1、Energy Policy ReviewEstonia 2023IEA member countries:AustraliaAustriaBelgiumCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandRepublic of TrkiyeUnited Kingdo

2、mUnited StatesThe European Commission also participates in the work of the IEAIEA association countries:Argentina BrazilChinaEgyptIndiaIndonesiaKenyaMoroccoSenegalSingapore South Africa Thailand UkraineINTERNATIONAL ENERGYAGENCYThe IEA examines the full spectrum of energy issues including oil,gas an

3、d coal supply and demand,renewable energy technologies,electricity markets,energy efficiency,access to energy,demand side management and much more.Through its work,the IEA advocates policies that will enhance the reliability,affordability and sustainability of energy in its 31 member countries,13 as

4、sociation countries and beyond.This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of any territory,city or area.Source:IEA.International Energy Agency Webs

5、ite:www.iea.orgEstonia 2023 Executive summary Energy Policy Review PAGE|3 I EA.CC BY 4.0.Executive summary This IEA Energy Policy Review comes at a critical moment for Estonia,which is facing notable challenges amid the climate and energy crises and the Russian Federations invasion of Ukraine.The IE

6、A commends Estonia for the steps it has taken to end all remaining energy trade with Russia while ensuring regional energy security,and for the work to accelerate the energy transition,including setting a 2050 carbon-neutrality target and a target for 100%of annual electricity demand to be covered b

7、y renewable energy by 2030.These targets require major investments across all sectors and improved energy sector planning.Estonia has notably decreased its greenhouse gas emissions(GHG),mainly due to an overall reduction in electricity and heat generation from oil shale and growth in generation from

8、 wind,solar photovoltaics(PV)and domestic forestry biomass.However,starting in 2020 net GHG emissions have been increasing due to a rebound in electricity and heat generation from oil shale and to land use,land-use change and forestry(LULUCF)becoming a net emissions source,mainly due to increased em

9、issions from forests.This report provides policy recommendations to help Estonia address its energy sector challenges and drive a clean,secure and just energy transition.It highlights international best practices relevant to Estonia and details areas where Estonias leadership can assist other countr

10、ies with their energy sector challenges.Estonia 2023 Executive summary Energy Policy Review PAGE|4 I EA.CC BY 4.0.Existing policies are insufficient to meet Esonias ambitious targets,but new policies are being developed to support more robust emissions reductions.Estonias ambitious targets require a

11、ccelerated renewables deployment,increased electrification and phasing out oil shale generation while ensuring a just transition that maintains energy affordability and supports economic development in the oil shale region.The IEA commends Estonia for establishing a Ministry of Climate with broad-ra

12、nging authority over the energy system and for starting work on a climate law.These steps will help provide the policy clarity and broad action needed to meet Estonias climate and energy ambitions.The IEA recommends Estonia pass a climate law that sets legally binding targets for carbon neutrality a

13、nd intermediate emissions reductions,allocates responsibilities for implementation,and sets clear targets for phasing out oil shale and other fossil fuels.Changes to fiscal and tax policy are needed to encourage consumers to move away from fossil fuels and support the uptake of low-emission,more eff

14、icient,renewable and innovative options.Estonias excise duty rates are not based on GHG emissions or other environmental factors.In addition,Estonia is the only IEA member country without taxation on private vehicles and has one of the oldest and least efficient vehicle fleets.IEA recommends a broad

15、 effort to align price signals with climate and energy goals by updating energy excise duties;increasing carbon prices;quickly introducing vehicle taxation to drive uptake of efficient vehicles,including electric vehicles(EVs);and ending support for fossil fuels.This should be done in a way that gen

16、erates sufficient revenue to support a just clean energy transition.A major electricity system transformation is needed to achieve the 100%renewable electricity target and put Estonia on the path to climate neutrality.The IEA commends Estonia for taking steps towards these targets but notes a lack o

17、f clarity on how they will be achieved and whether existing energy sector planning processes will effectively guide the country to a carbon-neutral energy system.The IEA recommends that the government ensure co-ordination between all components of electricity sector planning,including electrificatio

18、n,to clarify to energy sector stakeholders which pathways to climate-neutral electricity generation will be supported by policy,market regulations and incentives.It is also important that the government develop a streamlined and transparent system for spatial planning and permitting of renewable ene

19、rgy and supporting infrastructure to ensure projects can be deployed at the needed pace.Meeting climate targets will require stronger forestry and biomass policies.To meet its climate targets,Estonia needs to increase LULUCF emissions removals.However,LULUCF has been a notable emissions source every

20、 year since 2018,driven mainly by changes to Estonias forests,including increased logging.Forestry biomass plays a major role in Estonias energy system,accounting for 23%of total energy supply in 2022(compared to the IEA average of 3.5%in 2022)and is a key fuel for heating.The European Union ban on

21、wood imports from Russia could increase demand for Estonias forestry energy products(40%of which were exported in 2021),potentially increasing prices and reducing domestic availability.Measures to boost LULUCF carbon absorption could reduce the availability of biomass for energy.The IEA recommends t

22、hat the government Estonia 2023 Executive summary Energy Policy Review PAGE|5 I EA.CC BY 4.0.develop strong measures to ensure that LULUCF delivers net emissions reductions in line with climate and energy targets,including a robust forest inventory methodology,well-enforced biomass sustainability cr

23、iteria and clear estimates on the environmentally sustainable level of biomass available.In addition,efforts to reduce emissions from heating should focus on heat pumps and thermal storage.Estonia has taken steps to ensure regional gas security while working to reduce its gas demand and decarbonise

24、its gas supply.Natural gas plays a relatively minor role in Estonias energy system and is used mostly for heating.In 2021,natural gas accounted for just 8.6%of total energy supply(versus the IEA average of 30%)and came mostly from Russia.In 2022,Estonia took swift actions to end its reliance on Russ

25、ian gas and secure regional gas supply and reduced gas demand to 5.8%of total energy supply.This included co-operation to open a new supply route from Finlands liquefied natural gas(LNG)terminal through the Balticconnector pipeline.Despite damage to this pipeline in October 2023,Estonia has a secure

26、 gas supply thanks to its emergency gas reserve in Latvias storage facility and access to Lithuanias LNG terminal.At the same time,Estonia has successfully boosted biomethane production and,with further efforts,could decarbonise its entire gas supply.The IEA recommends the government swiftly decarbo

27、nise the gas sector by developing a comprehensive policy for boosting biomethane production and demand.Estonia is leveraging a high level of digitalisation to support innovative efforts in the energy sector that can serve as examples for other countries.The online e-construction platform allows user

28、s to access information and documents related to most buildings,including building permits,energy demand and energy performance certificates(EPCs).Estonia is also developing a methodology to calculate dynamic EPCs based on metered energy demand,exploiting the countrys 100%coverage of smart meters.Th

29、ese steps would help to address the strong need for increased data on and action to improve the energy efficiency of Estonias old and relatively inefficient building stock.Estonia is also a leader in boosting critical minerals supply,an essential element for the energy transition.Estonia is home to

30、one of the few rare earth elements processing facilities outside of the Peoples Republic of China.Construction has started on a factory that will produce rare earth permanent magnets used in EVs and wind turbines,with a goal to start production in 2025,making it the first rare earth magnet factory i

31、n Europe.Estonia also has large phosphate deposits that may contain other critical minerals and present an opportunity for Estonia to support the energy transition and expand its economy,with the potential to use skills and expertise from the oil shale industry.The IEA encourages Estonia to quickly

32、determine its critical minerals production capacity and the investments needed to bring any such resource to market,and to explore other areas that can support a just and inclusive energy transition.The IEA emphasises that expansion of critical minerals production should avoid and mitigate adverse i

33、mpacts on the environment and local communities.Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|6 I EA.CC BY 4.0.1.Climate and energy policy Greenhouse gas emissions have declined but fossil fuels still dominate energy supply and demand Estonia has noticeably reduced GHG emissions

34、 since 2010 and aims to continue this trajectory with a goal to achieve climate neutrality by 2050 and an interim emissions reduction target for 2035(Figure 1.1).Emissions reductions from 2010 to 2021 were mainly driven by less use of oil shale for electricity generation.Figure 1.1 Greenhouse gas em

35、issions by sector in Estonia,2010-2021 and 2035 and 2050 targets IEA.CC BY 4.0.Source:IEA analysis based on UNFCCC(2023),Greenhouse gas inventory data.While emissions have decreased,Estonias gross domestic product(GDP)has been growing since 2010,with only a slight decline in 2020 from the impacts of

36、 the Covid-19 pandemic(Figure 1.2).At the same time,energy demand measured as total final energy consumption(TFEC)has been stable,showing a clear decoupling of economic activity from energy demand and reflecting a shift to an economy focused on services and non-intensive industry.Estonias population

37、 has been relatively stable,with a slight increase from 1.31 million in 2015 to 1.33 million in 2021.Estonias energy system is still dominated by fossil fuels,but the share of fossil fuels in total energy supply(TES)declined from 90%in 2010 to 71%in 2022(Figure 1.3).This was mainly driven by changes

38、 in electricity generation from oil shale,which dropped sharply in 2019 and 2020,but rebounded some in 2021 and 2022 as high electricity prices made oil shale generation economically competitive.The drop in oil shale generation has been offset by increased generation from bioenergy,wind and solar PV

39、;and the switch from being a net exporter to a net importer of electricity(Figure 1.5).-50 5 10 15 202002520302035204020452050Mt CO-eqTargetIndustrial processesWasteBuildingsAgricultureIndustryTransportElectricity and heatproductionLULUCFClimate nautralityNet GHG emissions:8 Mt CO2-eqEsto

40、nia 2023 1.Climate and energy policy Energy Policy Review PAGE|7 I EA.CC BY 4.0.Figure 1.2 Trends of gross domestic product,population,total final energy consumption and greenhouse gas emissions in Estonia,2005-2022 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.Bioenergy plays a major and inc

41、reasingly important role in Estonias energy system.From 2010 to 2022,the share of bioenergy in TES increased from 14%to 24%(compared to the IEA average of 6%in 2021).Bioenergy comes mainly from domestic forestry biomass(96%of bioenergy TES in 2021)and has played a key role in reducing fossil fuel us

42、e in both district heating networks and individual home heating systems(Figure 1.5).Natural gas plays a relatively small and declining role in Estonias energy system.From 2010 to 2021 the share of natural gas in TES fell from 9.6%to 8.6%,mainly due to a significant shift away from gas to bioenergy i

43、n district heating and lower gas demand from industry.In 2022,the share of natural gas in TES dropped to 5.8%mainly because of high prices.The buildings sector is responsible for the highest share of energy demand(53%in 2021),followed by transport(30%)and industry(17%)(Figure 1.4).Energy demand has

44、been growing for buildings and transport but declining for industry.Estonias building sector relies on a diversified energy mix,mostly from district heating,bioenergy and electricity.The transport sector is dominated by oil products(most diesel and gasoline used in road transport).Estonias relativel

45、y small industrial sector has a diverse energy mix with a notably high share of electricity.0.40.60.81.01.21.41.62005200720092001720192021Index 1=2005GDPPopulationTFECGHG emissionsEstonia 2023 1.Climate and energy policy Energy Policy Review PAGE|8 I EA.CC BY 4.0.Figure 1.3 Energy product

46、ion,total energy supply and total final energy consumption by fuel in Estonia,2010-2022 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.Figure 1.4 Energy demand by sector and fuel in Estonia,2010-2021 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.Figure 1.5 Electricity and heat supply by

47、 fuel in Estonia,2005-2022 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.79%72%60%70%67%62%050020001020152021Energy productionTotal energy supplyTotal final energy consumptionPJDistrict heatingElectricitySolar,wind and hydroBioenergyPeatNatural gasOilCoalOil s

48、hale0020001020152021BuildingsTransportIndustryPJDistrict heatingElectricityBioenergyNatural gasOilCoalOil shale85%78%37%57%-4-202468520202022TWhElectricity output and net tradeElectricity net tradeSolarWindHydroBioenergyPeatNatural gasOilOil shale gasOil s

49、hale0201520202022TWhHeat ouputEstonia 2023 1.Climate and energy policy Energy Policy Review PAGE|9 I EA.CC BY 4.0.Estonia has ambitious climate and energy targets and created a Ministry of Climate with broad authority Estonias energy and climate policies aim to achieve climate neutrality

50、by 2050 while maintaining a high share of energy independence and affordable access to energy.The key documents defining Estonias energy and climate polices,targets and supporting measures are the Energy Sector Development Plan until 2030,adopted in 2017,and the National Energy and Climate Plan(NECP

51、).The NECP is required for all European Union(EU)member states and must be regularly updated to detail a countrys contributions to achieving EU-wide targets.In June 2023,Estonia submitted an updated NECP that sets higher ambitions in line with the European Climate Law,the Fit-for-55 package and REPo

52、werEU.The updated NECP will be finalised in 2024.Estonia is also in the process of developing an Energy Sector Development Plan until 2035 to reflect its 2050 carbon-neutrality target and increased ambition of EU climate and energy policies.Estonia has already updated most of its 2030 energy and cli

53、mate targets,with the goal of putting the country on a path to carbon neutrality(Table 1.1).Table 1.1 Estonias energy and climate targets Target Metric 2021 status 2030 target Total GHG emissions(Mt CO2-eq)CO2-eq emissions 15.5 8(in 2035)Non-ETS GHG emissions CO2-eq emissions vs.2005-2.37%-24%Energy

54、 efficiency(PJ)Primary energy consumption 186 165 Final energy consumption 118.6 109 Renewable energy (%of gross final energy consumption)Total 38%65%Electricity 29%100%Heating and cooling 61%63%Transport 11%14%In addition to its national GHG emissions targets,Estonia has an EU mandate target to red

55、uce GHG emissions from sources outside the EU Emissions Trading System(ETS).Estonia also has targets for energy efficiency under the EU Energy Efficiency Directive(see Chapters 3,4 and 5).Under the EU Renewable Energy Directive,Estonia has targets for renewable energy in gross final energy consumpti

56、on,electricity and transport.Estonias target for renewable electricity to cover 100%of annual electricity demand by 2030 notably exceeds the EU requirement and is one of the most critical targets to put the country on a path to climate neutrality.The current target for renewables in transport is not

57、 sufficient to meet EU requirements and will need to be increased.The government has indicated that existing policies are insufficient to meet the 2030 and 2050 targets and is working to expand existing policies and develop new Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|10 I

58、EA.CC BY 4.0.ones that support stronger emissions reductions,with a focus on increasing the use of renewable energy,especially for electricity generation,and boosting electrification of energy demand(see Chapter 2).The government is also planning new measures to reduce sectoral emissions,especially

59、from buildings and transport(see Chapters 3 and 4).In July 2023,Estonia established a new Ministry of Climate with broad-ranging authority over energy,natural resources,housing and construction,transport,and transport infrastructure.The Ministry is responsible for the execution of the green transiti

60、on;climate policy,including sectoral climate plans;promoting cleaner technologies;expediting renewable energy;organising the circular economy;and environmental and nature conservation,among other areas.The IEA commends this approach,as it signals that addressing the climate crisis is a top priority,

61、allows co-ordination on climate action across the government and helps build political will for climate action.The Ministry of Climate should be instrumental in supporting a“whole-of-government”approach to achieve Estonias ambitious energy and climate targets.It should take a central role in co-ordi

62、nating the several state actors that collaborate on renewables,energy efficiency and other areas of the energy transition.This includes the Ministry of Finance,electricity and gas system operators,the Competition Authority,the Consumer Protection and Technical Supervisory Agency,the Environment Inve

63、stment Centre,and the Estonian Business and Innovation Agency.The government should bring these players together,providing the necessary structures,governance,project management and support to ensure the 2030 and post-2030 targets will be delivered.Numerous IEA member countries have put climate and

64、energy-related matters under the responsibility of one ministry and have shown that this helps to push more aggressively for an energy transition.Estonia can look to the positive examples set by Canada(Ministry of Environment and Climate Change),Norway(Ministry of Climate and Environment),Portugal(M

65、inistry of Environment and Climate Action)and Switzerland(Federal Office for the Environment).The IEA commends Estonia for starting work on a climate framework law,which most other European countries have adopted.In September 2023,the Ministry of Climate started drafting a national climate law with

66、the aim for it to enter into force by 2025.A climate framework law generally enshrines in legislation the long-term carbon-neutrality goal;sets mechanisms to define intermediate targets;allocates responsibilities and accountability mechanisms for achieving the targets;and establishes an independent

67、advisory body to support policy making and review implementation and progress.Examples of well-implemented climate laws that could serve to guide Estonia include Frances Law on Energy and Climate,Irelands Climate Action and Low Carbon Development Act,New Zealands Climate Change Response(Zero Carbon)

68、Amendment Act,Norways Climate Change Act,and the United Kingdoms Climate Change Act.These countries experiences show that a climate law strengthens evidence-based policy making,stimulates public debate and helps focus climate change policy on the long-term goal.Estonia has a GHG reduction Estonia 20

69、23 1.Climate and energy policy Energy Policy Review PAGE|11 I EA.CC BY 4.0.target for transport but not for other sectors.The government should consider establishing GHG emissions targets for all sectors,backed with sectoral carbon budgets clarifying how each sector contributes to meeting overall GH

70、G emissions targets.This approach has proved useful in France,Greece and Ireland.A climate law also provides an opportunity to establish policy clarity on key topics such as legally binding dates for phasing out fossil fuels.For example,Greeces 2021 National Climate Law requires a complete phase-out

71、 of lignite-fired generation by 2028(lignite-fired generation was historically the largest source of electricity in Greece,covering around 60%of generation as recently as 2005).Estonia should consider establishing a legally binding date for phasing out oil shale-fired generation.Estonias Development

72、 Plan for Climate Change Adaptation to 2030 provides a comprehensive roadmap to identify climate hazards and build climate resilience.However,climate resilience and adaptation are now as well reflected in key energy sector policy documents.The formation of the Ministry of Climate and the passage of

73、a climate law should be used to mainstream climate resilience and adaptation across the energy sector,including policy making and implementation,and infrastructure planning and investments.The IEAs Estonia Climate Resilience Policy Indicator and Climate Resilience for Energy Security report can supp

74、ort energy sector stakeholders to take concrete steps to boost climate resilience and adaptation.Use of high emissions oil shale has significantly declined but is still a key part of Estonias energy system Estonia is unique among IEA member countries as its energy supply relies on oil shale,a hydroc

75、arbon-rich sedimentary rock that has slightly higher energy density than lignite.Oil shale is mined domestically;burned to generate electricity and heat;and liquefied to produce shale oil,a synthetic crude oil.Estonia does not have any oil refineries and all shale oil is exported,mainly to the Nethe

76、rlands,where it is blended with heavy fuel oil used for shipping.Estonias use of oil shale has declined,but it is still the countrys largest energy source.From 2011 to 2021,the share of oil shale dropped in both TES,from 71%to 60%,and electricity generation,from 85%to 48%(with a rebound to 57%in 202

77、2).The lower use of oil shale helped Estonia to drop from the 3rd-highest carbon intensity of energy supply in the IEA in 2017 to the 18th-highest in 2022,41.5 tonnes carbon dioxide per terajoule(t CO2/TJ),versus the IEA average of 44.4 t CO2/TJ);however,that year Estonia had the fourth-highest carb

78、on intensity of electricity generation.Oil shale production has fluctuated notably in recent years,driven mainly by variation in the demand for oil shale for electricity generation(Figure 1.6).In 2022,66%of oil shale was used for electricity generation followed by liquefaction(34%).Estonia 2023 1.Cl

79、imate and energy policy Energy Policy Review PAGE|12 I EA.CC BY 4.0.Figure 1.6 Oil shale production by use in Estonia,2011-2022 IEA.CC BY 4.0.Source:IEA analysis based on Statistics Estonia(2023),Consumption of Fuels by Economic Activity and Type of Fuel.Estonias oil shale industry has many negative

80、 environmental impacts.It is one of the most carbon-intensive forms of electricity and heat generation and of oil production.It results in large volumes of solid waste and air pollution and requires significant volumes of water.The government has expressed a general goal to reduce oil shale use,but

81、Estonia does not have legally binding targets regarding the phase-out of oil shale generation,liquefaction or mining.Eesti Energia,a state-owned energy company,is the largest oil shale producer and owns all oil shale power plants.The companys long-term action plan adopted in 2021 aims to end oil sha

82、le electricity generation by 2030 and transition to 100%renewable generation.Eesti Energia has taken steps to reduce electricity generation from oil shale.From 2020 to 2021,619 megawatts(MW)of oil shale generation capacity was permanently closed.Based on concerns over generation adequacy,Eesti Energ

83、ia has been required to keep 1.0 gigawatt(GW)of oil shale generation available until 2026 at a significant financial loss(see Chapter 2).The IEA recommends that the government establish a more ambitious and legally binding target to phase out electricity generation from oil shale by at least 2030,wh

84、ich could be done in the climate law.The government should also examine what investments are needed to ensure secure operation of the electricity system as oil shale generation is phased out and whether government support may be needed to ensure such investments are realised in the needed time frame

85、.This would help market actors to take relevant decisions and contribute to reducing Estonias GHG emissions.Estonia plans to continue liquefaction of oil shale.In 2020,the government provided Eesti Energia with EUR 125 million to support the construction of a new oil shale liquefaction plant.The pla

86、nt is expected to start full operations around 2025.Eesti Energias long-term action plan notes that the company aims to stop producing liquid fuels from oil shale after 2040,with the goal to instead produce raw materials for the chemical industry.The plan aims for all shale oil production to be carb

87、on-neutral by 2045 at the latest;however,it is not clear how this can be achieved or 0 5 10 15 20 25200002020212022ktOther industrialprocessesElectricity and heatgenerationLiquefactionEstonia 2023 1.Climate and energy policy Energy Policy Review PAGE|13 I EA.CC BY 4.

88、0.how much it would cost.The IEA recommends that the government does not provide any funding or support to oil shale liquefication and clarifies how continued oil shale liquefaction is compatible with Estonias 2050 climate-neutrality target.Oil shale mining,electricity generation and liquefaction al

89、l take place in Ida-Viru County,located in the north-east of Estonia along the border with the Russian Federation(hereafter“Russia”).The plans to significantly reduce oil shale production and use will have notable impacts in this region,as the oil shale industry is the key driver of the economy.Esto

90、nia aims to reduce these impacts through a Territorial Just Transition Plan that is supported with EUR 354 million from the EU Just Transition Fund from 2021 to 2027.This funding will support local investments in renewable energy and the reskilling of local workers.The government should closely moni

91、tor the implementation of the territorial just transition plan and complement EU funding with national funding as needed,especially if this can help accelerate the phase-out of oil shale production.In 2021,the IEA convened a Global Commission on People-Centred Clean Energy Transitions,including mini

92、sters and civil society leaders from IEA member and non-member countries.The Commission published 12 recommendations for countries to make the energy transition truly people-centred and inclusive.When designing and implementing just transition policies,the IEA suggests Estonia follow the Commissions

93、 framework,defining the principles for just energy transitions.Accelerated infrastructure permitting,clarity on a market-focused policy approach and an expanded electricity market would help drive the energy transition For Estonia to achieve its climate and energy targets,there will need to be a str

94、ong acceleration in the deployment of energy infrastructure,including new electricity generation capacity,expansion of the electricity transmission and distribution network,biomethane production,EV charging,among many others.The IEA commends Estonia for the work reducing barriers to the deployment o

95、f renewable energy and electricity infrastructure projects.However,the IEA notes that there are still risks related to permitting,environmental impact assessments and defence concerns.In addition,the current spatial planning process creates great uncertainties around project investment decisions and

96、 deployment timelines.The government needs to support the energy transition by developing streamlined and transparent permitting processes and a broadly consulted spatial plan,underpinned by robust data.This will require a transparent and efficient system for infrastructure planning and permitting.T

97、he IEA report Electricity Grids and Secure Energy Transitions provides recommendations on the key challenges to accelerating electricity infrastructure deployment.The government places a strong reliance on market measures and aims to limit subsidies and state intervention needed to achieve its clima

98、te goals.However,the need to accelerate the energy transition,especially in relation to reaching the 100%renewable electricity goal,will likely require targeted subsidies.In addition,Eesti Energia,a large state-owned company play a major role in energy markets.Some Estonia 2023 1.Climate and energy

99、policy Energy Policy Review PAGE|14 I EA.CC BY 4.0.transparency on its expected role is provided through the owners expectations for Eesti Energia.However,in some cases its actions do not align with energy market signals,for example,the government requirement for Eesti Energia to keep 1.0 GW of oil

100、shale generation available through 2026.There is a need for the government to clarify where its sees markets driving the energy transition and maintaining energy security,where economic incentives or other non-market measures are needed,and where state-owned companies will take a leading role.Transp

101、arency in these areas will help to ensure the needed investment can take place in an efficient and timely manner.The IEA notes that Estonias small market creates challenges in attracting the investment needed to drive the energy transition.The IEA encourages Estonia to continue working to establish

102、a common electricity wholesale market covering all three Baltic states(see Chapter 2)and to expand the common gas market(see Chapter 7).Through the Baltic Energy Market Interconnection Plan,Estonia co-operates with Denmark,Finland,Germany,Latvia,Lithuania,Norway,Poland and Sweden to achieve open and

103、 integrated regional electricity and gas markets between EU countries in the Baltic Sea region.The government should ensure that this group remains sufficiently resourced and active and should use it as a forum to discuss and plan the feasibility of a cross-border bidding zone.Meeting greenhouse gas

104、 emissions targets will require stronger forestry and biomass policies To meet its climate targets,Estonia needs to increase net carbon sinks from LULUCF by an additional 0.434 Mt CO2-eq per year by 2030 compared to the average sink between 2016 and 2018.LULUCF was historically an emission sink,but

105、LULUCF removals dropped sharply in 2014 and LULUCF has been a notable emissions source every year since 2018,reaching 2.9 Mt CO2-eq in 2021.The recent transition of LULUCF from a GHG emissions sink to a source is a regional problem that has also impacted Finland and Latvia.Forests have the largest e

106、ffect on Estonias LULUCF emissions.Historically,Estonias forests sequestered carbon due to the rapid increase in growing stock.Forest carbon sequestration has declined in recent years due to the high proportion of mature and near-mature forest stands;increased logging;and a growing share of forest l

107、and being treeless areas,areas under regeneration and young stands.Conversion of other land areas to forests through afforestation and reforestation has been decreasing,and the total forest area is not increasing.Wetlands were also a major cause of increased LULUCF emissions,driven mainly by peat ex

108、traction.The government estimates that LULUCF will continue to be a net source of GHG emissions and is developing measures to reverse this trend and improve the methodology to more accurately determine LULUCF emissions.The government should develop a strong set of measures to ensure LULUCF delivers

109、net emissions reductions in line with climate targets.This should include a robust forest inventory methodology,well-enforced biomass sustainability criteria and clear limits on the Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|15 I EA.CC BY 4.0.environmentally sustainable level

110、 of logging.In addition,the use of peat for energy should be ended and non-energy uses of peat should be well regulated to ensure the health of peat bogs,which are one of the most effective carbon sinks.The climate law should include clear LULUCF emissions targets and biomass sustainability requirem

111、ents.Estonias plans to achieve its climate and renewable energy targets rely on continued use of sustainably produced forestry biomass,especially through bioenergy use in district heating and individual heating systems.In addition,a notable share of Estonias forestry biomass energy products is expor

112、ted(40%in 2021,32%in 2020,34%in 2017).The high reliance on biomass creates risks.The EU ban of wood imports from Russia could substantially increase demand for Estonias forestry biomass energy products,potentially increasing prices and reducing domestic availability.There is also a risk that measure

113、s to ensure that Estonias forests deliver the needed LULUCF emissions reductions could reduce the availability of biomass for energy.Given these concerns,the IEA recommends that efforts to reduce emissions from heating be focused on electrification through heat pumps and thermal storage.This would a

114、llow for more cost-effective and flexible operation of heating systems,supporting greater integration of variable generation from wind and solar PV.It could also reduce the environmental impact of logging and help forests make a greater contribution to LULUCF emissions reductions and address local a

115、ir pollution resulting from the high share of direct biomass burning in individual residential heating systems.In 2022,the government supported a report(Transitioning to a Carbon Neutral Heating and Cooling in Estonia by 2050)that details options for deploying heat pumps and thermal storage.Estonia

116、has taken steps to address the impacts of the pandemic and the energy crisis In response to the Covid-19 pandemic,the European Union established the Recovery and Resilience Facility to support EU member states recovery and resilience plans,which aim to make their economies more sustainable,resilient

117、,and prepared for the green and digital transitions.The facility was expanded in 2022 with additional funding to support REPowerEU,the EU plan to rapidly reduce dependence on Russian fossil fuels and accelerate the green transition.In total,the facility will provide EUR 724 billion through 2026.Esto

118、nias plan consists of 25 investments and 16 reforms supported by around EUR 1 billion in grants,59.4%of which supports climate objectives,including investments in electricity infrastructure,renewable energy,clean transportation and building renovations.Starting in late 2021,global energy prices bega

119、n to rapidly increase,especially in Europe.Price spikes and high volatility have persisted though 2023,driven by Russias invasion of Ukraine.Estonia has taken several steps to address the impact of high energy prices on consumers.In 2021 and 2022,around 380 000 low-income households were given disco

120、unted electricity prices and network fees were halved for all electricity consumers.The total cost of these measures was around Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|16 I EA.CC BY 4.0.EUR 180 million.In 2022,Estonia established temporary subsidies covering a share of hou

121、sehold bills for electricity,gas and district heating;the measure was in force through March 2023 and cost the government around EUR 125 million.In late 2022,the government established a universal service,which created a regulated retail electricity price for households and small and medium-sized en

122、terprises(SMEs),with the aim to protect consumers from price volatility through April 2026.The IEA understands the need to protect consumers in times of unprecedented energy price volatility,but recommends eliminating the universal service and providing relief as needed through temporary support pro

123、grammes(see Chapter 2).More critically,efforts to protect consumers from high prices should focus on deep renovations that permanently lower energy costs(see Chapter 3).Estonia has ended its reliance on Russian energy imports and is working to boost energy security The IEA strongly commends Estonia

124、for taking quick action to end its reliance on Russian energy,including through efforts to reduce energy demand and co-operate to ensure regional energy security.Historically,Estonia relied on Russian imports for all its natural gas supply and a significant share of its oil products supply(39%in 202

125、1).In response to Russias invasion of Ukraine,Estonia stopped importing Russian pipeline gas in April 2022.In September 2022,the Estonian government banned imports and purchases of Russian natural gas,including LNG.In December 2022,Estonia banned the purchase and transfer of crude oil and oil produc

126、ts from Russia.Estonias gas supply is now imported via pipeline connections to the LNG terminal in Klaipeda,Lithuania and the new Inkoo LNG terminal in Finland(first commercial delivery in March 2023).Eesti Gaas(Estonias main gas supplier)signed deals to bring ten LNG cargoes by autumn of 2023,inclu

127、ding seven shipments via Finland and three via Lithuanias Klaipeda terminal(see Chapter 7).Estonia has not traded electricity with Russia since 2005.There is a major ongoing project to desynchronise the Baltics from the Russian electricity system and synchronise with the continental European network

128、(see Chapter 2).This project involves large investments in the electricity system and requires a significant commitment of the transmission system operators(TSO)capacity.In August 2023,the Baltic states agreed to move synchronisation forward to February 2025.Current infrastructure allows for synchro

129、nisation to take place under emergency circumstances.Price signals need to be aligned with energy transition goals,requiring an update of taxation and fiscal policy Estonia charges an excise duty on most energy products.In 2020,it reduced excise duties on all energy products as a response to the imp

130、acts of the Covid-19 pandemic.The reduced rates were extended twice to help consumers deal with the Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|17 I EA.CC BY 4.0.price impacts of the energy crisis.Starting in 2024,energy products excise duties will be gradually increased to re

131、turn to pre-pandemic levels in 2027(Table 1.2).Estonias excise duty rates are not based on GHG emissions or other environmental factors.Changes to fiscal and tax policy are needed to encourage consumers to move away from fossil fuels and support the uptake of low emission,efficient,renewable and inn

132、ovative options.Changes to energy taxation are also likely needed to comply with the expected revision of the EU Energy Taxation Directive,which will likely require energy products to be taxed according to their energy content and environmental performance.This would require fossil fuels to be taxed

133、 at the highest rate and electricity at the lowest rate.There is a particular need for better price signals in the transport sector,where Estonia is the only IEA member country without annual or registration taxation on private vehicles and has one of the oldest and least efficient vehicle fleets.Th

134、e IEA commends Estonia for introducing a road use fee for heavy trucking and encourages the government to quickly move ahead with its plan to introduce vehicle taxation,which should be designed to drive the uptake of more efficient vehicles,including EVs(see Chapter 4).Table 1.2 Energy excise duties

135、 by product in Estonia,2023-2027 Energy product 2023 2024 2025 2026 2027 Diesel(EUR/1 000 L)372 399 428 459 493 LPG(EUR/1 000 kg)55 65.01 79.91 90.98 107.71 Light heating oil(EUR/1 000 L)372 399 428 459 493 Heavy fuel oil(EUR/1 000 kg)422 456 490 525 559 Shale oil(EUR/1 000 kg)414 447 481 515 548 Na

136、tural gas(EUR/1 000 m3)40 47.81 56.42 66.58 79.14 CNG(EUR/1 000 m3)40 41.83 43.66 45.5 47.32 LNG(EUR/1 000 kg)55.79 58.34 60.9 63.45 66 Electricity(EUR/MWh)1 1.45 2.1 3.07 4.47 Liquid biofuels are taxed at the same rates as fossil fuels according to the purpose of use.Biogas and biomethane are exemp

137、t from excise duties.In 2019,reduced excise duties were introduced for electricity-and gas-intensive enterprises.To receive the lower rate(0.5 EUR/MWh for electricity and 11.3 EUR/1 000 m3 for natural gas),an enterprises energy management system must comply with the ISO 50001 standard.The government

138、 has no plans to increase the reduced electricity and gas excise duties for energy-intensive industry.The IEA commends Estonias effort to make electricity a competitive option for industry,as electrification offers a clear pathway to energy savings and emissions reductions.The government should not

139、implement measures that reduce the cost of natural gas or other fossil fuels,instead using limited budget resources to help industry stay competitive through investments that increase efficiency and support a transition to electricity or renewable energy,for example biomethane(see Chapter 7).Estonia

140、 2023 1.Climate and energy policy Energy Policy Review PAGE|18 I EA.CC BY 4.0.Estonias fossil fuel subsidies have declined and in recent years have come primarily from temporary programmes that reduced the impact of the high energy prices due to the energy crisis.However,there are still notable subs

141、idies being granted for fossil fuels in the form of excise duty exemptions and reduced rates for specific fuels and usages.In 2020,the government provided EUR 125 million to support the construction of a new oil shale liquefaction plant.The IEA encourages Estonia to continue working to eliminate fos

142、sil fuel subsidies and to avoid any government support for new fossil fuel investments.Estonias energy-intensive industrial facilities,large-scale electricity generation plants and domestic aviation are subject to carbon pricing through the EU ETS.Around half of Estonias GHG emissions fall under the

143、 ETS.Entities covered by the ETS must have ETS allowances for their emissions;most allowances are purchased through auctions.Some allowances are free,but the number of free allowances has been steadily decreasing.Revenues from the allowance auctions are delivered to countries participating in the ET

144、S based on the total value of allowances purchased by ETS-regulated entities operating inside their borders.In 2021,Estonia received EUR 248.6 million in ETS revenue.It has a legal requirement for 50%of ETS revenues to be earmarked for climate and energy,with the main programmes supporting energy ef

145、ficiency in buildings,sustainable transportation,biomethane,international climate co-operation and pilot projects.Estonia also has a low national carbon price of 2 EUR/t CO2.The price is only paid for CO2 emissions related to heat production and covers a small share of Estonias emissions(around 6%in

146、 2022).A proposal to increase the carbon price to 25 EUR/t CO2 for smaller scale heat producers not covered by the ETS was sent to parliament in September 2023.The government should expand the coverage of the national carbon price and increase it to an impactful level.Numerous IEA member countries h

147、ave national carbon pricing that is significantly higher than Estonia.Sweden,Switzerland,Norway and Finland have some of the highest carbon prices in the world,but have maintained strong economic growth.The IEA has published a commentary on carbon pricing and a report on emissions trading that provi

148、de insights on effective implementation of carbon pricing.The IEA is also part of the Global Carbon Pricing Challenge,which aims to triple the global coverage of carbon pricing from around 20%of global emissions in 2021 to 60%by 2030.The Carbon Pricing Leadership Coalition most recent report provide

149、s addition insights how carbon pricing can be effectively implemented.More effort is needed to ensure Estonia has the skills and capacity to drive the energy transition Estonias relatively small labour market limits the offer of a skilled workforce,especially in the energy sector.This could slow dow

150、n the energy transition,delaying the realisation of energy projects and buildings renovation,and cause bottlenecks in the achievement of energy and climate targets.The government should ensure that the education system is optimised for the countrys workforce needs,invest in upskilling and retraining

151、 programmes,and attract workforce from abroad.Efforts in Estonia 2023 1.Climate and energy policy Energy Policy Review PAGE|19 I EA.CC BY 4.0.this area can draw on studies conducted by the Estonian Qualifications Authority,including the 2021 overview of the skills needed for the digital and green tr

152、ansition.There is also limited capacity in the Estonia Competition Authority,the energy sector regulator,which has numerous key roles related to energy permitting,reviewing network development plans and other critical areas but limited staff supporting energy sector regulation.This presents a high-r

153、isk bottleneck on the pathway to a clean energy transition.Capacity is also limited in numerous parts of the government that design and implement energy policy.The creation of the Ministry of Climate bringing together various governmental competences,including on energy,provides an opportunity to en

154、sure that there is adequate capacity to support the achievement of energy and climate goals.The government needs to increase capacity and staffing across the areas relevant to achieving its ambitious climate and energy targets.Estonia is taking leadership on critical minerals and should determine it

155、s domestic production potential Estonia is home to one of the few rare earth processing facilities outside of the Peoples Republic of China(hereafter“China”).The rare earth separation plant located at Sillame is owned by the private company Neo Performance Materials and produces critical minerals ke

156、y to the energy transition.In July 2023,Neo started construction of a factory that will produce rare earth permanent magnets used in EVs and wind turbines.The factory will source rare earth oxides from the Sillame processing facility and is expected to start operating in 2025.If completed on schedul

157、e it would be the first rare earth magnet factory in Europe.A diverse and reliable supply of critical minerals is a key component of a secure energy transition.Estonia has large phosphate deposits that may also contain other critical minerals and may present an opportunity for Estonia to support the

158、 energy transition globally and expand its economy,with the potential to use skills and expertise from the oil shale mining industry.For example,Neos rare earth magnetic factory is being constructed in Narva,the main area of oil shale industrial activity.The IEA encourages Estonia to quickly determi

159、ne its critical minerals production capacity and the investments needed to bring any such resource to market.The IEA emphasises that expansion of critical minerals production should avoid and mitigate adverse impacts on the environment and local communities including water use and pollution,air poll

160、ution,and inadequate waste management and worker safety.Supply chain due diligence,with effective regulatory enforcement,is a critical tool to assess and mitigate risks and increase traceability and transparency.The IEA Critical Minerals Market Review 2023,the IEA Critical Minerals and Clean Energy

161、Summit press release and the forthcoming Sustainable and Responsible Supply Policy Guidance Paper provide additional details on the important role of critical minerals and actions that Estonia and other governments can take to help develop secure,sustainable and responsible critical mineral supply c

162、hains.Estonia 2023 1.Climate and energy policyEnergy Policy Review PAGE|20 I EA.CC BY 4.0.Recommendations The government of Estonia should:Pass a climate law that sets legally binding targets for carbon neutrality and intermediate emissions reductions,allocates responsibilities for implementation an

163、d tracking,and sets clear targets for phasing out oil shale and other fossil fuels.Clarify where it sees markets driving the energy transition and maintaining energy security,where economic incentives or other non-market measures are needed,and where state-owned companies will take a leading role.Al

164、ign price signals with climate and energy goals by updating energy excise duties;increasing carbon prices;quickly introducing vehicle taxation to drive uptake of efficient vehicles,including electric vehicles(EVs);and ending support for fossil fuels.This should be done in a way that generates suffic

165、ient revenue to support a just clean energy transition.Develop strong measures to ensure that land use,land-use change and forestry delivers net emissions reductions in line with climate targets.This should include a robust forest inventory methodology,well-enforced biomass sustainability criteria a

166、nd clear estimates on the environmentally sustainable level of biomass available.Estonia 2023 2.Electricity Energy Policy Review PAGE|21 I EA.CC BY 4.0.2.Electricity A secure clean energy transition in the electricity sector is critical to meet climate and energy targets Estonias electricity sector

167、is undergoing major changes,with growing electricity demand,a strong reduction in oil shale generation,growth in renewable generation and a historic shift from being a net exporter to a net importer of electricity.The government plans for the electricity sector to play a key role in meeting its clim

168、ate and energy targets and has set an ambitious target to cover 100%of electricity demand with renewables by 2030.The government is also working to finalise synchronisation with the European continental network and to boost regional electricity interconnections to ensure electricity security and a w

169、ell-functioning electricity market.From 2010 to 2021,Estonias electricity demand increased from 7.4 terawatt hours(TWh)to a record-high of 8.6 TWh,driven by an overall increase in the electricity demand from buildings(from 4.5 TWh to 5.5 TWh)and industry(from 2.8 TWh to 3.1 TWh)(Figure 2.1).In 2022,

170、electricity demand dropped to 8.3 TWh,driven by higher prices and government requests for consumers to save energy.Only a very small share of electricity demand come from the transport sector(0.4%in 2021,mainly from rail)and from 2010 to 2021,transport electricity demand declined(from 0.09 TWh to 0.

171、03 TWh).Peak electricity demand typically occurs in the winter and was around 1.4 to 1.55 GW in recent years.Figure 2.1 Electricity demand by sector in Estonia,2010-2021 and preliminary total demand for 2022 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.0.00.20.40.60.81.01.21.4Base year:2005D

172、emand trend by sectorTransportIndustryService sectorResidential0 1 2 3 4 5 6 7 8 9TWhDemand by sectorEstonia 2023 2.Electricity Energy Policy Review PAGE|22 I EA.CC BY 4.0.Estonias electricity generation and trade underwent major changes in 2019(Figure 2.2).Historically,oil shale generation dominate

173、d,averaging 84%of electricity generation from 2005 to 2018.From 2018 to 2020,oil shale dropped from 76%to 37%of generation,driven by high EU ETS prices,low electricity prices and increased renewable electricity generation.Oil shale rebounded to 57%of generation in 2022,as high electricity prices mad

174、e oil shale generation economically competitive.Electricity generation from oil shale gas(a by-product of oil shale liquefaction)increased from 0.4 TWh and 3.2%of generation in 2010 to 0.8 TWh and 9.1%of generation in 2022.From 2010 to 2020,electricity sector GHG emissions experienced a significant

175、overall decline from 15 Mt CO2-eq to 3.6 Mt CO2-eq.However,in 2021 and 2022,oil shale generation rebounded strongly,pushing electricity sector GHG emissions up to 6.5 Mt CO2-eq.In 2022,Estonia had the fourth-highest carbon intensity of electricity generation among IEA member countries(359 t CO2/MWh

176、versus the IEA average of 230 t CO2/MWh).Figure 2.2 Electricity generation by source,net trade and greenhouse gas emissions from electricity and heat in Estonia,2010-2022 IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.From 2010 to 2020,renewable electricity generation tripled,from 1.0 TWh to 3

177、.0 TWh,driven mainly by growth in generation from forestry biomass,and more recently solar PV(Figure 2.3).Despite a continued strong increase in PV generation,which reached 6.3%of generation in 2022,total generation from renewables decreased to 2.8 TWh in 2022 due to lower generation from forestry b

178、iomass(mainly because prices for forestry biomass increased notably following Russias invasion of Ukraine)and wind(manly because of lower wind speeds across most of Europe).Renewable generation covered 34%of electricity demand in 2022,far from the 2030 target of 100%.Historically,Estonia was a net e

179、lectricity exporter.As a result of the overall decline in domestic electricity generation,resulting mainly from the sharp drop in oil shale generation,Estonia has been a net electricity importer since 2019.Electricity imports reached 42%of demand in 2020 but decreased to 12%in 2022,when 2 4 6 8 10 1

180、2 14 162010 2012 2014 2016 2018 2020 2022Mt CO2-eq-6-4-202468001820202022Net tradeNatural gasShale oilOil shale gasOil shaleSolarWindBioenergyElectricity generation and tradeGHG emissionsTWhEstonia 2023 2.Electricity Energy Policy Review PAGE|23 I EA.CC BY 4.0.generation from o

181、il shale ramped up again.Electricity imports come mainly from Finland.Estonia still has small net electricity exports to Latvia.Figure 2.3 Renewables in electricity generation and demand in Estonia,2010-2022 and 2030 target IEA.CC BY 4.0.Source:IEA(2023),World Energy Balances.Estonias installed gene

182、ration capacity declined from a peak of 2 844 MW in 2019 to 2 337 MW in 2021,but started growing again to reach 2 542 MW in Q3 2023.These changes were driven mainly by the permanent closure of 640 MW of oil shale capacity and strong deployment of solar PV.From 2019 through Q3 of 2023,oil shale capac

183、ity dropped from 1 970 MW to 1 330 MW while PV capacity increased from just 33 MW to 510 MW.In Q3 2023,wind capacity was 317 MW,with no growth in several years.Biomass capacity increased from 77 MW in 2016 to 157 MW in 2019 and has since been stable(153 MW in Q3 2023).Gas-fired capacity has not seen

184、 major changes and was 110 MW in Q3 2023.More effort is needed to clarify how to meet the 100%renewables target The government has a general vision for a future electricity system based on wind and solar energy,various types of storage and flexibility options,strong interconnections with neighbourin

185、g EU countries,and synchronisation with the European continental network.There has been notable progress towards this vision but enacting it will require a radical transformation from Estonias past reliance on an oil shale-dominated and export-oriented system.The target for renewable electricity to

186、cover 100%of annual electricity demand serves as a central pillar for driving the energy transition in the electricity sector.However,several issues need to be clarified to ensure that the large investments and operational changes needed to achieve the target can be made in a timely manner.The 100%t

187、arget is ambiguous about the role of non-renewable sources and electricity trade,creating uncertainty over how the grid will be operated in the future and what investments are needed to ensure security of supply.The government has indicated that dispatchable generation could be needed through 2030 a

188、nd 0.00.51.01.52.02.53.0HydroSolarWindBioenergyElectricity generationShare of electricity demand covered by renewablesTWh0%10%20%30%40%50%60%70%80%90%100%Estonia 2023 2.Electricity Energy Policy Review PAGE|24 I EA.CC BY 4.0.beyond for system balancing but has not clarified how using non-renewable g

189、eneration for balancing is compatible with the 100%renewables target.Market conditions and policy signals have already reduced oil shale electricity generation(the main source of dispatchable generation)and most of the new generation that has come online in Estonia is non-dispatchable and non-synchr

190、onous.To maintain system security,Eesti Energia has been asked to keep 1 000 MW of oil shale generation available until 2026 at a significant financial loss.The 2022 European Resource Adequacy Assessment shows that Estonia could continue to have generation adequacy issues through 2030.The government

191、 is exploring the creation of a capacity market mechanism to address system adequacy issues.A draft concept note developed by the TSO indicates a preference for a technology-neutral strategic reverse.The government is currently working on legislation needed to define the roles and processes for sett

192、ing up a capacity mechanism.It is also waiting for the 2023 European Resource Adequacy Assessment,which will need to show that Estonia continues to face generation adequacy issues so that it can start working with the European Union to get approval for a capacity mechanism under EU state aid rules.T

193、he IEA advises that before considering capacity mechanisms,Estonia should examine how expanding its bidding zone and load frequency control block to all three Baltic states and improving price formation in the wholesale electricity market could address system adequacy issues.If a capacity mechanism

194、is adopted,it should be based on a well-defined reliability standard;be technology-neutral(with participation from demand-side resources);and pay for performance(with sufficient penalties for non-delivery).In addition,the 100%renewable energy electricity target and Eesti Energias plan to stop genera

195、tion from oil shale by 2030 are not aligned.It is also possible that shale generation could exit the market before 2030.The government should establish a more ambitious and legally binding target to phase out electricity generation from oil shale by at least 2030,which could be done in the climate l

196、aw.It should also examine what investments are needed to ensure secure operation of the electricity system as oil shale generation is phased out and whether government support may be needed to ensure such investments are realised within the needed time frame.This would help to clarify how the 100%re

197、newable electricity target can be met while also achieving the goals for security of electricity supply.A major transformation of the electricity system is needed to achieve the 100%target renewable electricity target and put Estonia on the path to climate neutrality.The IEA commends Estonia for tak

198、ing important steps towards these targets,including working with several third-party energy experts to develop a detailed report on Transitioning to a Climate-neutral Electricity Generation.The report provides a detailed cost-benefit analysis of seven technology pathways against key criteria(includi

199、ng costs,security of supply and socio-economic impacts)and includes risk and sensitivity assessments and insights on key actions that would need to be taken for each pathway(in policy,markets and infrastructure).This report and other work such as the complementary report,Transitioning to a Carbon Ne

200、utral Heating and Cooling in Estonia by 2050,are a helpful step towards Estonia 2023 2.Electricity Energy Policy Review PAGE|25 I EA.CC BY 4.0.informing energy sector stakeholders on the pathways for Estonia to achieve the 100%renewable electricity and climate neutrality targets.However,it is not cl

201、ear whether such reports will be undertaken on a regular basis or which scenarios are expected to be supported by policy.The IEA recommends establishing a regular exercise like these two reports on the transition to carbon-neutral energy systems to provide insights on how changes in key variables su

202、ch as technology costs and the ongoing development of energy infrastructure affect the pathways to carbon neutrality.A more regular process would also allow the government and other stakeholders to increase their capacity on developing/understanding the result of such studies and would ensure that l

203、ong-term decisions are taken based on the most up-to-date information.In addition,while the two reports on carbon-neutral energy systems recommend several potential pathways,they do not provide clarity on the preferred or politically supported pathway,limiting the guidance it can provide to investor

204、s and power sector stakeholders.Based on the results of these studies,the government should clarify to stakeholders which pathway will receive policy support.The link between the carbon neutrality studies and other key planning processes such as the TSO and distribution system operators(DSO)long-ter

205、m development plans is also not clear.For example,the TSOs Security of Supply Report provides a transmission network development plan to support increased renewable deployment but does not explicitly assess any of the pathways presented in the carbon neutrality reports,either for its network plan or

206、 adequacy analysis.Increasing co-ordination between the plans by examining the most relevant pathway(s)within the more detailed studies undertaken by the TSO and DSO can provide a better understanding of the technical implications of high-level policy direction and important feedback into policy tar

207、get setting.Given the large scale and fast pace of change needed to achieve these targets,the IEA recommends that Estonia establish regular integrated planning to provide clarity on which technology pathway is preferred and what policy,market regulations and subsidies will be put in place.This is ne

208、eded to ensure that energy sector stakeholders can make the needed investments in a coherent a cost-effective manner.A high degree of transparency across the different studies that make up the integrated planning activities in terms of inputs,methodologies,results and the links between them is also

209、essential to enable constructive stakeholder engagement and increased investor confidence.Given the increasing complexity for planning and operating an electricity system to achieve the 100%renewable target,the government needs to ensure that the relevant entities(energy regulator,TSO,DSO,Ministry o

210、f Climate)have the needed capacity and staffing to plan for and operate a system that is significantly different from the current reliance on large-scale dispatchable oil shale generation.The IEA recommends that the regular integrated planning examines high levels of electrification,as this is one o

211、f the best ways to achieve economy-wide emissions reductions(especially given the 100%renewable electricity target)and to introduce increased system flexibility through demand-side response(DSR)(for example,through heat pumps,energy storage and smart EV charging).Estonia also has a Estonia 2023 2.El

212、ectricity Energy Policy Review PAGE|26 I EA.CC BY 4.0.strong interested in expanding industrial activity to boost its economy.Achieve this goal will likely require an increased supply of secure of low-carbon electricity.Large-scale industrial electricity consumers can also present a relatively easy

213、options for significant levels of demand-side response.The NECP currently shows that electricity demand is expected to grow to 9.4 TWh by 2030(versus 8.3 TWh in 2022);however,this estimate includes relatively low expectations for electrification of heating and transport and for expansion of electric

214、ity intensive industry.Australias Integrated System Plan,conducted on a two-year cycle since 2018,provides an advanced best practice example for integrated power system planning in a liberalised electricity market.Key features of Australias Plan include:an extensive stakeholder engagement process;co

215、nsideration of multiple scenarios accounting for different paces of development in distributed energy and electrification;identification of transmission investment that supports renewables buildout based on resource-rich areas rather than a single-project basis;and a high degree of transparency,with

216、 publication where the power system model itself is made publicly available with all input data and detailed reporting on different aspects of the planning and consultation process.Many other countries and regions are also taking steps to improve their planning integration and co-ordination in line

217、with the needs of energy transitions and planners are taking steps to improve scenario development.For example,Ontario introduced its Pathways to Decarbonization study and Germany has introduced a range of power sector scenarios into its grid development plan.ENTSO-Es Ten Year Network Development Pl

218、an also illustrates scenario building at a European level.A number of countries,including Ireland and India,have introduced dedicated studies to reflect climate targets in power system plans.Estonia is already a leader in heat pump deployment and should take advantage of consumer awareness and push

219、for even stronger uptake of heat pumps for individual heating systems(see Chapter 3).Estonia is lagging on EV deployment and should make additional efforts to support the uptake of EVs,which is likely needed to reach its climate and renewable energy targets.The government should also develop a frame

220、work for smart EV charging to ensure that increased EV uptake supports integration or renewable electricity,while boosting system flexibility and minimising distribution system investments.The IEA report on Grid Integration of EVs provides valuable insights for policy makers(see Chapter 4).More work

221、 is also needed to link the electricity and heating systems(for example,though thermal energy storage and large-scale heat pumps).Increasing regional trade would help to balance the electricity system while boosting the integration of renewables.Planning exercise scenarios should examine the impacts

222、 of increased ambition in all these areas.The IEA notes that a higher ambition for electrification,especially in the context of the 100%renewables target,would have notable implications for investment in and operation of the electricity system.This would likely require higher levels of renewable gen

223、eration,transmission capacity,system flexibility,energy storage,DSR and regional trade,which should be examined with scenarios in the planning exercise.There should also be scenarios that examine Estonia 2023 2.Electricity Energy Policy Review PAGE|27 I EA.CC BY 4.0.how electricity security can be m

224、aintained if there is an accelerated market exit of oil shale generation and to clarify the role offshore wind can play in meeting Estonian and EU climate goals.The planning exercise should include a transparent,integrated generation and transmission plan that considers the role of storage and deman

225、d response to clarify what components and actors in the system need to provide in terms of electricity generation,capability of meeting residual load or dispatchability,frequency-based and non-frequency based ancillary services,and remedial actions.It is especially relevant to examine impacts on bui

226、lding out electricity infrastructure and how increased flexibility could lower overall investment needs.The planning process should include co-ordination with current and potential electricity trading partners to examine the role that electricity trade can play in supporting energy security and the

227、energy transition.Any potential reliance on imports for security of supply during periods of low renewables production needs to be actively co-ordinated with electricity trading partners and explicit agreements to ensure access to capacity should be considered if necessary.Opportunities for exportin

228、g renewable energy should also be examined with a view to ensuring benefits for Estonia and supporting EU-wide decarbonisation.Major infrastructure projects are ongoing and planned to support the energy transition and security The government plans for the electricity sector to play a key role in mee

229、ting Estonias climate and energy goals and has set an ambitious target for renewable energy to cover 100%of annual electricity demand.There are also goals to increase electricity system capacity,flexibility and reliability;and boost interconnection capacity to increase regional electricity trade and

230、 synchronise with the continental European network.To support these goals,Estonia continues to invest heavily in its electricity network(see the TSOs 2022 Security of Supply Report for details on investments).The IEA commends Estonias efforts to expand grid capacity and flexibility,but notes that ad

231、ditional efforts are needed to support the 100%renewable electricity target.The IEA report Electricity Grids and Secure Energy Transitions,released in October 2023,examines the urgent upgrades required of physical infrastructure and the way grids are planned and managed,quantifying the costs of dela

232、yed action.It provides key recommendations for policy makers,highlighting what is necessary in areas such as investment,regulation and planning.In 2022,Estonias transmission system consisted of 1 634 kilometres(km)of 330 kilovolt(kV)lines,3 361 km of 110 kV lines and 5 km of 6-35 kV lines(Figure 2.4

233、).Estonia is interconnected to Latvia via three alternating current(AC)330 kV lines.The third line started operating in 2020,increasing interconnection capacity to 1 447 MW(Estonia to Latvia)and 1 259 MW(Latvia to Estonia).Estonia is interconnected with Finland via two direct current(DC)undersea cab

234、les EstLink 1(358 MW)and EstLink 2(658 MW)with a total bidirectional capacity of 1 016 MW.Estonia 2023 2.Electricity Energy Policy Review PAGE|28 I EA.CC BY 4.0.There has not been electricity trade between Estonia and Russia since 2005.Estonia is part of a synchronous electricity zone that includes

235、Belarus,Latvia,Lithuania and Russia.There is a major ongoing project to synchronise the Baltics with the continental European network.The project will increase Baltic energy security and support full integration into the European electricity market.It involves large investments,including new and upg

236、raded transmission lines and other crucial grid assets such as synchronous compensators.Figure 2.4 Estonias electricity transmission system and major generation in 2022 In response to Russias invasion of Ukraine,the Baltic TSOs agreed to reduce dependence on the Russian network.Since June 2022,balan

237、cing of supply and demand in the Baltics is ensured mainly through balancing capacities on the Baltic,Nordic and Polish markets.This allowed the Baltics to end payments to Russia for balancing services in July 2022.In August 2023,the Baltic states agreed to move synchronisation forward from the end

238、of 2025 to February 2025.Synchronisation is already possible under emergency circumstances.There are major ongoing and planned investments in the transmission system to support increased deployment of renewable energy,including expansion of the grid in western Estonia funded through the EU Recovery

239、and Resilience Facility.There is ongoing work to boost interconnection capacity.The TSOs of Estonia and Latvia are planning a fourth interconnection via a 700 MW to 1 000 MW subsea DC cable to support increased trade and the development of a joint offshore wind project(ELWIND),with possible commissi

240、oning of the interconnection by 2035.The TSOs of Estonia and Finland are planning EstLink 3,a third DC subsea cable with a capacity of 700 MW to 1 000 MW,with possible commissioning by 2035.In May Estonia 2023 2.Electricity Energy Policy Review PAGE|29 I EA.CC BY 4.0.2023,the TSOs of Estonia and Ger

241、many(50 Hertz)signed a letter of letter of intent to jointly develop the Baltic WindConnector,a hybrid submarine cable that would support the development of offshore wind projects and electricity trade between Estonia and Germany.This project is in the evaluation stage,with an indicative commissioni

242、ng in 2037.During 2023,Estonias TSO will submit its first network development plan that follows EU legislative requirements.The process of adopting network development plans should include a broad base of stakeholders to incorporate the grid reinforcements needed to meet energy and climate goals.The

243、 plans can also be used to ensure healthy reinvestment strategies.Network development plans should set out the needed investments to accommodate expected new generation and loads and are required to be transparent and include public consultation.Estonia should examine deployment of sensor-based dyna

244、mic line rating(DLR)on existing AC power lines and interconnections and inclusion of DLR in ongoing and future projects.Measurement data show that DLR supports a 10-20%increase in capacity 90%of the time,offering a low-cost option to boost transmission and interconnection capacity,and support the in

245、tegration of renewable generation.Belgium,France and several other IEA member countries have extensive experience demonstrating the benefits of DLR.Regionally,Finland and Lithuania are deploying DLR.Expanding Estonias small electricity market would help to boost investment and increase competition T

246、he Estonian Competition Authority is responsible for market regulation and publishes an annual report giving key metrics on the performance of electricity market.The 2020 report shows that Estonia has a relatively small electricity market,with around 750 000 consumers.There has been some reduction i

247、n market concentration,but the state-owned incumbent energy company,Eesti Energia,maintains a dominant position in both the wholesale market(56.2%of sales in 2022)and retail market(47.6%of sales in 2022).In 2022,Herfindahl-Hirschman Index values in most categories exceeded 4 000,reflecting a high le

248、vel of market concentration.The energy crisis notably increased electricity prices in Estonia and the Baltic/Nordic region.Estonias household retail electricity prices increased notably from 2019 to 2022,but were the lowest in the region and below the average for OECD European countries(Figure 2.5).

249、Estonias non-household retail electricity prices also increased significantly.In Q4 of 2022 they were higher than the average for OECD European countries and the second-highest in the region after Lithuania.Estonias relatively small electricity market,both for energy products and frequency reserves,

250、creates challenges in attracting the investment needed to drive the energy transition and support energy security.Expanding Estonias bidding zone and load frequency control block to all three Baltic states would help boost liquidity,competition and investment.Estonia is working with Latvia and Lithu

251、ania to develop a common market;for example,the Baltic TSOs plan to establish a common load Estonia 2023 2.Electricity Energy Policy Review PAGE|30 I EA.CC BY 4.0.frequency control block.The government should examine what additional infrastructure investments and regulatory changes are needed for a

252、well-functioning common Baltic electricity market and work with the Baltic TSOs and the energy regulators to ensure needed investments and regulatory changes are made as soon as possible.In line with the European Councils proposal to improve the EU electricity market design,Estonia could support the

253、 formation of a virtual hub covering all three Baltic states(and possibly other electricity trading partners)to boost liquidity in the forward markets.In September the European Union Agency for the Cooperation of Energy Regulators(ACER)initiated a procedure to decide on the Baltic TSOs proposal on t

254、he alternative bidding zone configurations for the Baltic region.A decision from ACER is expected before the end of 2023.Figure 2.5 Electricity retail prices in Estonia and neighbouring countries,2015-2022 IEA.CC BY 4.0.Source:IEA(2023),Energy Prices.Estonia has a liberalised electricity market.Howe

255、ver,in late 2022,the government established a universal service,which created a regulated retail electricity price for households and SMEs,with the aim to protect consumers from price volatility through April 2026.The universal service resulted in many consumers being removed from the retail market

256、without their consent and in many cases being charged above market prices.The IEA understands the need to protect consumers in times of unprecedented energy price volatility.However,the IEA recommends eliminating the universal service and avoiding disruptive market interventions.Support,if needed,sh

257、ould come through temporary short duration programmes that do not force consumers to change energy contracts.More critically,efforts to protect consumers should focus on deep building renovations that result in sustained reductions in energy and heating bills and are targeted to support the most vul

258、nerable households(see Chapter 3).Estonias TSO owns and operates a 250 MW dual fuel(gas/oil)emergency reserve power plant located at Kiisa.This plant is used in the case of a network failure or capacity shortfall and does not participate in the electricity market.The European Commission provided Est

259、onias TSO an exception to EU rules banning TSO 0 50 100 150 200 250 300USD/MWhLatviaLithuaniaFinlandOECD EuropeEstoniaHouseholds0 50 100 150 200 250 300Non-householdsEstonia 2023 2.Electricity Energy Policy Review PAGE|31 I EA.CC BY 4.0.ownership of generation assets for this plant.However,several e

260、nergy sector stakeholders have expressed concerns that TSO ownership of the plant is causing market distortions.The TSO ownership and use of the Kiisa power plant beyond synchronisation with the continental European network should be clarified to provide proper market signals.The government should a

261、lso consider how this plant could provide system balancing with renewable dispatchable generation,for example through use of biomethane and/or biofuels.Support for renewables has been updated to drive more cost-effective deployment Estonia recently updated the way it awards subsidies for renewable e

262、lectricity.Under the previous system(established in 2014 and amended in 2017)qualifying projects received a market premium on top of market revenue.The market premium is 57.3 EUR/MWh for renewable energy and 32 EUR/MWh for high-efficiency co-generation using natural gas,retort gas,peat and municipal

263、 waste.Market premiums are given for 12 years following the first delivery of generation.The cut-off date to qualify for this system was 31 December 2020.As of September 2023.this programme had awarded EUR 965 million in subsidies.Since 1 January 2021,subsidies are awarded through reverse auctions t

264、hat provide winning projects with payments through a contract for difference.The maximum subsidy is set at 20 EUR/MWh and the maximum bid(subsidy plus market price)at 45 EUR/MWh.Payments are given for 12 years from the first delivery of generation.Auctions were conducted in 2019,2020 and 2021 for a

265、total of 15 gigawatt hours(GWh),with all support awarded to PV.A second auction in 2021 awarded support to 430 GWh of PV and 110 GWh of wind generation.An auction opened in September 2023 for 650 GWh with a focus on wind generation.Auctions are planned in 2024(500 GWh)and 2025(500 GWh),with a focus

266、on wind generation.For upcoming and future auctions(especially any undertaken in relation to offshore wind)the government should consider indexing strike prices secured at auctions to reduce the risks that increases in costs beyond the control of project developers will prevent the delivery of aucti

267、on-winning projects.Such risks include increased deployment costs relating to commodity prices,inflation and supply chain disruptions.Strike prices can be indexed against composite indices,such as the Harmonised Index of Consumer Prices or sector-specific indices,such as construction labour or steel

268、 price indices.The selected index,or formula of indices,should be balanced between selecting those that are most relevant and those that are practical to administrate,and should ideally avoid inadvertently introducing new risks by applying an irrelevant or overly specific indexing formula.Indexation

269、 does not necessarily need to apply for the full support period.The component of an auction bid deemed to reflect construction costs,for example,could be indexed to the point in time post-auction that these costs are fixed,for example signing of engineering,procurement,construction and installation

270、contracts,or to a point where the project is considered to have been delivered,for example grid connection.Estonia 2023 2.Electricity Energy Policy Review PAGE|32 I EA.CC BY 4.0.Both subsidy programmes are funded through a renewable energy charge paid by all electricity consumers to the TSO.The char

271、ge is updated annually based on the expected level of subsidy payments and the remaining funds from previous years.The charge(including value-added tax)has varied from a minimum of 9.2 EUR/MWh(2014)to a maximum of 13.6 EUR/MWh(2020 and 2021).The IEA commends the move to awarding subsidies through au

272、ctions providing contracts for difference,as this should help to minimise the cost to consumers and allow reducing renewable electricity charges.If there remains a need for notable subsidies to drive the energy transition,the government should consider alternatives to charging electricity consumers,

273、which increases the cost of electricity,decreasing the incentive for electrification.Alternative funding sources include an increased carbon price and higher excise duties on fossil fuels(both of which would help to align price signals with the energy transition;see Chapter 1)and EU ETS revenues or

274、direct funding from the state budget.The government should also take steps to support the development of projects with no subsidies.This could include developing a template/standardisation of power purchase agreements to foster additional market-based financing and promote partnerships between renew

275、able suppliers and energy consumers,especially SMEs and other small consumers.In addition,the government could lead by example,using power purchase agreements to deliver renewable electricity to government-owned sites while helping to establish power purchase agreements as a clear option for renewab

276、les deployment.Steps are being taken to reduce regulatory barriers,but more work is needed on permitting and spatial planning Estonia is working to reduce barriers to the deployment of renewable energy and electricity infrastructure projects.This includes reforms to reduce the time to obtain a gener

277、ation licence from around 3-5 years to 1.5 years and to streamline the environmental impact assessment process for renewable projects.EUR 26 million from Estonias Recovery and Resilience Plan supports reforms to streamline permitting and the hiring of additional staff at entities responsible for per

278、mitting.The government is also working to remove wind turbine height restrictions that apply to a large part of Estonias land and sea area to prevent turbines from interfering with military and civil aviation radar systems.From 2019 to 2022,the government invested EUR 74.5 million to upgrade radar s

279、ystems to increase the area available for wind generation deployment.In 2022,an additional EUR 74.5 million was budgeted,with the goal to remove height restrictions from most of mainland Estonia by 2025.Solar PV projects have also faced barriers related to defence issues.In February 2022,the Ministr

280、y of Defence banned large-scale solar PV projects in some regions bordering Russia,which The restriction impacted several projects under development in Ida-Viru County.The Ministry of Defence is analysing mitigation measures to allow for PV projects to be deployed in this area.Estonia 2023 2.Electri

281、city Energy Policy Review PAGE|33 I EA.CC BY 4.0.The IEA commends the government for working to reduce regulatory barriers to renewable energy deployment.However,the IEA notes that there are still risks related to permitting and environmental impact assessments and a need to clarify at which point o

282、f the development process wind(and PV)projects receive clearance by the Ministry of Defence.The government should develop a process map clearly identifying the regulatory pathway a project must follow from pre-planning to decommissioning and the roles of all the responsible authorities.Development o

283、f the process map and working to address the barriers identified would be greatly assisted by establishing a delivery taskforce,with Ireland serving a good example.Using the process map a taskforce can conduct gap analysis,identifying barriers and areas that can be improved and provide clarity to pr

284、oject developers.This would also help to determine if additional funding and/or staffing is needed to boost the capacity of the Ministry of Climate,the Estonian Competition Authority,the courts,local governments or other entities with responsibility over permitting.The taskforce can also serve as si

285、ngle point of contact in the government to help guide projects through the process and a digitalised one-stop shop that allows all paperwork to be submitted and processed on line and clearly informs project developers of their progress through the permitting process.Best practices for accelerating p

286、ermitting processes include the Danish Energy Agencys one-stop shop approach,Greeces Law on Modernization of the Licensing Process for Renewable Energy Sources and the United States recent Improvements to Generator Interconnection Procedures and Agreements.Alternative models for permitting projects,

287、such as auctioning available grid capacity,should also be explored.Performance bonds and/or delivery milestones should be incorporated into the permitting process to ensure delivery and prevent land/seabed hoarding and/or wasting valuable grid connection.There is a need for a broadly consulted spati

288、al plan underpinned by robust data and to ensure clarity on where renewable energy projects and support infrastructure can be built.In particular,the central and local governments capacity to organise environmental data should be prioritised.The government should ensure that full and correct data se

289、ts underpin the designation of go-to areas for renewables and spatial plans,both onshore and offshore.One of the objectives should be to identify and avoid special protection areas(for example,the habitats of migratory birds)as part of the spatial planning process.In the designation of go-to areas,a

290、 transparent and participatory approach should be adopted to ensure all relevant stakeholders views are considered and to minimise future planning objections.More work is needed to boost system flexibility through smart grids,demand response and energy storage Since 2017,all electricity consumers in

291、 Estonia have smart meters that transmit at least hourly data to an online database.Consumers have free access to their data and can give service providers access to their data.By 2025,smart meters with a 15-minute resolution will be deployed to all metering points of the transmission Estonia 2023 2

292、.Electricity Energy Policy Review PAGE|34 I EA.CC BY 4.0.system,generating installations with capacity more than 15 kilowatts and consumers with a connection with more than 200 Amps.By 2031,all metering points will have a smart meter with 15-minute resolution.The advanced roll-out of smart meters an

293、d high level of digitalisation provide a clear opportunity for consumers to play an important role in ensuring a flexible and secure electricity system and supporting the clean energy transition,for example by providing DSR.However,there has only been limited use of smart meters and engagement of co

294、nsumers to increase system flexibility.Flexibility can also play an important role by providing services to the TSO or DSO.For example,in 2022,the DSO published a tender to procure flexibility options on the island of Hiiumaa,which could enable increased PV connections without requiring grid investm

295、ents.The project should be combined with flexibility research efforts and dissemination of results.To support increased system flexibility,the government should enable the development of system service markets needed for a 100%renewable electricity system.This should facilitate the participation of

296、variable generation,storage and energy service companies(ESCOs),and harness the considerable DSR potential among Estonias electricity consumers,for example through the development of energy communities.In line with this,the government should take steps,such as establishing regulatory sandboxes,to al

297、low for aggregated services,ESCOs and other market actors to gain experience in offering services in the ancillary markets that will open once synchronisation with continental Europe is completed.Estonias report on Transitioning to a Climate-neutral Electricity Generation notes that expanding the el

298、ectricity system balancing market to encourage investments in flexibility is a key action regardless of the technology pathway taken to achieve climate neutrality.The IEA provides resources on how policy makers and other energy sector stakeholders can better support the development of smart grids an

299、d demand response.Estonia does not have significant deployment of energy storage.Several storage projects,including both pumped storage and batteries,are being planned in Estonia that have the size and technical potential to make significant contributions to the countrys electricity system,both in t

300、erms of storing energy and providing ancillary services.In January 2023,approved construction of a large-scale pump-hydro storage project with a capacity of 500 MW and 6 GWh,that connects an underground cavern on the western coast of Estonia to the Finnish gulf.The project developer is backed by Est

301、onias main private sector energy companies and aims to start construction in 2024 and be operational in 2028.Eesti Energia is planning an innovate 225 MW pumped storage at an old oil shale mining site in eastern Estonia,which aims to start operating in 2026.These projects would create 725 MW of ener

302、gy storage(compared to a peak demand of 1 400 GW to 1 550 GW in recent years)and would have a major positive impact on boosting integration of renewable energy and strengthening electricity security.Estonia should take additional steps to boost the deployment of energy storage,as this is one of the

303、key options for increasing system flexibility and integration of variable renewables and can help reduce traditional grid investments.Estonia Estonia 2023 2.Electricity Energy Policy Review PAGE|35 I EA.CC BY 4.0.should quickly complete the planned removal of double tariff charging of energy storage

304、 facilities and ensure the storage is allowed to participate in all electricity market segments.Further promotion of storage could be achieved by including storage in hybrid renewable auctions and/or dedicated energy storage auctions.For example,Greece has used both options to rapidly accelerate cos

305、t-effective deployment of energy storage,with a three-phase auction in 2023 offering support for 1 GW of storage.Estonia should also expand support for thermal storage in conjunction with the electrification of the heating sector,as this presents an excellent option to boost the flexibility of the e

306、lectricity and district heating systems while also increasing the integration of variable renewable generation.Finland has demonstrated notable success in deploying thermal storage systems linked to district heating in Helsinki and Vaskiluoto to reduce heating sector emissions and costs while boosti

307、ng renewable integration(see Chapter 3).Clarity is needed on the expected role of offshore wind Estonia currently has no offshore wind generation.The government has indicated that offshore wind could play a key role in meeting Estonias climate targets,while also boosting economic activity and suppor

308、ting the achievement of EU climate targets through the export of renewable electricity.In many respects,Estonia is preparing well for an offshore energy future.A marine spatial plan has been published and Estonia has good regional co-operation on offshore wind through the Baltic Energy Market Interc

309、onnection Plan,which has adopted a Baltic offshore wind work programme that supports co-operation on the development of the offshore grid,maritime spatial planning,enabling appropriate financing and acceleration of Baltic offshore wind projects and permitting.Despite these steps,the government does

310、not expect offshore wind generation to be deployed in Estonia before 2030 and there is a lack of clarity on Estonias plans for offshore wind.Some key energy sector stakeholders have questioned if offshore wind deployment is needed to meet national targets,while others are clearly pushing for large-s

311、cale deployment.This is creating risks and uncertainties that could significantly slow and limit offshore wind deployment.The government should clarify what role it sees for offshore wind in Estonia and what level and timeline of deployment is needed to support this role.In October 2023 the Ministry

312、 of Climate delivered a memorandum to the government providing options to achieve the 100%renewable energy target.It analysed the contribution of different generation technologies including offshore wind and estimated that the 100%renewable energy target can be met with only onshore renewable genera

313、tion.It states it is important to maximise onshore renewable development but also acknowledges that starting development of offshore generation is important for long-term economic development.It light of these findings,the Ministry of Climate proposed organising a tender process of sufficient scale

314、and conditions to achieve the national target that allows for participation of onshore and offshore renewable energy technologies.Such a Estonia 2023 2.Electricity Energy Policy Review PAGE|36 I EA.CC BY 4.0.tender could offer support to up to 6 000 GWh/year with a deadline for delivery of electrici

315、ty by 2030.It was decided that further work will be conducted and the specified terms for the tender will be elaborated for approval by the government in November 2023.The IEA recommends that the analysis supporting the memorandum be made publicly available and notes concerns with the analysis,which

316、 estimated that offshore wind is two to three times more expensive than onshore renewables.This might be true when only considering the levelized cost of electricity,but any policy-informing analysis of cost,must also consider the overall system value.Offshore wind speeds are generally higher in mag

317、nitude and lower in variability than onshore,which is for example reflected in the higher capacity credit given to offshore wind in US of up to 42%,versus 13-15%for onshore wind.Onshore renewable projects could require more backup thermal generation to meet system security requirements,thus raising

318、costs and emissions.Unless this is reflected in the auction design,offshore projects would be at a disadvantage when trying to compete.The new tender system should have separate auctions for offshore wind(as has been done in most countries)or rules that will clearly allow competitive offshore projec

319、ts to win support.The government also needs to clarify how the offshore electricity grid will be developed and who will bear this cost.In addition,the wider and longer term economic opportunities associated with offshore wind development in Estonia should be determined.A post-2030 strategic plan for

320、 the sector should be developed,bringing together interconnection policy,economic analysis and export potential analysis.There are several ongoing efforts to support offshore wind deployment;however,they do not appear to be well co-ordinated with each other.Estonia and Latvia are working on a joint

321、1 GW offshore wind project(ELWIND),which includes the development of a fourth interconnection that will connect offshore wind farms while supporting electricity trade between Estonia and Latvia.In October 2022,the Estonia and Latvian deployment locations were selected.The aim is to hold an auction i

322、n 2026 to select a developer to deploy 700-1 000 MW of capacity by 2030.Separate from ELWIND,three offshore wind projects have superficies licences and a“first mover”advantage,as they are in the advanced environmental impact assessment stage.The total generation potential of these three projects is

323、estimated at 15 TWh,which is more than enough to meet current and forecasted domestic demand in Estonia.But there are currently no clear plans on how these projects would be connected to Estonias electricity grid,which would require major investments in onshore and offshore electricity infrastructur

324、e.Additionally,in 2023,the government accepted 44 offshore wind applications for an area covering nearly 1 800 km2 south and west of the island of Saaremaa.In relation to this effort,the government plans to conduct auctions in 2023 that will award building permits for specific areas of the sea floor

325、.The IEA questions the value of proceeding with an auction for seabed licences without any viable route to market for these potential offshore wind projects and when several other processes are already ongoing that could likely support offshore Estonia 2023 2.Electricity Energy Policy Review PAGE|37

326、 I EA.CC BY 4.0.wind generation well beyond Estonias current electricity infrastructure capacity.The resources of the government and regulator required for this auction would be better directed elsewhere.The government should also reflect on the value in progressing with an open-door policy for supe

327、rficies licences,in the absence of any coherent offshore energy strategic policy or roadmap.It should be borne in mind that countries with advanced offshore renewable energy sectors such as Denmark(and other early-stage countries like Ireland)have taken the decision to suspend their open-door approa

328、ch to licensing in favour of a strategically aligned,plan-led approach.Estonia has an opportunity to develop a robust offshore wind framework with sound foundations and avoid the painful and potentially litigious decision of ending an untenable open-door approach in the future,being mindful of the a

329、dministrative burden involved in running auctions and processing and granting licences to projects which are not viable and will likely not be required to meet energy targets.It is recommended that the government focus on accelerating the ELWIND project,which is the most advanced in terms of plannin

330、g,is already supported by the TSOs ongoing investments and supports increased interconnection capacity.The successful realisation of the ELWIND project will provide a model for delivering a commercial offshore project to scale which will thus provide market confidence,and in doing so establish a pro

331、ven regulatory framework,including in respect to transmission assets.A decision on whether to proceed with nuclear power is expected in 2024 The government is examining an option to deploy nuclear generation and aims for a final decision on whether to proceed in 2024.The consideration of a civil-nuc

332、lear power programme dates from a November 2020 decision by the Cabinet of Ministers instructing relevant ministries to convene a national Working Party on Nuclear Energy.This led to the establishment of the Nuclear Energy Program Implementing Organization(NEPIO)working group in April 2021 charged w

333、ith delivering a recommendation on whether to move forward with a nuclear programme.NEPIO plans to deliver a final report to the government by December 2023 on requirements for establishing a nuclear programme,accompanied by draft legislative and regulatory structures.NEPIOs report will first be evaluated by the government then by the parliament to reach a final decision on whether to move forward