Conference: Energy policy must take into account the global, European and national aspects

World Energy Council (WEC) Estonia held the annual energy policy conference in Tallinn; the conference was titled “Energy Trilemma – Estonia’s position in the World”. Conference was attended by representatives of Estonian parliament, ministries and many different stakeholders. In was concluded that energy policy must be synchronized to a greater degree (both regionally and in the EU) and a wide variety of different resources and technologies must be used.

Current Estonian Energy Policy

In this year’s WEC energy sustainability index Estonia placed 35 out of 94 WEC member states. Compared to last year Estonia climbed 3 places in the index. The figures are equally mediocre in all the categories: security of supply, environmental impact mitigation, and social equity.

There is ample room for improvement in all these categories. The index also illustrates the fact that Estonian energy policy has been very balanced throughout the years, none of the aspects is lagging behind too much. On a side note, it has to be mentioned that Estonia’s relatively good position was achieved thanks to the overall development of our society. Had it been only the energy related indicators, Estonia would have fared far worse – somewhere in the second half of the list.

Being a small country, Estonia has certain limitations which influence our performance in the index. The bigger the GDP of a country, the better the score in affordability of energy, and the lower the emissions per unit of GDP. Looking at Estonia’s neighbours it can be seen that almost all of them are ranked higher in the index: Latvia is 37th, Lithuania 31st, Finland 5th and Sweden 1st. Out of 5 Nordic-Baltic countries we are second to last.

Estonia must diversify its electricity production. Today most of electricity produced in Estonia comes from oil shale fired power plants. In addition to not being diverse and therefore posing a risk to security of supply, oil shale fired power plants also have quite a big environmental impact, which lowers our overall score in the sustainability index.

Our neighbours on the other hand use a wide range of different technologies and energy sources: coal, nuclear energy, natural gas, hydro and wind. Having this kind of variety is not only good for security of supply, but it also limits country’s vulnerability to outside supply and price risks.

Estonia as a small country faces the challenges how to diversify its energy portfolio, how to limit the environmental impacts, and how to keep costs to the final consumer down. “We have been focusing on one resource, oil shale, for a very long time. This must change, but we must also guarantee that the equilibrium wouldn’t shift totally to the other extreme. This wouldn’t be neither in the interest of the consumers nor the environment. If we speak about our energy portfolio, then diversification must be our goal,” said the Minister of the Environment Keit Pentus-Rosimannus.

Conflicting Energy PoliciesEinari Kisel, Senior Fellow of European Policies in the World Energy Council gave a keynote presentation at the conference. He said that conflicting policies are not unique to Estonian policy – this is a common trait for all European nations. “Unlike other regions of the World, Europe is very liberal. We have a large number of stakeholders trying to shift the balance in their favour. The final outcome is highly dependent on the stakeholders involved,” Kisel commented.

Einari Kisel described Estonia as a country with a very open economy, which in turn makes us very dependent of the global changes. “The global developments will influence us in the future even more than today. This is something we must remember and take into account. People might think that we are constantly taking U-turns with our policy, but in reality this is just the government reacting to global changes,” Kisel said.

Keit Pentus-Rosimannus was happy to see that Estonia’s position has improved during the years. “Already the fact that environmental impact is under discussion today, is a great step in the right direction. Not too long ago environment was a topic that was largely ignored. If there was a possibility to talk only of the positive, this was done,” Pentus-Rosimannus concluded.

Juhan Parts, the Minister of Economic Affairs and Communication focused on three aspects of Estonian energy policy: global context, national aspects, and balancing the energy trilemma.

“The global context is full of contradicting beliefs – some believe we are running out of oil, others say there has never been more; some say a climate catastrophe is coming, others say just the opposite,” said Parts. He added: “Estonia cannot copy its energy policy from other countries; we have our own national aspects that we must adhere to. We have oil shale, border with Russia and vast infrastructure already in place.” Third point Parts made was regarding the balance between having clean but also affordable energy.

Emissions Trading and Environmental Taxes

Einari Kisel finds that the principles of European climate policy are right, but how to implement this should be rethought so it would give right signals to the market participants and to the wider audience.

“The question is if emissions trading is built on the right foundations? Maybe we should have tax on CO2 or the minimum price pre-set, these are things discussed in Europe right now. For example Germany is having a lot of problems because of high energy prices and because of the uncertainties posed by CO2 price in the future. Companies are closing shop and moving elsewhere,” Kisel added.

Sandor Liive, CEO of Eesti Energia proposed having higher resource taxes for oil shale and setting up a fund for investing income from our national resources, as has been done in Norway and Denmark. Einari Kisel agreed with the proposal but also cautiously added that the government should also have a plan what to do if there is no more income from oil shale.

“For example, common electricity market with the Nordic countries means that power plants in Narva might not be competitive. This would mean lower environmental impact, but at the same time smaller income for the government. These possibilities must be taken into account,” said Kisel. Keit Pentus-Rosimannus mentioned that in Estonia all the environmental fees and taxes are invested to combat the impact to the environment.

Long-Term Plan

Einari Kisel said that Estonia has set itself a number of goals, all of which have been achieved and now we should think what should be the next goal.

“Sometimes national goals have undesired outcomes, companies don’t use the methods hoped by the government, instead companies look for the most profitable way to achieve these goals. One concrete example is Germany where high subsidies for PV were thought to boost local industry, the real outcome is that German PV manufacturers are bankrupt and the Chinese have taken over the market. So Estonia must be sure to find measures that actually boost our development,” Kisel elaborated.

Juhan Parts on the other hand found, that a country as small as Estonia must always follow the lead of others and must always remain flexible to react to the changes on the global market. “We are not rich enough to experiment with immature technologies,” Parts added.

Deputy Secretary General for Energy in the Ministry of Economic Affairs and Communication, Ando Leppiman, said that the ministry has plans that are dependent on the regional and European context. Estonia wants to be able to import its surplus of renewable energy via the mechanism of statistical transfers. Ando Leppiman continued that Estonia must always be flexible; this is one of the greatest strengths a small country has.

“We must have a long-term strategy, but this strategy must be such that we keep ourselves options to choose the best alternative available. We mustn’t limit ourselves to certain technologies and we mustn’t set ourselves unnecessary restrictions. We should be ready to support off-shore wind parks if this is the best option available or nuclear if this should happen to be the best technology on the market,” Leppiman said.

Martin Kruus, head of Estonian Wind Energy Association said that Estonia, and Europe as a whole, must become more integrated. “What’s the use of investing into cross-border transmission lines, if these are not used?” Kruus rhetorically asked. He added that the main point of having an integrated system is to use the strengths of each country so that in the end everybody would win.

Raul Kotov, Board Member in Eesti Gaas, said that having plans makes sense, but plans should be universal and not limit competition between energy sources and technologies. “It is important to give everybody a fair opportunity on the market. The government shouldn’t subsidize energy sources but instead should invest into R&D to find new and better ways to fuel our development,” found Kotov.

CEO of Tallinna Elektrijaam Andres Taukar thought it necessary to have long-term plans. “District heating infrastructure built today must remain in operation for the next 50 years. One must have long-term plans for such investments,” he firmly added.

Founded in 1923, the World Energy Council is the only truly global and inclusive forum for thought-leadership and tangible engagement committed to our sustainable energy future. Estonia joined WEC in 1937 in Paris, where Estonia was represented by the National Power Committee headed by Director J.Veerus and Professor P. Kogerman. In 1998, the 17th World Energy Congress in Houston formally reinstated Estonia’s membership of WEC. Today the Secretary General of WEC Estonia is Mihkel Härm.