This January was one of Estonia's coldest in the past 25 years, pushing electricity consumption up by roughly one-fifth compared with December. A surge in electricity demand is always a significant price driver on the power market because in cold weather it is not only Estonia's energy needs that increase, but those of the entire Baltic and Nordic region.

Due to the rapid growth in consumption, fossil fuel–fired power plants had to come online as there is not enough lower-cost renewable energy supply in our region. As a result, price formation shifted to more expensive gas- and oil shale–fired plants. Output from Baltic gas plants rose by nearly 80 percent in January, while production from oil shale plants increased by about 50 percent. Consequently, the average monthly electricity exchange price jumped by as much as 110 percent compared with December, reaching approximately 15.4 cents per kilowatt-hour (154 euros per megawatt-hour).

Wind power cannot be blamed for the high prices. On the contrary, wind energy was one of the few generation types that helped push prices downward in January as well. In what appeared to be a low-wind month, electricity generated from wind still covered a full fifth of the Baltic region's January consumption. Had we had more wind farms, wind energy's share would have been even greater and at least one more expensive fossil fuel plant might not have needed to enter the market.

The decline in renewable energy was primarily driven by Latvian hydropower, which fell by half compared with January last year due to freezing temperatures. While in January 2025 hydropower covered about 16.5 percent of the region's demand, this year it accounted for only around 7.1 percent.

High prices are also quickly blamed on the Auvere Power Plant, which was indeed off the market for much of January due to a malfunction, but was replaced by other Narva power plants. The Auvere plant has been back on the market since Feb. 6, yet no relief in electricity prices has been seen. Although every additional megawatt is important in a situation of significant production deficit, the price impact of the Auvere repairs was nevertheless limited due to the replacement capacity.

We are part of the Baltic electricity system where consumption currently exceeds 5,000 megawatts. In addition, our price has recently aligned with Finland's where consumption volumes are also reaching record highs and there is a shortage of lower-cost electricity generation. At the same time, both Estonia and the Baltic region face structural import dependence. Nearly 30 percent of the Baltic region's January consumption was covered by imported electricity, but neighboring countries were also experiencing severe cold, driving up both consumption and electricity prices.

How to fend off sky-high power bills

Households that rely on electric heating and electricity priced at the market rate were hit hardest by the high bills. For these consumers, a double risk materialized: the cold increased consumption, while at the same time the price of every kilowatt-hour consumed rose. Customers on fixed-price packages were in a far calmer situation — consumption did increase, but the price remained under control.

Although consumers cannot control the weather, everyone can protect themselves against price spikes. In January, exchange prices during daytime hours often ranged from 20 to 30 cents per kilowatt-hour and during the worst hours even 40 to 50 cents. A customer on a fixed-price contract consumes electricity at a stable rate of roughly 10 to 12 cents, depending on when the agreement was signed. That is several times less than what a consumer on a market-based package paid.

Those remaining on a market-based package can reduce their costs by shifting higher-load activities to cheaper hours. Unfortunately, during a prolonged cold spell such as in January, there are few low-price windows and it is not possible to move all consumption to nighttime hours.

Modern generation capacity needed for long-term solution

If we want future winters to stop jolting us with high electricity prices, Estonia needs a systematic and long-term solution. As long as we remain in a production deficit and depend heavily on imported electricity, price spikes will continue to recur.

We need more modern, competitive electricity generation capacity to cover our own consumption needs. That means additional renewable energy production to help keep prices down, as well as rapidly dispatchable gas-fired power plants to ensure supply at times when renewable generation is insufficient.

Without revenue certainty — that is, relying solely on the market — it is nearly impossible to build any type of electricity generation in Estonia, whether a wind farm, a nuclear plant or a gas-fired station. In addition, the lengthy and uncertain planning process is hindering the development of new generation capacity. To bring electricity prices under control, we must overcome these obstacles. The longer we wait, the more expensive and risky it will become for Estonia.

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