Six months ago, in the spring, ERR reported on the government's plans to create a separate loan guarantee scheme to support major investments worth billions of euros. The scheme could have helped finance the construction of new offshore wind farms, a pumped-storage hydropower plant and a nuclear power plant.

However, Erkki Raasuke and Anne Sulling subsequently conducted a study that found state guarantees alone would not be enough to attract such major investments to Estonia.

Jaanus Uiga, deputy secretary general of the Ministry of Climate, has now said that the state is no longer developing a separate loan guarantee scheme for a nuclear power plant. However, the possibility has not been ruled out entirely.

"We have moved beyond focusing solely on a guarantee scheme because it has since become clear that such a scheme alone would not be sufficient for projects of this kind. Any project worth more than €1 billion will most likely require a tailor-made solution," Uiga said.

Kalev Kallemets, CEO of Fermi Energia, said that under European Union law, the only price guarantee mechanism available for a nuclear power plant is a two-way contract for difference (CfD). In simple terms, this involves an agreed fixed price. If the market price of electricity falls below the agreed level, the state pays the producer the difference. If electricity prices rise above that level, the producer pays the additional revenue back to the state, through Elering.

Kallemets said it was too early to estimate what the agreed price might be.

"This year's average electricity price will probably end up somewhere around €90 per megawatt-hour by the end of the year. That is also roughly the estimated cost of generating electricity with a small modular reactor, depending on the cost of capital. It depends quite significantly on financing costs and interest rates," he said.

Uiga said that a single measure would probably not be enough to finance a nuclear power plant and that a combination of measures would likely be needed. However, it remains unclear which combination would be most suitable.

Uiga noted that, apart from Finland, there are effectively no examples of other countries financing a nuclear power plant without a contract for difference.

"Other countries are seeking state aid approval for various combinations of measures, whether loans, loan guarantees, contracts for difference or equity investments. We will most likely need to examine these measures and their various combinations. Whether Estonia can afford such support and under what conditions it would be financially feasible remains to be determined," Uiga said.

Kallemets said the detailed terms of the contract for difference would likely be left for the next government to work out, even if a formal decision on state aid approval comes later.

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