Latvia is 2nd in EU by the share of renewable energy

European statistics office Eurostat has summed reports that, in 2011, Latvia took the second place in EU by the share of renewable energy in its total consumption.

33.1% of all Latvian energy came from renewables and, although Latvia could not reach the EU leader Sweden with 46.8%, it did manage to leave Finland third at 31.8%.

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Secretive Swede becomes Estonia’s largest forest owner

Swedish businessman Jonas Wahlström is now the largest private forest owner in Estonia and now owns about 23,000 hectares of land, mainly forest, in Estonia, writes Äripäev.

Wahlström has been buying land in Estonia for about a decade, but is extremely secretive about his business and does not say what is his purpose.

Wahlström who is known in Sweden as a supersecretive businessmen and now lives in an undisclosed location in Southern Europe told Dagens Industri that he forecast a rapid rise in the price of land and forest. „It was in 1987 and since then I have been investing in land,” he said.

Metsnik is now the largest landowner on Saaremaa island. One reason why local residents of Saaremaa are worried is the fact that in 2010 the local newspaper Saare Hääl wrote that Swedish company Ekovind AB planned to put up wind farms on forest and agricultural land of Metsnik.

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Electricity should not cause much price hike

As had been expected the consumer price index underwent a one-off jump in January. The price level increased by 0.7% from the previous month and price growth was 3.4% in annual terms. The price of electricity was 23.6% more expensive for households in January than in December, while the consumer basket excluding electricity became some 0.2% cheaper. Another factor contributing to inflation besides electricity was the alcohol excise. The seasonal fall of 4.9% in the price of clothing and footwear had a counterbalancing effect. Core inflation fell as the consumer basket without energy and food became 1.0% cheaper in January. This was greatly affected by the 9.9% fall in the cost of public transport.

Data from the Estonian Institute of Economic Research show that companies are expecting sales prices to increase faster over the next few months. Since the share of electricity in the total costs of companies is on average 1%, the price of electricity should not give rise to broad-based inflation, especially because the electricity market was already opened to large consumers in 2010.

Eesti Pank’s forecast expects this year’s average HICP growth will be 3.6%. This estimate rests on the assumption that the level of commodity prices will not change much. Eurostat’s flash estimate shows that inflation in the euro area slowed to 2.0% in the first month of the year. The joint forecast of the central banks of the euro area expects the average inflation rate for the euro area to remain in the range of 1.1–2.1% in 2013.

SOurce: Bank of Estonia
Author: Rasmus Kattai, Head of the Economic Policy Division, Eesti Pank

Share of renewable energy almost 15 pct

Renewable energy accounted for 14.9% of the total amount of electric energy consumed in Estonia during 2012, 2 percentage points more than in 2011, the transmission system operator Elering said.

The percentage that renewable energy makes up of total energy consumption already exceeds the goals set for the coming few years in the explanatory letter to the bill of amendments to the Electricity Market Act that is being handled by the parliament, Elering said. The target set by the explanatory letter for 2013 is 11.3%, whereas according to a forecast by producers the percentage of renewable energy will be 12.6, not including the amount generated using biomass at the Narva plants.

Altogether 1.37 terawatt-hours of electricity was produced using renewable sources during 2012, 18% more than a year ago. The biggest contributor to renewable generation was biomass, the amount of electricity produced from which grew 15% year on year to 880 gigawatt-hours. The amount of electricity generated using biomass fell in September when large scale burning of biomass at the Narva plants of the state-owned energy group Eesti Energia was ended.

The amount of wind energy generated during the year grew by 23% or 83 gigawatt-hours as several new wind farms, such as those of Aseriaru, Paldiski and Tuhavalja went into operation. The subsidy paid on wind energy meanwhile declined 7% as a result of significantly lower efficiency of wind generating facilities due to poorer wind conditions in 2012.

Records taken on the Pakri peninsula and at Virtsu showed the daily average wind speed as having been significantly lower in 2012 than in 2011. Some of the new wind farms that went into operation during the year did not get any subsidy yet and the sums received by the new generating capabilities did not balance off the overall
reduction in subsidies.

The amount of renewable energy on which renewable energy support was paid during the year was 1.17 terawatt-hours. The sum total paid out grew by about one-tenth to 62.7 million euros.

Of high-efficiency cogeneration support 4.3 million euros was paid out during the year, nearly 11% less than in 2011. The amount of energy receiving the support dropped from 147 gigawatt-hours to 132 gigawatt-hours. The major energy producers working in high-efficiency cogeneration mode produced on the average 11 % less energy in high-efficiency cogeneration mode than a year ago, whereas the use of biomass at their stations increased by approximately as much.

In the final quarter of last year renewable energy accounted for 12.6% of the total amount of energy consumed in Estonia, compared with 16.9% in the final quarter of 2011.

Source: Estonian Review

Brussels to sue Estonia over energy package

The European Commission has referred Estonia together with Bulgaria and the UK to the European Court of Justice because it has not fully transposed the EU’s electricity and natural gas directives making up the EU’s third energy package and is requesting fines.

The directives were supposed to be fully adopted in national law by March 3, 2011.

“The EU needs an internal energy market to tackle Europe’s energy and climate challenges and to ensure affordable and secure energy supplies to households and businesses,” EU energy commissioner Gunther Oettinger said in a statement. “Delays in implementation of the EU internal energy market rules have negative effects on all players and are therefore not acceptable.”

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Estonia to have power surplus for next 10 years

Estonia will maintain a power surplus for the next 10 years, even during peak winter demand, while neighbours such as Lithuania strive for electricity independence and lower prices, Estonia’s grid operator Elering said.

Estonia will have 2,042 megawatts of net available production this winter, more than enough to meet demand, even if average weekly temperatures are below minus 17 degrees Celsius during the country’s October-March cold season, Elering said.

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Estonian inflation caused by growing energy prices

According to Statistics Estonia the country’s consumer price index rose 0.5% in September, when compared to August. The consumer basket cost 3.8% more than in September 2011. Inflation remained unchanged in September compared to August, whereas according to Eurostat’s preliminary estimate the euro area inflation accelerated from 2.6% to 2.7%.

The rise in prices in September was primarily due to the increase in the prices of clothes, footwear, motor fuel and thermal energy. The price level of processed food has remained relatively stable in recent months. However, in the final months of the year Estonia’s food prices may be affected by several commodities, mainly cereals.

Estonia’s core inflation was slow in September, year-on-year (1.3%), because price pressures caused by services decreased somewhat during that period.

According to the Eesti Pank’s summer forecast inflation will be 3.9% in 2012 and 3.2% in 2013. In 2013 the price level will increase owing to a great extent to the rise in the price of electricity in January (a rise of almost 20% for consumers). The direct contribution of rising electricity prices to consumer price inflation in 2013 will likely be 0.7 percentage points. At the same time the prices of other goods and services will also increase due to the rise in companies’ production costs. Their contribution to inflation may reach 0.2 percentage points. The rise in electricity prices will dampen economic growth because it will reduce the real income of households and thereby slow down the growth of consumption and domestic demand.  Poorer economic outlook will cause the decrease in investment and in demand for labour.

In the next few years competition in the electricity market will increase, but during the opening of the market it will be relatively weak because technical options for importing electricity from the Nordic countries will remain limited also in 2013. In an environment of limited competition it is important that the state increases the efficiency of the functioning of the electricity market. In addition, as the sole owner of Eesti Energia the state should ensure that the enterprise does not use its market power to raise the prices too much. 

Source: Bank of Estonia

Author: Rasmus Kattai, economist of Eesti Pank

Power tariffs to go up by 50 – 60 pct

Estonian power company Eesti Energia announced that the price of electricity will go up between 50 and 60% since January when the electricity market is fully liberalised.

Households will be one of the first to be hit hard by new tariffs.

Electricity makes up about one-third of the power bill, the other components being network fees and renewable energy fees. 

The company said yesterday it will offer three different price packages: Fixed, Combined and Variable, plus the general service where households buy electricity without a contract.

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Former Latvenergo executives bribed with millions of euros

Former executives of Latvian power group Latvenergo received around EUR 8 million in bribes, and were about to receive another EUR 11 million, according to Latvian law enforcement authorities.

The bribery occurred during the reconstruction of the Plavinas power plant and the Riga 2nd cogeneration plant, and may involve a total of 17 persons.

Suspects include former Latvenergo President Karlis Mikelsons who was detained in June 2010 but released in August of the same year on an LVL 50,000 bail, as well as his deputy Aigars Melko and Sadales tikls CEO Ivars Liuziniks and his deputy Andrejs Stalazs. 

It is known that Mikelsons used the proceeds through an Estonian company Isengar to buy property in Latvia. In 2007, Isengar paid 571,000 euros part of a farmhouse in Abragciemises. Five yeas ago Mikelsons had paid 30,000 euros for a waterfront residential complex.

Investigation in the case continued for two years, and fourteen countries were involved in the investigation altogether. The materials in the case are comprised in 262 files. European Anti-fraud Office and authorities in many countries assisted the Corruption Prevention Bureau.

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Estonians to invest into wind farms in Latvia

Estonia’s Nelja Energia will open its representation in Latvia and is planning to build wind farms at the capacity of 200 megawatts in that country, investing nearly half a billion euros into the project.

Kalle Kiigske, member of the board of the renewable energy company Nelja Energia AS, told BNS that the big minus of operating in Latvia was a poorly developed system of subsidies up until now. Daniels Pavluts,  the Latvian economics minister who entered into office after the extraordinary elections, is more open to co-operation and Kiigkse said that the company could hope to successfully co-operate with Latvia in the future.

Of the Baltic countries, Kiigske considers co-operation with Lithuania the best and three wind farms have already been built there. Nelja Energia is currently looking for a CEO for the Latvian representation.

Last year Nelja Energia operated with 12 wind farms with a total capacity of 154 megawatts. The wind farms produced 311 gigawatt-hours of electricity.

Source: Estonian Review