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Estonia

Estonia

Slow warming to wind brings price hikes -- Estonia, Lithuania and Latvia

While its Baltic neighbours continue to limp along, Estonia's wind market seems on the cusp of a new era. With good wind resources, improved purchase prices, and wind firms chomping at the bit to get projects underway, some 500 MW is under development and more than 3000 MW of planned projects is waiting in the wings. The local wind energy association is optimistic the government will now act to remove barriers to development. Under EU law, Estonia must increase the share of renewables in energy supply from 18% today to 25% by 2020. Combined with Estonia's pressing need to ensure energy security, the 2020 target should act as a major driver for political action.

Just 19 MW of new wind capacity was added to Estonia's wind fleet in 2008, taking cumulative capacity to 78 MW, says the Estonia Wind Power Association (EWPA). Wind power now supplies 2-3% of Estonia's electricity. An improved market structure that came into force on January 1 should see 150 MW built this year, with a race between developers to get there first.

They have two options for selling electricity from their wind power stations. The first is a fixed price of EUR 0.0735/kWh and the second is an incentive payment of EUR 0.0537/kWh to augment the wholesale electricity price achievable on the open market, currently around EUR 0.03/kWh. With a combined price of EUR 0.0837/kWh, the second option is proving by far the more popular choice for developers. But incentives are only being granted to enough projects to meet a wind generation target of 400 GWh a year, effectively capping new capacity at around 150 MW.

The wind industry is banking on that cap being lifted soon, noting the country's energy supply development plan calls for 400 MW onshore and 500 MW offshore by 2020. Legislation on offshore development is currently being drafted, says EWPA's Jaan Tepp, who hopes it will be finalised over the next year. In addition, for wind development to move forward significantly, Tepp says "an obscure" load-balancing requirement for wind plant must be removed and public support also needs to be regained, following the fiasco over the Hiiumaa offshore wind projects (page 121).

Lithuania

In Lithuania to the south, bordering Poland and Belarus, 2008 was another dead year for wind development, with capacity standing still at 52.3 MW from 36 turbines. Wind power accounts for just 12 GWh of the country's 13 TWh total annual electricity generation. This year, however, the country's cumulative capacity may almost double, with the Lithuanian Wind Power Association (LWEA) saying that 50 MW could come online. This includes 4Energia's 14 MW Sudenai project currently under construction.

The government is working towards a goal for 200 MW of wind capacity by 2010, with the monopoly utility Lietuvos Energija having issued calls for proposals for projects across six designated zones of the country from 2004-2008. The plan was initiated as part of the government's previous national energy strategy to meet a 7% by 2010 renewable energy target, although thanks mostly to hydro, renewable energy now accounts for 15% of energy supply already.

Under the wind plan, operators are being paid EUR 0.086/kWh for the power they generate, a rate set in January -- the government had previously promised just EUR 0.0673/kWh. The purchase price is guaranteed, for now, to 2020. According to LWEA's Aleksandras Paulauskas, while the price hike helps and should ensure at least 50 MW proceeds this year, the zoning of project plans has overly restricted development options. Combined with the costs and difficulty of dealing with the country's private grid operators, getting the next 100 MW built is going to take time, he adds.

Latvia

Neighbouring Latvia to the north continues to have just 26.8 MW online, generating less than 1% of the country's electricity. There is no sign of that changing for some time, despite declared intentions to have 600 MW of wind online by 2020. A government call for proposals issued last year for bids to build onshore wind projects totalling 135 MW failed to attract interest and was cancelled. The likelihood of the tender being reissued or any others being launched is slim, says Paulis Barons of the Latvia Wind Energy Association.

Latvia's national monopoly utility, Latvenergo, argues that the prospect of more wind capacity raises too many system balancing concerns, although it also says it is open to wind. "In words they are positive, but in actions they are negative," says Barons. "The gas lobby is quite strong. To have wind we must have a political decision." This could come within three to four years, he believes, with the government slowly warming to wind power. The Kurzeme coastal region could be a good option for development, he adds. A new substation is being planned here for stronger grid connection, though mainly in support of a coal fired plant. The possibility of a 1000 MW electricity cable link to Sweden is also being floated and might just be the impetus the government needs to strengthen support for wind development, says Barons.

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