August 25, 2022 [ News Err ] – While Fingrid, the Finnish grid operator, has warned of the possibility of winter blackouts, Elering, the Estonian TSO, is certain that the new LNG terminal will guarantee adequate electrical generation in the region.

In its examination of supply security conducted last winter, Elering estimated that Estonia’s average winter peak demand of around 1,600 megawatts can be satisfied by on-site generation capacity. Nonetheless, during colder winters more imports could well be required. This occurs when weather conditions with low wind and sunlight coincide with peak demand.

Erkki Sapp, the head of Elering’s energy market department, said that this type of collaboration has provided us with certainty against blackouts, but this year there are slightly bigger concerns.

“The risks of natural gas supply security have significantly increased in the context of energy market trends,” Sapp said.

“The primary concern is whether Europe, particularly central Europe, has enough natural gas to provide sufficient quantities of energy.”

Sapp continued that although all signs point to the existence of substantial gas reserves, “as said earlier, the risks have certainly increased and all system operators are worried.”

Estonia relies on Finland and Finland on Estonia

Natural gas concerns prompted Finland’s transmission system operator Fingrid to issue a warning about possible power outages this winter. Only up to 85 percent of Finland’s peak domestic electricity consumption can usually be met and the remainder has to be imported from Estonia or Sweden.

On the other hand, the lion’s share of Estonia’s imported power comes from Finland. As also in Latvia and further south in Lithuania power consumption exceeds output, Sapp suggested looking at the larger region before transferring the Finns’ concerns onto Estonia. “Moreover, prior studies have indicated that there is no longer a need to control energy consumption,” Sapp explained.

Minister: Power outages unlikely in Estonia but risks have gone up
Sapp also emphasized that the production capacities, i.e. the requisite equipment, are still available throughout the region and are able to provide supply security. It is necessary, however, to ensure that the plants have sufficient fuel.

“And it is in our region that we are collaborating with the Finns to bring additional LNG supply capacity to the Gulf of Finland’s shores,” Sapp added. “This will address our region’s gas supply security issue.”

Norwegian power export restriction might disrupt the market

There is yet another issue on the Finnish side concerning the electricity system. Terje Aasland, Norway’s minister of petroleum and energy, has said that the government is likely to limit power exports as the region’s largest hydropower producer’s reservoirs are at historically low water levels.

“The government prioritizes replenishing reserves and ensuring the security of its country’s electricity supply,” Aasland said.

The decision to do so would have repercussions for Finland via neighboring Sweden. On Monday, system operators from Finland, Sweden and Denmark published an united statement urging the Norwegian government to abandon this plan.

“If exports were restricted, electricity would not be available as usual and the price would reflect this,” Asta Sihvonen-Punkka, the managing director of Fingrid, told Finland’s daily Helsingin Sanomat.

The Nordic grid corporations said that the Norwegian government is unaware of the advantages of the power market. In their appeal, they stress that the Norwegians’ decision could set off a domino effect with other nations beginning to contemplate implementing similar limitations.

Kiisa backup power plant can’t lower electricity prices

“Concerns have been raised about the fact that we have spent over two decades building the European single market and are now willing to abandon it during a crisis,” Sihvonen-Punkka said.

Sapp referred to the Norwegians’ idea as unsettling. The most crucial factor, he said, is understanding the potential repercussions.

This could be good for building up a strategic winter reserve; however, if the free flow of electricity is limited in any way, Sapp said, this could have a serious impact on our supply security.

Due to rising prices the emergency power plant in Kiisa should remain inactive

No one has attempted to predict the winter electricity price, which includes the cost of delivering LNG to the region and power plants, as of yet. It does not affect supply security, Sapp said.

“From Elering’s perspective, supply security is primarily evaluated based on whether sufficient electricity is available to meet demand,” Sapp explained.

Elering lacks direct control over electricity costs. It owns the Kiisa emergency power plant that is also capable of running on liquid fuel but does not participate in the market.

Even if the highest bidder raised the stock exchange price to €10,000 and it could be replaced by burning fuel oil in Kiisa, the plant would not be put into operation.

The 250-megawatt power plant in Kiisa will only become operational if another generating unit unexpectedly fails.

“As we all know, generation and consumption in the electricity system must be balanced. Otherwise, a shortfall will lead to decreased consumption or, worse, the system going offline,” Sapp said.

This means that if the Kiisa plant was already up and running and the Auvere Power Plant failed unexpectedly, there would be no way to fill the void.

“That is why reserves are held rather than made available to the market,” Sapp said.

Sapp also said that both European and Estonian law prohibits the use of a reserve like Kiisa to influence market prices.

“As neutral parties, transmission system operators should not be influencing market prices.”

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