Estonia has committed to cover its electricity consumption with 100 % renewable electricityby 2030 from a share of 22 % in 2020, according to the country’s draft update of the 

 (NECP ).This is going to help reach 65 % of renewables in gross final energy consumption.

Estonia RES targets

The country’s annual electricity consumption is expected to increase from the current 8.5 TWh to 9.4 TWh in 2030. Estonian renewables production stood at 2.6TWh in 2022 which means the country has seven years to more than triple its renewables generation. Competitive support schemes for renewables would be key to achieving the goal with an emphasis on wind (both onshore and offshore).

Onshore wind capacity is set to grow from 310 MW in 2022 to 1.3 GW in 2030 with the first 1 GW of offshore wind to come online in 2030. Solar capacity should double to 1.2 GW while biomass and hydro capacity should remain relatively steady at 1.1 GW and 8 MW respectively. 

In addition, the government auction plan for 2023-2027 stipulates the need for the construction of storage capacities (both pumped storage and batteries) in proportion to renewable energy with the first round of 

As of 2024, the Baltic system operators plan to start with a common electricity system reserve market to ensure the functioning of the electricity system and security of supply following the synchronisation of the Baltic electricity systems with the Continental European synchronous area. 

Meanwhile, Estonia’s level of electricity interconnection exceeds the EU’s targets (15 % by 2030) several times, reaching 63 % further ensuring security of supply. Estonia is separately mulling the possibility to apply a capacity mechanism in case of problems with meeting the reliability standard.

In preparation for deployment of onshore and offshore wind farms, grid operator Elering built in 2021 a new internal high-voltage line that could integrate up to 1 GW of wind capacity.

In 2019, Estonia closed its feed-in-tariff scheme for renewable installations and launched a new format based on competitive auctions. The first three pilot auctions between 2019-2021 targeted a relatively small amount of renewable electricity production to gauge investor interest (see table).

Estonia RES-E auction results

The auction volume was subsequently increased amid consistent oversubscription. Successful bidders receive a subsidy on top of the hourly day-ahead exchange price for a period of 12 years.

Investor interest remained strong in the fifth auction which aimed to secure 650 GWh of renewables production per year. Elering received a total of 1,070 GWh worth of bids (893 GWh wind and 177 GWh solar), according to 

The maximum government support in the last auction was set at EUR 20/MWh and producers’ total income together with the subsidies cannot exceed EUR 45/MWh for the subsidy to be paid. If the exchange price goes above EUR 45/MWh producers keep the profit from the market and the government does not pay any top up. No subsidy is paid in case of negative exchange prices.

A new condition introduced in the fifth auction requires at least half of the 650 GWh to be generated in the first and fourth quarters of a given year. The new condition is set to diversify production, support grid stability, reduce system integration costs and increase security of supply, especially in the winter period when consumption is at its highest. 

Successful bidders must start production no later than July 1, 2027. Two more auctions for 1 TWh/annum are planned in 2024 and 2025.

As of 2 June 2023, 40 applications for building permits for offshore wind farms in Estonian waters (52.3 GW total) have been submitted, four building permits have been launched and one procedure has been launched for the planning of an offshore wind turbine, according to the NECP.

The Consumer Protection and Technical Supervision Agency (TTJA) has already started to evaluate the applications and competitive auctions are expected to take place in the fourth quarter of 2023. 

A dozen areas are expected to be auctioned at a starting price of EUR15,000 per square kilometer. There are two valid marine area plans in Estonia that have established 2,439 square kilometers as suitable for offshore wind development which could yield 15-17 GW installed capacity.

Separately on 11 August 2023, ELWIND - a joint Estonian-Latvian state-run cross-border offshore wind project – closed a tender for the preparation of documentation for pre-development studies.

, an auction for securing the project’s construction permit and grid connection could be announced in 2026 with commissioning of 700MW-1 GW expected capacity planned from 2030 onwards. Estonian and Latvian electricity consumption in total is about 16 TWh/annum and ELWIND will be able to cover about one fifth (3 TWh/annum) of it.

The healthy investor interest in the latest renewables auctions suggests that Estonia has made a good start in achieving its ambitious 2030 target of having 100 % renewable electricity production. However, seven years is a relatively short period to more than triple existing production given that a lot of it hinges on offshore wind delivering the first 1 GW of capacity in 2030 with the first auctions yet to take place.

Separately, the new rule added to the latest renewables auctions which requires producers to deliver 50 % of the contracted generation in the first and fourth quarter of the year may prove difficult and expensive to achieve, especially for solar generators which have the most optimal production conditions in the second and third quarters of the year.

Having 100 % renewable electricity production would also prove a challenge for Elering. While the grid operator has started to prepare for the future by strengthening internal connectivity and ensuring cross-border support from the other Baltic operators, the government would have to speed up the process of incentivising balancicng capacities such as batteries and pumped storage as well as decide on a potential capacity market for fossil generators.

Estonia is a net exporter within the AIB. The country has been issuing around 2.5 TWh of GOs annually between 2019-2022 while cancellations have been steadily increasing from 292 GWh in 2019 to 1.05 TWh in 2022, according to AIB statistics.

If the country succeeds in its 2030 targets and reaches 100 % renewable electricity production, GO supply could go up to 9.4 TWh based on expected production set in the NECP. Beyond 2030, the untapped potential of the offshore wind in the Baltic Sea could turn the country into a net electricity exporter, further boosting the potential supply of GOs.

At the same time internal demand for GOs is expected to remain relatively steady around 1.2-1.3 TWh, according to Veyt’s GO long-term model.

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Ambitious 2030 decarbonisation targets and positive renewables investment signals suggest that Estonia could solidify its position as an exporter of Guarantees of Origin (GO) within the AIB by the end of the decade and further boost supply of offshore wind GOs in the next decade.

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Estonia pushes forward with 100 % RES-E production targets

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