The government is looking for new ways to meet its renewable energy targets. Just a year ago, the plan was to support large-scale renewable projects, such as offshore wind farms, through competitive tenders.

However, in February, the previous government decided to abandon a tender for offshore wind farms that could have cost up to €2.6 billion. The government has also stated that similar tenders for offshore wind farms will not be organized in the future.

Now, Minister of Energy Andres Sutt (Reform) plans to introduce a new national loan guarantee scheme alongside existing tenders to attract energy projects worth hundreds of millions of euros to Estonia.

This would not be a direct subsidy — instead, the state would guarantee bank loans for such projects. This would reduce the developers' risk in the eyes of banks and make it easier for them to attract private investment.

"Possible projects that could benefit from this measure include offshore wind farms, large-scale storage facilities and perhaps even a nuclear power plant in the future. There are several potential options, but we're talking about very large, costly and long-term projects in the Estonian context," said Tauno Hilimon, head of the renewable energy department at the Ministry of Climate, in an interview with ERR.

Hilimon declined to say how large the state guarantee could be.

"The projects themselves generally cost hundreds of millions of euros. The size of the guarantee depends on the specific terms and on which projects are ultimately carried out," he explained.

Energy and Environment Minister Andres Sutt also discussed the proposed guarantee scheme on September 23 on Vikerraadio's "Reporteritund." He said that banks are currently unwilling to take on the risk that electricity prices on the market could fall, leaving such projects without sufficient revenue.

Private banks also want developers to repay their loans within 20 years, while wind farms, storage facilities or nuclear power plants generate income over a much longer lifespan. This means that the projects' cash flow and loan repayment schedules do not align well.

According to the minister, the guarantee instrument of the Estonian Business and Innovation Agency (EIS) could help mitigate this risk. "If revenue from electricity sales isn't sufficient to service the loan, the foundation could pay the missing amount to the bank," Sutt said on Vikerraadio.

This would not simply involve transferring state money, however. Under the government's plan, EIS would purchase bonds issued by the developer in return. This would give the developer more time for the investment to pay off and reduce financial risk for the bank.

"In essence, we're extending the repayment schedule and removing part of the financial risk from the bank. Over the long term, electricity prices can't stay at zero — otherwise, no one would invest. So it's reasonable to assume the money can be earned back over time," the minister explained.

The state would therefore not provide direct funding but would assume part of the financial risk associated with projects that private banks are reluctant to shoulder alone.

The ministry is currently working out the detailed terms of the guarantee scheme in cooperation with the Ministry of Economic Affairs and Communications and EIS.

Clean industry agreement makes state aid easier

According to the government's action plan, financial instruments supporting the launch of offshore wind farms on the market will be developed under the EU's Net-Zero Industry Act by the first quarter of next year.

One of the main goals of the Net-Zero Industry Act is to make state aid rules more flexible for green technology projects. The act allows EU member states to obtain approval from the European Commission more quickly and easily for state aid measures that promote the adoption of renewable energy and the reduction of industrial carbon emissions.

Before the Net-Zero Industry Act, the European Union's rules on state aid were strict. A member state could not simply start offering loan guarantees to its companies, as this could create an unfair competitive advantage. The process of securing approval for state aid was lengthy and complicated.

The Net-Zero Industry Act changes that. It was introduced in response to the United States' major green investment package, with the goal of preventing European industry and investments from moving elsewhere.

The act gives member states more favorable conditions to support green technology projects — and one such form of state aid is the loan guarantee scheme.

Share of renewable energy should be 73–86 percent by 2030

Although the Riigikogu has written into law that by 2030 Estonia must produce as much renewable electricity as it consumes, the Ministry of Climate now acknowledges that this target will not be met.

The ministry estimates that by 2030, renewable electricity will likely account for between 73 and 86 percent of Estonia's total electricity consumption. The exact share will depend largely on the results of the upcoming onshore wind tender — in other words, how much new onshore wind capacity will be added through that process.

A regulation currently before the government would authorize another tender for onshore wind farms, with a total capacity of one to two terawatt-hours. This could bring up to 700 megawatts of additional renewable energy online in Estonia.

According to Hilimon, the relevant documents are already with the government and once approved, Elering will announce the tender. The deadline for submitting bids is expected in the first quarter of 2026, with the new wind farms scheduled for completion by the end of 2029.

The upcoming National Energy Sector Development Plan (ENMAK) no longer includes as ambitious a target as the one currently set in law. The draft plan sets a goal of achieving 80 percent of electricity generation from emission-free sources by 2035. Unlike renewable sources, emission-free electricity can also come from, for example, a nuclear power plant.

The 100 percent target is more achievable with state support measures

According to Hilimon, the development plan does not specify when Estonia should reach the current 100 percent target. Reaching that goal will depend on market-based investments and the growth of electricity demand.

"If demand for electricity increases, achieving that target could shift beyond 2035," he noted.

The official added that without state support measures, the likelihood of meeting the goal remains low.

"The probability that renewable electricity will account for 100 percent of consumption by 2035 is higher if there are national support measures in place. It's much less likely without them," Hilimon said. He added that reaching the goal by 2040 seems more realistic, citing advances in technology and market developments.

Because the targets in the draft energy development plan are lower than those currently enshrined in law, the law will likely have to be amended, Hilimon said.

The government plans to adopt the National Energy Sector Development Plan by the end of this year. "If the ambition set in law is significantly higher than what's outlined in the development plan, then a legal amendment will definitely have to be included in the agenda," he confirmed.

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