity market opening increased during a year 34

percentage points

• By the midnight of 31 December 66,4% of electricity consumers in Estonia

signed contract for power purchase (465 000 contracts)

• Contracts with fixed end date 80%

• 7 sellers to household market, 9 sellers to larger customers

Elektrituru konkurentsile avanemine

5

Teadlikkus elektrituru konkurentsile avanemisest Kas Te olete kuulnud, et Eest i elekt r iturg avaneb 1 . jaanuarist 2 0 1 3 konkurentsile? % Eesti 15-74-aastastest elanikest

6 4 %

3 5 %

1 %

jaanuar 2 0 1 2

jah ei

H kasv -september), mil teadlikkus elektrituru

E 15-24-aastaste vanusegrupis, keda elektrienergia ostmisega seonduv

Ka mitte-eestlastest ja Virumaa elanikest, kes olid eelmiste uuringulainete ajal halvemini informeeritud

7 9 %

2 1 %

juuni 2 0 1 2

9 2 %

8 %

septem ber 2 0 1 2

9 8 %

2 %

detsem ber 2 0 1 2

Electricity market opening

Gas market

Great Baltic area relies entirely on

Russian gas imports

• Single supplier of natural gas, vertically integrated gas

monopoly

• No compressor stations in the border

• Gas infrastructure doesn’t meet N-1 criteria

• Gas price highly tied with oil prices

• Gas share in total energy consumption around 10%

• Unbundling TSO and gas supplier

• New infrastructure (interconnections, LNG terminals)

• Diversification of gas suppliers, Internal gas productions

• Harmonised gas market development within the region (Baltic

States, Finland), market based gas prices

• Gas share increase in total energy consumption (power,

transportation, industry, district heating)

• Bunkering services and harbours development

Challenges and oportunities in Estonian

gas market

Summer Winter

Challenges in Estonian gas market

• Great Baltic area relies entirely on Russian gas supplies and

only Latvia and Finland are compliant with N-1 rule regarding

the security of supply

• Finland, Estonia, Latvia and Lithuania gas market is currently

total about 10 bcm/y

• If gas supply diversification were enhanced and the required

infrastructure were developed accordingly, market could grow

up to 16 bcm/y

• With the additional upside of 1.5 bcm/y for LNG bunkering

• To expand supply options and achieve security of supply, an

LNG terminal of 4bcm/y is foreseen

• Upgrades of the existing interconnections “Intrabaltic

connections”

• New pipeline connections as Balticconnector and GIPL

Great Baltic regional gas market

development

Development of Renewable Energy

Targets of EE and RES policy

• National RES target

– target for renewables – 25% from gross final energy consumption in 2020, 10% for transport

• Support scheme for renewable electricity

– Premium tariff support scheme to market price (ca. 45 €/MWh)

– premium tariff 53.7 €/MWh for RES

– Premium tariff 32 €/MWh for efficient co-generation

– available for 12 years from start of production

– for wind, support is available until 600 GWh is generated during the calendar year

• Investment support schemes

– for installation of wind energy capacities

– for small CHPs (biogas, biomass) less than 2 MWel

– For district heating networks and boiler houses to lower the losses and fuel switch

Liquid fuels market

• Estonia depends on oil import 100% (excl. shale oil). In case of incl. shale

oil, the dependency is 47%

• There is no refinery in Estonia, but under planning are 1,6 Mt/y refineries

which exceeds Estonian liquid fuels consumption by 60%

– Eesti Energia 20 000 bbl/d (980 kt/y) - 2017

– VKG 14 000 bbl/d (685 kt/y) - 2016

NGL,

kt

Bitumen,

kt

Lubricants,

kt

Fueloil,

kt

Shaleoil,

kt

Lightfuel

Oil,kt

Diesel,

kt

Gasoline,

kt

Jetfuel,

kt

Total,

kt

Import 9.2 39 4 169 0 7 590 261 36 1115

Export 0 0 422 0 0 0 0 422

Marinebunkers 0 169 0 0 24 0 0 193Netimport 9.2 39 4 0 -422 7 566 261 36 500

Inlandconsumption 7.5 39 4 2 131 8 572 261 34 1059

Importdependency 47.3%

Liquid fuels balance 2011

• Implementing act proposed under the Fuel Quality Directive at the end of 2011 turned out that its main aim was to keep all unconventional transport fuels (produced from Canadian and other oil sands, Estonian oil shale, coal) away from the EU market

• Estonia is concerned that the methodology in the implementing act of the Fuel Quality Directive will not produce GHG savings globally which is the aim of the climate change policy

• Instead, it will bring along several negative effects that will damage the competitiveness of the EU industry:

– The proposal has a negative impact on the EU refineries

– It endangers energy security by discriminating against domestic unconventional petrol and diesel fuels that have the potential of bringing an added value and security of supply to the EU market. The EU is already heavily dependent on import fuels

– It will lead to carbon leakage. Transporting fuels to third countries will cause additional CO2 emissions

– It creates severe administrative burden to suppliers and the state

– It will not take into account the investments already made or planned in the EU refining sector (including the oil shale sector.

– Estonia pursues towards less carbon intensive use of oli shale

Fuel quality directive of EU

• All stocks are owned and maintained by OSPA

• All stocks are established in the form of final product

• Significant share of the stocks are held in neighbouring

countries

Oil Stocks in tons in days *1

Gasoline 80 288 112

Diesel *1 143 862 91

Jet A-1 9 139 98

Heavy Fuel

Oil

1 732 126

Oil stockpiling

Thank you!