According to the Climate Ministry's latest forecast, the end price of electricity for consumers is projected to be 14.9 cents per KWh, down from 17.4 cents per KWh last year.

The forecast highlights that over the next ten years, the renewable energy charge will increase from the current 1.05 to 1.56 cents. The fixed connection fee will be 0.125 cents, the frequency reserve fee 0.5 cents and the capacity mechanism charge will be 0.4 cents per KWh.

It also notes that VAT will decrease from the current 3.12 to 2.61 cents per KWh, while the excise duty will rise from 0.15  to 0.447 cents per KWh.

These calculations indicate, however, the presumption that network service fees, which are currently set at 4.40 cents per KWh, will remain unchanged for the next decade.

ERR asked the ministry what these calculations were based on, given that, according to the energy sector development plan, €1.67 billion in investments will be needed to improve the grid by 2035, and funds will also be needed for the construction of new external connections.

The Climate Ministry's calculations likewise don't seem to account for costs related to the development of storage capacities or natural gas-fired power plants.

Rein Vaks, director of the ministry's Energy Department, told ERR that the ministry has factored in a 0.15 cent per KWh rise in the transmission network charge.

"This will be used to enable faster connections to the main grid, and to ensure more affordable connections to the grid," he explained. "Additional investments are certainly needed in the main grid — for example, for the construction of new external connections, strengthening the grid and similar — but [funding] for these won't be coming from the tariff."

According to the department director, transmission system operator (TSO) Elering has secured €233 million from the European Commission under the synchronization project, which has allowed for the strengthening of a significant portion of the country's transmission grid.

As a result, he noted, Elering has had to invest less money from its grid tariffs into general grid development.

"A third Estonia-Finland connection, Estlink 3, is planned to be built using congestion revenues collected by Elering and partially supported by EU funds, such as the Connecting Europe Facility (CEF)," Vaks noted.

According to the ministry official, the cost of frequency reserves, including the cost of new dispatchable capacities procured by Elering, has already been included in the forecast price — 0.5 cents per KWh accounts for the costs Elering will have to bear in maintaining frequency reserves.

He also stated that, based on current information, the distribution grid tariff will not change in connection with wind energy development.

Härm: Elektrilevi grid needs major investments

Mihkel Härm, CEO of electricity distribution system operator (DSO) Elektrilevi, said that all major wind farms will be connected to Elering's grid, but Elektrilevi's network requires significant investments as well.

"Currently, 26 percent of our grid has exceeded its lifespan, 25 percent isn't weatherproofed, and we have customers expecting high-quality grid service," he highlighted.

The DSO chief added that in the coming years, Elektrilevi's goal is to significantly increase the share of weatherproof grid infrastructure, and achieving this will require annual investments of €150-160 million.

He noted that in Ireland, for example, one in three customers are left without power in a severe storm, and standard weatherproofing solutions are no help against such storms.

"We need to build underground cables, which requires an investment of €2.5 billion," Härm acknowledged. "This money can only come from network charges."

However, Estonia's entire power grid will not be moved underground. The optimal solution would require €160 million annually over the next ten years, totaling €1.6 billion.

"Then we'll be able to say we have a fairly high-quality grid," Härm said. "But it still won't be fully weatherproofed against extreme weather events."

Currently, the network charge in Estonia is about 4.4 cents per KWh, but according to Härm, a decade from now it could be 5.5-6 cents per KWh — if taking only Elektrilevi's grid investment needs into account.

Elering CEO Kalle Kilk said that, according to their development plan, grid construction needs amount to approximately €320 million — half of which should be covered by power plants joining the grid, and the other half of which Elering would finance from its own network charges.

According to Kilk, Elering envisions a future energy grid where production costs will continuously decline, but to ensure sufficient production capacity, the cost of guaranteeing production — also known as the fixed component — will rise.

"But overall, this should still result in a lower price," he added.

Elering also hopes to cover the costs of building Estlink 3 without hitting consumers' wallets, as the Climate Ministry official also mentioned.

"Currently, there's a bottleneck in cross-border trade, and funds are continuously being collected to eliminate this bottleneck," Kilk explained. "We can build Estlink 3 using this fund."

Maintaining frequency reserves following desynchronization from the Soviet-era BRELL system will require Elering to pay power plants €60 million a year. During the first, transitional half a year, this cost will be covered from Elering's own funds. Starting in July, however, customers will have to start picking up the tab.

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