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The Authority published the report on the Estonian electricity and gas market

The Authority published a report that examines the developments in the Estonian electricity and gas market in 2020 and provides assessments of the competitive situation in the respective markets. The ongoing COVID19 pandemic is still affecting us, but the sharp and rapid recovery in the economy today has significantly increased the prices of various commodities – from metals to energy, oil, natural gas, and electricity. At the same time, in 2020, we saw lower consumption of both electricity and gas due to the COVID19 pandemic. Therefore, the prices were lower than usual.

The economic recovery will inevitably be accompanied by an increase in energy consumption, which is one of the reasons for the current high price of natural gas. According to various analyses, natural gas is the main fuel in the green transition from fossil to renewable energy sources, and from this perspective, an increase in global consumption can be predicted. The reasons for the high price of electricity must be considered in a complex way. It is a coincidence of several different factors. These factors include the increase in electricity consumption as a result of the pandemic – a growing economy inevitably needs more energy, the sharp rise in gas prices mentioned above, too little investment in renewable energy, little rainfall in the Nordic countries, high CO2 quota prices, and so on. The transition to a carbon-free economy also plays a role, with electricity having an increasingly important role in various sectors of the economy, be it transport or heating and cooling systems in buildings. The European Commission has repeatedly emphasised that the green transition must operate in a market economy and that the foundations of free competition set out in the EU Treaties have not been changed. In our report this year, we have also looked at our support scheme for renewable electricity producers and found that it is time to make a final decision in favour of a free market economy. At the same time, every coin has two sides – high energy bills are a burden on consumers and they increasingly need help from the state. On the other hand, the high price of electricity is precisely what should give a stronger impetus to renewable electricity investments, and in combination with low interest rates, it is the best time for market-based rather than subsidised investments.

Security of supply of electricity generation is discussed in more detail in the 2019 report. There are different sources of supply for gas today. The year of 2020 was a turning point for the gas market, as the Baltic and Finnish gas systems were connected with the Balticconnector gas pipeline between Estonia and Finland. In addition, Estonia, Latvia, and Finland created a common tariff zone that allows gas to be transported between the three countries tariff-free, creating more competition in the market. Consumers will ultimately benefit from a larger market and closer competition between gas sellers. Although the interconnected Baltic–Finnish gas system is largely supplied by Russia, there are several inputs and, in addition, the Klaipeda liquefied gas terminal as an alternative source of supply also plays an important role.

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