With 2024 in mind, it can be pointed out regarding special legislation in the energy sector (Natural Gas Act, Electricity Market Act and District Heating Act) that, in addition to the entry into force of important provisions in all of these laws, an important keyword here is foresight.
All of the aforementioned laws were supplemented with provisions on the business continuity of vital service providers and requirements for ensuring the security of supply of services. In addition, the terms and conditions specifying the strategic gas stocks payment and its rate came into force in the Natural Gas Act, and provisions on the introduction and financing of the electricity reserve capacity mechanism came into force in the Electricity Market Act. To find a universal electricity service provider, clarifications were added to the rules of procurements conducted under the Public Procurement Act, and the regulation on universal electricity service, which had been in effect since October 2022, was repealed on 1 July 2024. The Competition Authority was given the additional task of monitoring investment in electricity production capacity and storage, with a view to security of supply, and assessing regulatory and administrative barriers related to renewable electricity sales contracts, along with providing guidance on removing unjustified barriers.
The goal set for 2025 is to supplement the Electricity Market Act with provisions that reduce the operating costs of electricity storage by eliminating double taxation, specify the legal framework for demand response and requirements for electricity invoices, and introduce the principle of net metering for end consumers during the trading period. The goal is also to encourage flexible solutions as an alternative to investing in the electricity grid, which will also reduce the costs of maintaining the grid, and to promote investments in electricity grids. Since there may be a risk that sufficient production capacity will not be available from 2026, a regulation for ensuring islanding functionality will be made, which will allow the maintenance of electricity generation capacity in the amount necessary to maintain the stability of the Estonian electricity system from 2026. With the islanding functionality service, Estonia’s electricity system would be able to independently cope in a situation where we were to end up in islanding. This is a measure that increases energy security. To ensure the islanding functionality service, the system operator Elering AS will conduct a public procurement that is technology-neutral in nature and all Estonian electricity producers that meet the conditions can submit a bid. The conditions will be approved by the Competition Authority.
Since it is necessary to develop and strengthen the Estonian electricity grid in order to meet renewable energy goals, the concept of the network connection charge established in the Electricity Market Act will be changed so that half of the connection costs of producers wishing to connect to the existing electricity grid will be covered by electricity consumers and the other half by those connecting to the grid, and a separate fixed price list will be established. This allows potential producers and consumers to better predict the costs associated with connecting to the electricity grid. In locations where there is no existing electricity grid, a cost-based connection charge will still apply. The scope of the development obligation of electricity distribution network operators will be expanded, and in order to promote optimal network use, provisions on the implementation of network underutilisation charges will be specified through legislative amendments.
The district heating sector is also inextricably linked to achieving renewable energy goals. To ensure the reduction of carbon emissions in the Estonian heating and cooling sector and achieve climate-neutrality in this sector, the main challenges are the wider adoption of storage technology, the maximum use of environmental and waste heat in district heating, and the transition to low-temperature district heating. Thus, in 2024, the implementation of the district heating reform began with the involvement of the Competition Authority, the Ministry of Climate and market participants, and the study ‘Transitioning to carbon neutral heating and cooling in Estonia by 2050’ has been taken as input for planning the future directions and developments of the sector.
Considering the performance of the Competition Authority’s tasks arising from the District Heating Act and its supervisory work, it can be pointed out that one of the most acute problems has been the outdated regulation of heat sales and pricing set out in the law, which has been in effect essentially unchanged since 2003. Another major concern is the regulation of trade secrets, which concerns conducting the heat purchase tender, the heating sector development plan and the sustainable activities of undertakings, the possibility of transferring consumers to an alternative heating solution, as well as approval of the maximum price of heat. The Ministry of Climate is currently working on the draft. The Competition Authority’s proposals to amend the District Heating Act are available in the Authority’s document register.