The fact that electricity prices began to break records was already known last fall. What caused such a rise in prices?
There are many factors that influenced the rise in electricity prices: the fuel from which electricity is made, geography, politics, etc. One of the main reasons for the price hike was the sharp rise in natural gas prices. The price of gas increased due to the growth in demand for it. Because gas is cleaner than coal and shale, which until recently were used as the main fuel for energy production.
The lack of “green energy” capabilities – wind, hydro, nuclear, etc. was also cited as the reason for the price hike. Was there really not information that these capacities were not enough and therefore coal and gas power plants were launched?
In fact, there is not enough green energy, but a simple desire to increase it is not enough. The problem is that “green” energy cannot be built so quickly. In addition, “green” energy is more expensive than conventional energy, and the demand for it is lower, so the business was in no hurry to invest in it.
What else affected the price hike?
The next reason for higher electricity prices is higher CO2 prices. It was a carbon quota mechanism designed not only to reduce pollution, but also to make green energy attractive for investment. In general, this mechanism justifies itself. But now, let’s say, we’re in a transition state – in the so-called power hatch.
On the one hand, they began to actively close coal-fired power plants to gradually replace them with “green” energy. On the other hand, a pandemic came to the world that reduced economic growth globally, but it affected the consumption of electricity, that is, the withdrawal of old energy energies from the market, and new energies were released more slowly than we would like. But after the epidemic, the economy began to grow faster than expected, and electricity consumption rose.
Are Europeans starting to burn more lights in their homes?
Compared to the previous year, when the epidemic reached its peak, consumption has now increased significantly. Electricity consumption increased in both the housing and production sector. Compared to previous years, there has been a jump in electricity consumption. It should also be borne in mind that the forecasts for gas reserves provided by European countries did not come true – the countries have little gas reserves for the winter period. This led to an increase in the prices of electricity and thus the price of electricity.
What is the role of the geopolitical factor in rising prices? To what extent can you blame Russia for the fact that the price of gas has risen?
It’s hard to say. Russia sells gas to Europe, usually under fixed contracts. At the moment, there is not a single company in Europe that would complain about Russia for its failure to fulfill gas supply contracts. Another question is why Russia does not sell natural gas on the spot exchange when its price has risen several times? On the other hand, Russia supplies Europe with more gas than before, and the problem here is that European countries did not store large quantities of gas last summer.
How are things going with the energy capabilities of Europe and, above all, Estonia? Can we supply ourselves with electricity?
We can supply ourselves with electricity. The problem is exactly what it was made of, where to get fuel and at what prices to buy it. Let me stress once again that the energy crisis is not Estonian or even European, it is a global crisis – energy prices have gone up all over the place.
If there is enough capacity, why are the prices so high in our area?
We are part of the European market. If the price rose in the world, it rose in Europe, and therefore this inevitably happened in our country.
How long will this last?
The market is showing that prices will start declining gradually this spring. How the price will continue to change, no one can say now, but we see that somewhere in two or three years, prices will return to their previous level.
In your view, does Estonia have real leverage to influence this situation, or does the government just have to pay the subsidies?
Of course, there are ways to influence prices. One is to lay a third cable between Estonia and Finland in order to get more cheap electricity from Norway and Sweden through the neighbours.
Raivo Vare expert recently stated that residents may have to pay subsidies within the next five years. Do you agree that benefits must be paid for a long time?
In my opinion, it is wrong to go on cycles in these subsidies. It is paid in part from funds received from the sale of carbon dioxide emissions allowances. The question arises, why keep the prices of carbon dioxide quotas so high, when the money from their sale should be returned to the population? Wouldn’t it be easier to simply increase the number of rations, lower electricity prices, and get away from this bureaucratic red tape? And so it turns out that we are chasing money in a circle – first we take it from the population, and then return it to him.
How do you feel about the proposal to withdraw consumers from the private sector, for example, small businesses from the exchange?
I wouldn’t say I am with that. The exchange system has proven to be effective. Thanks to her, electricity prices have been kept at a relatively low level in recent years.
In fact, we’ve already experienced the price shock this winter. What can we expect next?
Prices are past their highs, and everything indicates that they are likely to fall in the future. But we must learn a lesson from what just happened. Europe should take care of creating energy reserves, as is the case, for example, in the United States, where there are gas and oil reserves.
What can the average Estonian do to reduce the electricity bill?
The simplest and most understandable advice of all is to save electricity and heat. This is what I personally do – watch the prices and use more electricity when the price is the lowest. brings results.