Estonia plans to boost its wind sector
Estonia has total wind capacity of 310MW and added only 7MW last year. It also has a small population (1.3million) and met its national targets for renewables ten years early. Those three points suggest there should be little here of interest for investors.
But, in our view, it would be premature for investors to ignore the country. If we look beyond those few statistics we can see that Estonia has ambitious plans to grow its wind market.
To date, wind farms in Estonia have been installed solely onshore. However, the country has shallow waters, 3,794km of coastline and moderate sea conditions, which mean lower costs of installations and maintenance of offshore wind farms. These should be the ideal conditions for developing the offshore sector.
At the Windforce Baltic Sea conference in Estonia’s capital Tallinn this month, its minister of economics affairs & infrastructure, Kadri Simson, pointed out that the time is ripe for Estonia to become a significant player in offshore wind. It may not need the electricity itself, but is hoping to be able to sell it to other EU nations.
Estonia achieved its 2020 target of having 20% of its final energy consumption from renewables in 2011, but it sees the potential to build offshore wind farms and take advantage of energy trading mechanisms in the EU’s Renewable Energy Directive.
The directive has three cooperation mechanisms – statistical transfers, joint projects, and joint support schemes – to allow countries to work together to exploit their renewable resources in order to meet their renewable energy targets. These enable countries to trade certificates that show they get their power from clean sources, in much the same way that companies can.
This could help other countries to meet their own renewables targets – but why is Estonia interested? Of course, the reason behind this is not altruism.
This strategy would enable the country to grow the offshore wind market and support the growth of its wind industry, with all the benefits that brings for jobs and economic growth, and to cut its reliance on fossil fuels from Russia.
Currently, Estonia has a series of large projects in prospect, with over 3GW of offshore schemes in the early concept phase.
Estonian developer Baltic Blue Energy submitted an application in early 2016 to the Ministry of Economic Affairs & Communications for the installation of 388 turbines with a total capacity of 2.7GW, with a plan is to build initially just 1.9GW of capacity, over five sites located between Saaremaa and Hiumaa islands. Since then, we have seen little further progress on the schemes.
Meanwhile, fellow Estonian firm 4Energia started to develop an up-to-1.1GW scheme off the island of Hiiumaa in 2006, but the project is awaiting approval after its environmental impact assessment.
And finally, utility Eesti Energia is planning up to 960MW of wind schemes off the coast of the Gulf of Riga.
So it has the projects, and businesses in the country also have some knowledge about offshore wind. For example, most of the wind generators produced globally by ABB are made in Estonia; and Estonian shipbuilding firm BLRT already manufactures and exports various structures for offshore wind farms.
EU countries that have not reached their renewables targets yet – among them UK, France and Luxembourg – could also see benefits here, as doing deals with Estonia could help them achieve their own renewables targets. And potential investors would benefit from backing schemes where the power deals have support from countries seeking to hit their targets.
Wind in Estonia has three P's: projects, political support and a few relevant producers. That means there's a fourth P: potential.