COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Estonia Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK Third Report on the State of the Energy Union
Date: 2017-11-23
Institutions: European Commission, Secretariat-General
Subjects: Estonia, climate change policy, competitiveness, economic and social cohesion, energy cooperation, energy policy, innovation, investment, regional cooperation, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.11.2017 SWD(2017) 391 final  COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Estonia Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK  Third Report on the State of the Energy Union  {COM(2017) 688 final} - {SWD(2017) 384 final} - {SWD(2017) 385 final} - {SWD(2017) 386 final} - {SWD(2017) 387 final} - {SWD(2017) 388 final} - {SWD(2017) 389 final} - {SWD(2017) 390 final} - {SWD(2017) 392 final} - {SWD(2017) 393 final} - {SWD(2017) 394 final} - {SWD(2017) 395 final} - {SWD(2017) 396 final} - {SWD(2017) 397 final} - {SWD(2017) 398 final} - {SWD(2017) 399 final} - {SWD(2017) 401 final} - {SWD(2017) 402 final} - {SWD(2017) 404 final} - {SWD(2017) 405 final} - {SWD(2017) 406 final} - {SWD(2017) 407 final} - {SWD(2017) 408 final} - {SWD(2017) 409 final} - {SWD(2017) 411 final} - {SWD(2017) 412 final} - {SWD(2017) 413 final} - {SWD(2017) 414 final}  
 
 
                              Energy Union – Estonia 

Estonia 

                       Energy Union factsheet1 

1.  Macroeconomic implications of energy activities 

Energy  and  transport  are  key  sectors  for  the  overall  functioning  of  the  economy  as  they  provide 
important  input  and  service  to  other  sectors  of  the  economy.  The  combined  activity  in  these  two 
sectors2 accounted for 11 % of the total value added of Estonia in 2015. Similarly, their share in total 
employment3 was 8 % in 2015, of which 6.8 % in the transport sector and 1.2 % in the energy sector.  

The  decarbonisation  of  the  energy  and  transport  sectors  will  require  significant  investments  and  a 
shift in economic activities beyond these two sectors. The energy transition implies a structural shift 
in economic  activity.  Energy-related investment and  jobs  will in  part  migrate  from traditional  fossil 
fuel  based  activities  towards  construction,  equipment  manufacturing  and  other  services  related  to 
the deployment of low carbon and clean energy technologies At the moment the efforts related to 
the energy transition in other sectors can only be partially quantified and are therefore not included.  

In the case of renewable energy sector, both the direct as well as the indirect effects on employment 
are being estimated. According to EurObserv'ER, in 2015, the share of direct and indirect renewable 
energy related employment in total employment of the economy in Estonia was 0.87 %, above the 
EU average of 0.54 %. The turnover of the renewable energy industry in the same year was estimated 
at around EUR 500 million, the largest part being attributed to biomass followed by heat pumps. 

1 The indicators used in this country factsheet largely build on indicators developed for the Commission Staff 
Working Document "Monitoring progress towards the Energy Union objectives  – key indicators" (SWD(2017) 
32 final) https://ec.europa.eu/commission/sites/beta-political/files/swd-energy-union-key-indicators_en.pdf  
2 Gross value added and employment in NACE sectors D-Electricity, gas, steam and air conditioning supply and 

H-Transportation and storage 

3   National accounts, Eurostat 

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                              Energy Union – Estonia 

 (source: EC based on Eurobserv'Er and Eurostat) 

An indication of the level of efforts made and challenges encountered by Estonia in the energy sector 
is  given  by  the  Gross  fixed  capital  formation  (GFCF).4  Investment  in  the  electricity  and  gas  sectors, 
which are taken as reference sectors, amounted to about 2.5 % of the country's GDP in 2015. 

(source: Eurostat) 

In  terms  of  trade,  Estonia  is  a  net  importer  of  fossil  fuels  and  a  net  exporter  of  shale  oil  and 
electricity. The overall trade deficit in energy products has fallen from about 3.4 % of GDP in 2006 to 
1.6 % in 2015, under the influence of falling oil prices and a decrease in oil imports.  

4 Gross fixed capital formation consists of resident producers´ acquisitions, less disposals, of fixed tangible or 
intangible assets. This covers, in particular, machinery and equipment, vehicles, dwellings and other buildings. It 
also includes foreign direct investment (FDI). Steam and air conditioning supply are also included in the figures 
mentioned above as Eurostat reports electricity, gas, steam and air conditioning supply together. 

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                              Energy Union – Estonia 

(source: Eurostat) 

2.  Energy security, solidarity and trust 

2.1. Energy Mix 

In  comparison  with  the  EU's  average  energy  mix,  the  energy  mix  of  Estonia  is  characterised  by  a 
much higher share of solid fuels (due to the use of shale oil) and a much lower share of petroleum 
products.  The  share  of  renewables  in  gross  inland  consumption  is  14.3  %,  higher  than  the  EU 
average. The share of natural gas in Estonia's energy mix is 6.2 %, less than a third of the EU average 
(22 %). Estonia does not generate nuclear energy.  

(source: Eurostat) 

2.2. Import dependency and energy security 

7.4  %  of  Estonia's  energy  consumption  comes  from  imports,  much  less  than  the  EU  average.  The 
country remained highly dependent on direct imports of natural gas from Russia in 2015. At the same 
time,  Estonia  imported  20.3  %  of  the  consumed  natural  gas  through  Lithuania.  However,  gas  only 
represents 6.2 % of gross inland consumption and plays a marginal role in total energy imports. The 
dependency for solid fuels and petroleum products has decreased, mainly due to Estonia's domestic 
oil shale production and biomass use. 

3 

 
 
 
 
 
                              Energy Union – Estonia 

The overall import dependency of Estonia decreased 18.7 % between 2005 and 2015, while at the EU 
level, import dependency increased by 1.9 percentage points over the same period.  

(source: Eurostat) 

The  security  of  gas  supply  Regulation  requires  that,  if  the  single  largest  gas  infrastructure  in  one 
Member State fails, the capacity of the remaining infrastructure is able to satisfy total gas demand 
during a day of exceptionally high gas demand. Estonia complies with this requirement. 

(source: Gas Coordination Group) 

3.  Internal market 

3.1. Interconnections and wholesale market functioning 

3.1.1.  Electricity  

Estonia is part of the Nordic and Baltic wholesale electricity market. The interconnection capacity for 
electricity  in  the  Baltic  States  increased  to  around  10  %  after  the  Estlink2  interconnection  with 
Finland entered into operation in 2014. Once the LitPol Link (connecting Lithuania and Poland) and 

4 

 
 
 
 
                              Energy Union – Estonia 

NordBalt (connecting Lithuania and Sweden) began operating in 2015, the interconnection capacity5 
rose  to  around  23  %  for  the  three  Baltic  States  together.  Furthermore,  the  launch  of  the  Estlink  2 
interconnection has remarkably increased Estonian connectivity with the Nordic power market.  

Thus in 2017 the electricity interconnection level of Estonia was 23.7 %, well above the 2020 target 
of 10 %. Better interconnection has increased competition and at the same time benefitted Estonian 
electricity consumers. Nevertheless, the limited capacity of the interconnection between Estonia and 
Latvia  has  an  adverse  impact  on  the  electricity  markets  of  Estonia  and  other  Baltic  states.  Several 
projects in the region have received the label of Projects of Common Interest (PCI) in the framework 
of the trans-European energy networks policy. They are expected to contribute to enhancing security 
of  supply,  effectiveness  of  operation  and  competitiveness  of  the  electricity  markets  in  the  entire 
Baltic  region.  The  transfer  capacity  on  the  Latvian  –  Estonian  border  will  be  improved  and  the 
existing  bottlenecks  will  be  removed  in  several  steps  by  2020,  2024  and  2025  through  the 
construction of the Estonia-Latvia 3rd interconnection and the enhancement of transfer capacity of 
internal lines within the Baltic States.  

Market  concentration  in  electricity  and  gas  markets  is  higher  than  the  EU  average.  The  Estonian 
electricity  market  was  fully  liberalized  at  the  beginning  of  2013,  eliminating  regulated  prices  and 
opening the market to competition. Estonia is part of the Nord Pool Spot power exchange and from 
2013 all the prices have been determined by the market.  

In 2016, wholesale electricity prices were below the EU average, and between 2013 and 2016 they 
recorded a higher decrease than the EU average (23.4 % in Estonia vs 14.8 % in the EU as a whole). 

 (source: EC based on ENTSO-E scenario 
outlook and adequacy forecast 2014) 

(sources: EC services based on Eurostat for the left graph  and 
based on Platts and European power exchanges for the right 
graph) 

5 The interconnectivity level is calculated as a ratio between import interconnection and net generation capacities 
of the country (i.e. the 2017 value is the ratio between simultaneous import interconnection capacity [GW] 
and net generating capacity [GW] in the country at 11 January 2017, 19:00 pm as resulted from ENTSO-E 
Winter Outlook  2016/2017). For  the  three Baltic  states  it  is considered the  common  interconnection  level 
witht the rest of the EU.  

5 

 
 
 
                                                            
                              Energy Union – Estonia 

In  2015,  the  three  Baltic  States  agreed  on  a  common  strategic  goal:  the  synchronisation  of  their 
power  systems  with  the  European  network.  It  is  recognised  as  a  self-standing  objective  of  the 
reinforced BEMIP cooperation (Baltic Energy Market Interconnection Plan) as it would contribute to 
achieving a fully functioning and connected internal energy market and to increasing energy security 
in the electricity and gas sectors of the Baltic States. A dedicated BEMIP Working Group was set up 
supported by the Commission to work on the identification of the most cost-efficient synchronisation 
scenario that ensures system stability. The infrastructure element of the synchronisation of the Baltic 
States' electricity system with the European network has been included in the 3rd list of Projects of 
Common Interest. 

3.1.2.  Gas 

Estonia  has  natural  gas  network  connections  with  Russia  and  Latvia.  Through  the  Klaipeda  LNG 
terminal  Estonia  already  has  access  to  new  sources  of  gas,  ending  its  previous  isolation  in  the  gas 
sector.  Besides  the  existing  Klaipeda  LNG  terminal,  there  are  plans  for  other  LNG  projects  to  be 
developed in the coming years.  

The  ongoing  construction  of  the  Poland–Lithuania  gas  interconnector  (GIPL)  will  provide  a  pipeline 
connection  between  the  Baltic  States  and  the  EU  gas  transmission  network  and  the  natural  gas 
pipeline  Balticconnector  between  Finland  and  Estonia  will  further  increase  security  of  supply  and 
diversification  in  the  region.  Additionally,  the  Baltic  States  and  Finland  are  engaged  in  a  project  to 
create a broader regional gas market. 

Wholesale gas prices have decreased the last few years, but remain above the EU average. Estonia’s 
gas market is liberalised from 2007. In addition, Estonia finished unbundling the vertically integrated 
TSO from natural gas supply in 2015.  The natural gas market remains very small (below 1 bcm). Four 
companies  now  have licenses  for  importing gas.  It  is  expected  that  competition  on the gas  market 
will improve once the broader regional gas market is established.  

(source: ACER for the left graph and EC services based on Platts, gas hubs, Eurostat for the right graph) 

Retail electricity and gas markets 

3.2. 
3.2.1.  Electricity 

On 1 January 2013 the electricity market opened to competition, and currently there are 16 suppliers 
of electricity on the market. 

6 

 
 
 
                              Energy Union – Estonia 

In 2016, electricity prices for households in Estonia were below the EU average. Between 2013 and 
2016,  average  retail  electricity  prices  decreased  slightly.  The  annual  switching  rate  by  consumers 
from one electricity  supplier  to  another is  less than  a  third of  the EU  average:  in 2015  only  2  % of 
household consumers switched electricity supplier.  

The  roll-out  of  smart  metering  is  complete  and  since  1  January  2017  all  consumers  have  remote 
reading devices. The roll-out of smart meters along with utilising an innovative data hub has been a 
real  success  story  enabling  a  decrease  in  grid  losses  and  network  tariffs.  One  third  of  Estonian 
electricity consumers are buying electricity with spot prices/choosing dynamic price contracts. 

(source: ACER) 

(source: Eurostat)  

(source: Eurostat) 

3.2.2.  Gas 

Estonian gas  market is  still  highly  dependent on  Russia  and  is  dominated  by  one supplier  (AS  Eesti 
Gaas), although in 2015, due to  the emergence of new importers in the market, the share of Eesti 
Gaas in the retail market had decreased to 77.7 % (compared to 93.4 % in 2014). There are currently 
36 retailers of gas on the Estonian market. 

In 2015 household gas prices were significantly below the EU average despite higher wholesale price. 
In 2015 the switching rate of gas household customers (5.9 %) was almost three times higher than 
for electricity customers (2 %), but remained lower than the EU average (7 %). 

7 

 
 
 
 
 
 
 
 
                              Energy Union – Estonia 

(source: ACER) 

(source: Eurostat)  

(source: Eurostat) 

3.2.3.  Market performance indicators 

According to the periodical survey of DG JUST, the Estonian consumers are more satisfied than the 
EU average about the services received in energy retail markets.  

(source: DG JUST survey) 

3.3. Energy affordability  

Energy poverty in Estonia is measured by the ability to keep the home adequately warm is far lower 
than  the  EU  average.  Therefore,  only  6.1  %  of  citizens  below  the  "at-risk-of  poverty"  threshold 
consider that they are unable to keep their home adequately warm.  

In Estonia, climate conditions result in significant heating needs which contributes to the fact that the 
share  of  energy  in  total  household  expenditure  in  the  lowest  quintile  (in  terms  of  income)  of  the 
population is higher than the EU average and the 20 % of the poorest households spend 10.7 % (EU-
28: 8 %) of their income on domestic energy services (at 2012 level, the latest available figures for 
Estonia).  

 Effective and targeted measures to protect vulnerable and low-income consumers are in place. 

 (source: ad-hoc data collection of DG ENER based on HBS with the support of Eurostat and national statistics) 

8 

 
 
 
 
 
 
 
 
                              Energy Union – Estonia 

4.  Energy efficiency and moderation of demand 

Estonia has achieved levels of primary and final energy consumption (6.2 and 3 Mtoe respectively) 
that are below its national targets (6.5 and 2.8 Mtoe respectively), but maintaining these levels until 
2020 will remain a challenge. The slight increase in international oil prices has made the country's oil 
shale  sector  competitive  again,  and  this  could  have  an  impact  on  Estonia's  primary  energy 
consumption. However, there is a great potential for energy savings in residential buildings, energy 
distribution, the service and transport sectors. 

Estonia experienced the largest annual increase of primary energy consumption in the EU between 
2005 and 2015, with primary energy use amounting to 6.16 Mtoe in 2015. Similarly, primary energy 
intensity  in  Estonia  increased  from  2005  onwards  and  remains  significantly  above  the  EU  average. 
Over the same period, final energy consumption decreased by 3.9 % to 2.77 Mtoe in 2015.  

 (source: Eurostat) 

In 2015, the residential sector was the largest energy consuming sector in Estonia, representing 31 % 
of  total  final  energy  consumption,  which  is  above  the  EU  average  (25.4  %).  In  2015  the  energy 
consumption of Estonia's transport sector was at 28.4% of total final energy consumption, below the 
EU average of 33 %. The Estonian energy consumption of the services sector (16.8 %) is also above 
the EU average (13.6 %). In contrast, the final energy consumption in the industrial sector in Estonia 
(19 %) is below the EU average (25.3 %).  

 (source: Eurostat) 

Nevertheless, a high energy intensity reduction is recorded in the industrial sector, i.e. about 40 % 
between  2005  and  2015,  significantly  more  than  the average  energy  intensity  reduction  in the  EU. 

9 

 
 
 
 
                              Energy Union – Estonia 

Specific energy consumption by households and the energy intensity of the services sector are above 
EU average and remained quasi-stagnant from 2005 onwards.  

(source: Eurostat)  

(source: Eurostat)  

  (source: Odyssee database) 

In transport, between 2005 and 2015, the final energy consumption in Estonia recorded an average 
annual increase of 0.3 %, slower than the 1.8 % average annual increase of the GDP.  

Passenger  transport  activity  in  2015  was  22.9  %  above  the  2005  level.  On  the  other  hand,  freight 
transport activity has decreased consistently since 2005, by about 44.7 %. Between 2005 and 2015, 
the share of collective land transport has decreased by 1.2 % while it remained almost constant in 
the EU as a whole. 

(source: Eurostat)  

        (source: Eurostat and DG MOVE pocketbook) 

10 

 
 
 
 
 
 
 
 
 
 
                              Energy Union – Estonia 

(source: Eurostat)  

Estonia  has  made  progress  promoting  public  transport;  its  main  policy  measure  is  to  reduce  air 
pollution  and  energy  consumption  in  transport.  The  introduction  of  new  inter-city  and  sub-urban 
trains  and  upgrading  the  infrastructure  has  brought  along  a  considerable  (17  %)  increase  in  use  of 
passenger  trains6.  Similarly,  the  introduction  of  free  public  transport  in  the  capital  –  Tallinn  -  has 
increased the use of public transport  by 13 %7. Estonia is also in the process of changing its Public 
Transport  Law  legalising  collaborative  economy  in  passenger  transport  and  is  preparing  an 
amendment  to  Traffic Law  to  allow  delivery  robots  on roads.  The energy  labelling scheme  for  new 
passenger cars was introduced in 2016. 

Investments  in  transport  infrastructure  depend  mainly  on  EU  funds  and  are  focused  on  a  small 
number  of  major  projects  such  as  Rail  Baltic,  which  is  a  project  of  high  strategic  importance  to  all 
three Baltic States and has high priority under the CEF instrument. Coordinated implementation of 
the project is progressing, with a target completion date of 2025. 

Estonia  is  facing  challenges  in  reaching  its  2020  goal  of  10  %  renewable  energy  in  the  transport 
sector, and the current level remains under 1 %. Nevertheless, Estonia continues to promote the use 
of bio-methane.  

Currently, there is no transport related taxation to improve energy efficiency or to reduce emissions 
of  CO2  in  Estonia.  However,  the  country  is  gradually  increasing  the  excise  tax  on  motor  fuel  and  is 
also  preparing  a  time-based  road  charging  scheme  for  heavy  goods  vehicles  (HGV)  above  12t 
(covering an estimate of 75% of all HGVs registered in Estonia) for possible implementation in 2018.  

5.  Decarbonisation of economy 

5.1. GHG emissions 

According  to  preliminary  estimates,  greenhouse  gas  emissions  in  sectors  not  covered  by  the  EU 
Emissions Trading System increased by 8 % between 2005 and 2016. According to the latest national 

6  For  Elron 

trains, 
(http://elron.ee/elron/organisatsioon-2/) 

from 

5.8  million 

7 2012-2015, based on a poll by Turu Uuringute AS 

in 

2014 

to 

6.8  million 

passengers 

in 

2016 

11 

 
 
 
 
       
 
                                                            
                              Energy Union – Estonia 

projections based on existing measures, non-ETS emissions will increase by 11 % between 2005 and 
2020. The target is consequently expected to be met with a margin of 0.3 percentage points. 

 (source: EC and EEA)   

As a producer of electricity and heating from oil shale and being a net-exporter of electricity, Estonia 
is the most carbon-intensive economy in the EU, and has one of the highest carbon intensities in its 
energy use.  

(source: EC and EEA)   

Preliminary accounts under the Kyoto Protocol for Estonia show overall removals of -0.4 Mt CO2-eq. 
as  an  annual  average  in  the  period  2013-2015.  For  comparison,  the  annual  average  of  the  EU-28 
accounted  for  removals  of  -119.0  Mt  CO2-eq.  It  should  be  noted  that  in  this  preliminary  simulated 
accounting exercise, removals from Forest Management did not exceed the accounting cap.  

The  relative  importance  of  activities  changed  over  the  period  of  three  years.  While  removals  by 
Forest Management were lower than emissions by Deforestation, its increase in 2015 made it by far 
the  most  important  contributor.  Removals  by  Afforestation  became  as  important  as  emissions  by 
Deforestation.  Overall,  there  is  an  increasing  trend  in  removals  mainly  due  to  above-mentioned 
increasing  removals  by  Forest  Management.  Emissions  by  Deforestation  decreased  notably  and 
removals by Afforestation increased slightly over the course of the three-year period.  

12 

 
 
 
 
 
                              Energy Union – Estonia 

Note: Forest Management credits are capped and presented as yearly averages when the total Forest 
Management credits of the considered period exceed the simulated cap over the same period. 

(source: EC and EEA) 

CO2 emissions in transport and alternative fuelled vehicles 

Average CO2 emission from new vehicles in Estonia remain the highest in the EU, with an average CO2 
emission of 134 grams per kilometre compared to the EU-28 average of 118 grams in 2016, although 
decreasing significantly compared to the 2005 levels, in line with the EU trend.  

(source: European Environment Agency) 

The number of electric charging points in Estonia more than doubled between 2013 and 2016, while 
the  largest  year-on–year  increase  happened  between  2015  and  2016  when  the  number  increased 
from 189 to 364 units. 

13 

 
 
 
 
 
                              Energy Union – Estonia 

(European Environment Agency)  

       (European Alternative Fuels Observatory) 

National Policy Frameworks under Directive 2014/94/EU on alternative fuels infrastructure have to 
establish targets, objective and measures for the development of the alternative fuels market in the 
transport  sector  and  the  deployment  of  the  relevant  infrastructure.  Estonia  has  submitted  its 
National Policy Framework as requested under article 3 of the Directive 2014/94/EU.  

A detailed assessment of the Estonian National Policy Framework in terms of its compliance with the 
requirements  of  Directive  2014/94/EU  on  alternative  fuels  infrastructure,  its  contribution  to 
achievement of long-term energy and climate objectives of the EU and coherence of its targets and 
objectives in terms of cross-border continuity has been published as part of the Communication on 
Alternative  Fuels  Action  Plans  (COM(2017)652)  and   the  related  staff  working  document 
SWD(2017)365.  

5.2. Adaptation to climate change 

The Estonian National Strategy on climate change adaptation was adopted in 2017. It calls for eight 
sub-goals  for  the  following  priority  areas:  human  health  and  rescue  preparedness,  land  use  and 
spatial planning, natural environment, bio-economy, economy, society, infrastructure and buildings, 
and finally energy and energy supply systems. The action plan to implement the adaptation strategy 
was  developed  in  parallel  with  the  Strategy  itself  and  supports  the  goals  and  sub-goals  that  are 
developed in it. For the time being, monitoring mechanisms are under development, so no system is 
in  place  for  monitoring  mainstreaming  of  adaptation  into  specific  sectoral  policies  or  assessing 
adaptation actions that are being implemented. 

5.3. Taxes on energy and transport  

The overall tax burden on energy and transport in Estonia amounts to 2.4 % of GDP, which is in line 
with  the  EU  average. The  increase registered from  2007  is  due  to  higher  revenue from  taxation  of 
heat and electricity as well as of transport fuels. In contrast, the tax burden on vehicles has remained 
stable.  Moreover,  taxation  of  transport  vehicles  is  among  the  lowest  in  the  EU.  Estonia  has  no 
general CO2 component in its taxation framework for energy products or in the taxation of vehicles. 

14 

 
 
 
 
 
                              Energy Union – Estonia 

 (source: Eurostat) 

Fossil fuel subsidies have been relatively stable in Estonia over the last decade (about EUR 3.8 million 
in  2014),  with  a  decreasing  trend  since  2011.  At  the  end  of  that  year,  fuel  tax  exemptions  for  the 
forestry and construction sectors were abolished. 

(source: OECD Inventory of Support Measures for Fossil Fuels 2015)  

5.4. Renewable energy  

With a 28.6% share of renewable energy in gross final energy consumption in 2015, Estonia is already 
above its 25 % target for 2020. In 2015 the share of renewables in the heating and cooling sector was 
49.6  %  and  in  electricity  generation  the  share  was  15.1%.  However,  in  transport  the  share  of 
renewables  was  only  0.4  %.  Starting  in  2011,  Estonia  developed  a  nationwide  network  of  fast-
charging points for electric vehicles.  

15 

 
 
 
 
                              Energy Union – Estonia 

 (source: Eurostat-SHARES) 

(source: Eurostat-SHARES) 

Estonia's  renewable  electricity  production  is  mainly  based  on  two  sources:  wind  and  biomass.  For 
onshore wind, the technology deployment is below the planned trajectory whereas biomass growth 
is over-performing. 

During  the  years  2008-2010,  the  country  experienced  fast  growth  in  the  renewable  energy  sector, 
and  gained  momentum  again  in  2015.  Since  2003,  electricity  from  renewable  energy  sources  has 
mainly  been  promoted  through  a  feed-in  tariff  policy.  For  costs  containment  reasons,  the  scheme 
was reformed in 2007 to feed-in premium and a 600 GWh/year support ceiling for wind power and a 
downward adjustment of the tariff were established. Currently, the scheme is being further reformed 
in order to shift the scheme to competitive bidding processes. 

As  regards  renewable  heating  and  cooling,  the  Estonian  National  Renewable  Energy  Action  Plan 
(NREAP) anticipates a share of 38.4 % of renewables in heating and cooling in 2020. In 2015 the share 
was close to 50 %. The main source of renewable heating is biomass.  

The  government  puts  great  emphasis  on  district  heating  and  networks.  Between  2007  and  2015, 
Estonia  implemented  subsidies  for  investment  in  renewables  heating  and  cooling  installations.  The 
subsidies were granted for the refurbishment of boilers and heat distribution networks as well as for 
the construction of combined heat and power plants. In 2016 this support programme was replaced 
by investment support for heating infrastructure and for the refurbishment of piping and boilers. 

According  to  the  NREAP,  the  share  of  renewables  in  transport  is  expected  to  reach  10  %  by  2020. 
However,  the  renewables'  share  in  transport  was  only  0.4  %  in  2015.  In  Estonia,  the  support  of 
renewables  in  transport  takes  the  form  of  an  excise  duty  exemption  for  biofuels.  Estonia  has 

16 

 
 
 
 
 
                              Energy Union – Estonia 

amended the Liquid Fuel Act, which would ensure that the share of biofuels will gradually rise to at 
least  10%  by  2020.  In  addition,  a  support  scheme  was  put  in  place  to  promote  the  purchasing  of 
electric cars that use power produced from renewable energy sources. At the end of 2015, a support 
scheme for the promotion of biomethane use in the transport sector was introduced. 

Estonia  imports  all  of  the  petrol  and  diesel  used  in  transport.  The  drop  in  international  crude  oil 
prices  has  affected  Estonia’s  retail  petrol  and  diesel  prices  as  well.  At  the  beginning  of  2015,  both 
fuels  were  approximately  30  %  cheaper  compared  to  prices  one  year  before.  This  had  a  negative 
impact on several biofuels projects. 

In order to promote the consumption of biomethane, two support measures have been created and 
implemented  using  funding  from  the  Cohesion  Fund.  One  of  these  measures  grants  investment 
support to applicants who wish to establish a biomethane filling station. The other measure grants 
support to public institutions which operate public bus services that use biomethane as fuel.  

Thanks  to  a  consistent  deployment  of  renewables  since  2005,  it  is  estimated  that  in  2015  Estonia 
avoided 9.4 % of fossil fuels in gross inland consumption and 10.1 % of greenhouse gas emissions at 
national level.8  

 (source: EEA) 

5.5. Contribution of the Energy Union to better air quality 

Air  quality  in  Estonia  is  reported  to  be  generally  good,  with  exceptions.  Nevertheless,  for  the  year 
2013,  the  European  Environment  Agency  estimated  that  more  than  690  premature  deaths  were 
attributable to fine particulate matter (PM2,5) concentrations9.  

In 2015, Estonia reported no instances of exceeding the binding EU air quality standards10. 

8   Avoided  GHG  emissions  mentioned  here  have  a  theoretical  character  as  these  contributions  do  not 
necessarily represent "net GHG savings per se" nor are they based on life-cycle assessment or full carbon 
accounting.  

9   European  Environment  Agency,  2016,  Air  Quality  in  Europe  –  2016  Report,  table  10.2.  The  report  also 

includes details as regards the underpinning methodology for calculating premature deaths.    

10  
quality and cleaner air for Europe, OJ L 152, 11.6.2008, p.1-44 

Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air 

17 

 
 
 
 
                                                            
                              Energy Union – Estonia 

(source:EEA) 

The health-related external costs from air pollution in Estonia have been estimated to be more than 
EUR 414 million/year (income adjusted, 2010), which includes the intrinsic value of living a healthy life 
without premature death as well as the direct costs to the economy such as healthcare costs and lost 
working days due to sickness caused by air pollution11. 

The  Energy  Union  can  substantially  contribute  to  further  improve  air  quality  in  Estonia  through 
measures reducing emissions of both GHG and air pollutants such as PM and nitrogen oxides (NOx) 
from major contributing sectors such as (road) transport, energy production, industry and residential 
heating12. 

(Source: EEA. This table reflects only sources of primary PM2,5 emissions.) 

11 See also the EU Environmental Implementation Review Country Report for Estonia, SWD(2017)40 final of 
3.2.2017 
12 National emission data as reported by the Member States to the EEA (available on the EEA's Eionet/Central 
Data Repository), http://cdr.eionet.europa.eu/ee/eu/nec_revised 

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6.  Research, innovation and competitiveness  

6.1. Research and innovation policy 

Energy research in Estonia is driven by societal and economic factors that include the country’s high 
level of urbanisation, the dominance of oil shale in domestic energy production, and the transition to 
a  knowledge  economy.  The  most  important  energy  research  area  in  Estonia  is  oil  shale,  due  to  its 
importance  in  the  primary  energy  mix  and  in  the  Estonian  economy.  Other  research  areas  are 
renewable energies (including smart grids) and nuclear technologies. 

The  Estonian  Energy  Technology  Programme  (ETP)  is  the  country’s  main  programme  for  funding 
energy R&I. The ETP is a thematic programme within the country's Innovation Strategy ‘Knowledge-
based  Estonia’  and  is  managed  by  the  Ministry  of  Economic  Affairs  and  Communications  in 
collaboration with the Ministry of Education and Research and the Ministry of Environment. The role 
of  the  Estonian  ETP  is  to  identify  energy-related  R&D  trends  and  priorities  and  to  set  funding 
priorities  accordingly.  The  ETP  provides  the  framework  for  setting  research  and  technology 
objectives and carrying out research. It also facilitates stakeholder collaboration by collecting input 
from the energy industry and the public sector, and through international cooperation. 

Estonia is not a very active contributor to the ongoing work of the Strategic Energy Technology (SET) 
Plan. It only participates in four (out of fourteen) temporary working groups for the implementation 
of the integrated SET Plan. 

Regarding  the  Horizon  2020  programme,  Estonia  has  received  so  far  0.8  %  of  the  EU  contribution 
devoted  to  the  'secure,  clean  and  efficient  energy'  part  of  the  programme.  As  of  January  2017,  35 
participations from Estonian organisations have been awarded about EUR 12 million in Horizon 2020 
energy  projects.  This  includes  nine  grants  totalling  over  EUR  8.2  million  to  Estonian  beneficiaries 
participating in project SmartEnCity (smart zero emissions cities).  

6.2. 

Investments and patents in the Energy Union R&I priorities  

In  2014,  public  (national)  investments  in  the  Energy  Union  R&I  priorities  reached  EUR  2.4  million 
displaying  a  5.5  %  decrease  compared  to  2013.  The  highest  share  of  investments  (62  %)  was 
attracted by the Smart System priority of the Energy Union, followed by Renewables (33 %). In the 
period 2011-2014, the maximum annual public investment was  EUR 8  million, reported in 2011. In 
2014, the most recent year for which data for most Member States are available, public investment 
per GDP in Estonia was lower than the EU average. 

Private investment in the Energy Union R&I priorities in 2013 was estimated at EUR 5 million (0.03 % 
of the private R&I investment in Energy Union R&I priorities in the EU). The focus was on Sustainable 
Transport, which received 54% of these investments, followed by Efficient Systems with a share of 38 
%. 

In 2013, the most recent year for which complete patent13 statistics are available, 4 companies and 
research organisations based in Estonia filed 2 patents in low-carbon energy technologies (0.03 % of 

13   In  the  context  of  this  document,  the  term  'patent'  refers  to  patent  families,  rather  than  applications,  as  a 
measure  of  innovative  activity.  Patent  families  include  all documents  relevant to  a  distinct  invention (e.g. 

19 

 
 
 
 
 
 
 
 
 
 
 
                                                            
 
                              Energy Union – Estonia 

the EU total). The focus was on Sustainable Transport and Efficient Systems (44% each), followed by 
the Smart System priority (12%). 

In 2013, private R&I investments and patents in Energy Union R&I priorities were lower than the EU 
average  when  normalised  by  GDP  and  by  population  respectively.  In  the  period  2007-2013,  both 
private R&I investments and the number of patents have decreased on average by 5 % and 8 % per 
year  respectively,  contrary  to  the  EU  indicators  that  increased  at  average  rates  of  6  %  and  15  % 
respectively.  

Note: Data only available for the period 2011 – 2014. 

(Data sources: Public investment as available in the International Energy Agency RD&D Statistics database14 for 
codes  relevant  to  Energy  Union  RIC  priorities.  Patent  data  based  on  the  European  Patent  Office  PATSTAT 
database15. Private investment as estimated by JRC SETIS. Detailed methodology available from the JRC16.) 

applications to multiple authorities), thus preventing multiple counting. A fraction of the family is allocated 
to each applicant and relevant technology. 

14   http://www.iea.org/statistics/RDDonlinedataservice/  
15   https://www.epo.org/searching-for-patents/business/patstat.html#tab1  
16   https://setis.ec.europa.eu/related-jrc-activities/jrc-setis-reports/monitoring-ri-low-carbon-energy-

technologies  

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                              Energy Union – Estonia 

6.3. 

Competitiveness 

In  2014,  the  real  unit  energy  costs  (RUEC)17  in  Estonia  (13.3)  were  slightly  below  the  EU  average 
(15.3),  almost  twice  more  than  those  in  the  US  but  well  below  those  in  Japan  and  China.  The 
electricity prices paid by the median industrial customers in Estonia are below those paid in the EU 
and  OECD.  At  present,  Estonia  does  grant  exemptions  on  energy-related  taxes  to  energy  intensive 
industries.  The  government  is  currently  drafting  a  legislation  that  may  introduce  such  targeted 
exemptions  in  the  coming  years.  Conversely,  gas  prices  for  the  median  industrial  consumer  are 
similar to those in the EU but above those in the OECD.  

(source: ECFIN) 

                   (source: Eurostat and IEA) 

Regarding the competitiveness in wind and solar energy, Estonia is performing quite well in the wind 
sector  where  the  revealed  comparative  advantage18  is  around  the  EU  average  and  has  increased 
significantly since 2005. This is mainly due to a strong specialisation in power electronics. The relative 
trade  balance19  confirms  that  Estonia  is  a  net  exporter  of  wind  components,  also  around  the  EU 
average.  As  indicated  by  the  revealed  comparative  advantage,  the  Estonian  economy  is  not 
specialised in solar PV and records a trade deficit in this technology.  

17   This indicator measures the amount of money spent on energy sources needed to obtain one unit of value 

added. 

18 The RCA index for product "i" is defined as follows: RCAi =

Xj,i
∑ Xj,i
i
Xw,i
∑ Xw,i
i

 where X is the value of exports, and j is 

the country and w is the reference  group, the World economy. 2005 refers in the text to the indicator average 
over the 2000-2009 period, while 2015 represents the average over the 2010-2016 period. The same applies for 
the RTB indicator - see below. 
19 The RTB indicator for product "i" is defined as follows: 𝑅𝑇𝐵𝑖 =
exports and 𝑀𝑖 imports. 

 where 𝑋𝑖 is the value of product's "i" 

𝑋𝑖−𝑀𝑖
𝑋𝑖+𝑀𝑖

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                              Energy Union – Estonia 

(source: UN comtrade) 

7.  Regional and local cooperation 

Estonia is part of the Baltic Energy Market Interconnection Plan (BEMIP). BEMIP’s main objectives are 
to develop an internal and regional energy market between the EU Member States in the Baltic Sea 
region  and  integrating  it  fully  into  the  EU's  energy  markets  thus  increasing  security  of  supplies. 
BEMIP  projects  have  been  part  of  the  European  Economic  Recovery  Plan  (EERP)  and  the  Trans-
European  Energy  Networks  Programme.  BEMIP  projects  have  also  been  funded  through  the  EU's 
structural funds, including the European Regional Development Fund (ERDF) and the Cohesion Fund 
(CF).  Many  infrastructure  projects  are  supported  through  CEF  co-funding,  to  a  total  of  EUR  534.3 
million.  In  the  framework  of  the  societal  challenge  for  secure,  clean  and  efficient  energy  of  the 
Horizon 2020 programme, EUR 16.9  million have been allocated  to participants from the Baltics to 
stimulate research and innovation in this field. 

The  Baltic  region  was  the  first  region  that  adopted  in  2012  a  joint  Risk  Assessment  of  the  risks 
affecting  the  security  of  gas  supply  in  the  region  under  the  Regulation  on  Security  of  Gas  Supply 
which is currently being updated20. The three Baltic countries and  Finland are  working together on 
the preparation of a joint Preventive Action Plan and an Emergency Plan for the region.  

The EU macro-regional strategy for the Baltic Sea Region in which Estonia takes part can be used as a 
basis  for  regional  cooperation  on  energy.  European  Territorial  Cooperation  –  'Interreg'  –  under  EU 
cohesion policy also provides further opportunities for cross-border, transnational and interregional 
cooperation, including in the Energy Union areas. 

Cities and urban areas have a key role in the energy and climate challenge. The Urban Agenda for the 
EU,  established  by  the  Pact  of  Amsterdam  in  May  2016,  better  involves  cities  in  the  design  and 
implementation of policies, including those related to the Energy Union. It is implemented through 
Partnerships, in which the Commission, Member States, cities and stakeholders work together on  a 
number  of  important  areas,  including  on  Energy  Transition,  Urban  Mobility,  Air  Quality,  Climate 
Adaptation and Housing. 

20   Regulation (EU) No 994/2010 

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                              Energy Union – Estonia 

By 2016, the sustainable energy action plans delivered by three Estonian municipalities participating 
in the Covenant of Mayors, had been assessed. Overall, these three municipalities cover about 400 
000  inhabitants  representing  around  30  %  of  the  total  population  in  Estonia.  All  together,  these 
municipalities committed to reduce by 2020 the GHG emissions by 20.1 % (as compared to the 1990 
baseline).  

In Estonia, by September 2016, 1 city (covering 0.41 million inhabitants) has committed to conduct 
vulnerability and risk assessment and develop and implement adaptation plans in the framework of 
the Covenant of Mayors for Climate and Energy. 

8.  Cohesion policy and EU-supported clean energy investments  

EU  cohesion  policy  makes  a  key  contribution  to  delivering  the  Energy  Union  objectives  on  the 
ground, including important investments to implement energy policy objectives in Estonia which are 
complemented  by  national  public  and  private  co-financing,  aiming  at  optimal  leverage.  It  also 
ensures integrated territorial solutions to energy and climate challenges, supports capacity building 
and provides technical assistance. 

is 

investing  some  EUR  247  million 

in  energy  efficiency 
Over  2014-2020,  cohesion  policy 
improvements in public and residential infrastructure, as well as in high-efficiency cogeneration and 
district heating and renewable energy in Estonia. Cohesion policy is also investing significantly in R&I 
and in SME competitiveness in Estonia, based on the national strategy for smart specialisation. For 
Estonia, the strategy includes a focus on more efficient use of resources. At this stage, at least EUR 
145 million is foreseen for investments in R&I and adoption of low-carbon technologies in Estonia, 
but this might increase further in line with the evolving content of the smart specialisation strategy. 
A further estimated EUR 232 million is invested in supporting the move towards an energy-efficient, 
decarbonised transport sector. 

23 

 
 
 
 
                              Energy Union – Estonia 

(source: DG Regio) 

These investments are expected to contribute to around 40 000 households with improved energy 
consumption classification, as well as to around 110 km of reconstructed or upgraded railway lines. 
Overall, the EU cohesion policy investments in Estonia over 2014-2020 are expected to contribute to 
an estimated annual decrease of GHG emissions of around 40 000 tonnes of CO2eq. 

For example, the Tartu Biogaas OÜ project involves co-production of electricity and heat from bio-
waste (dung, waste from food processing industry) and biomass, with an annual capacity to process 
ca 80,000 tonnes.  Annually it is producing 1.5 MW electricity and 1.5 MW heat. The total cost of the 
project  is  EUR  4  million,  of  which  EUR  1.5  million  from  the  European  Regional  Development  Fund 
(ERDF). 

As another example, the Tallinn Technical University ZEBE – Centre of Excellence for zero energy and 
resource  efficient  smart  buildings  and  districts  (ZEBE  CER)  contributes  to  energy  and  resource 
efficiency improvement in buildings and districts. It consolidates five existing research groups active 
in the ZEBE domain at three Estonian universities in order to build up key competences of CER. ZEBE 
CER  contributes  to  the  Estonian  smart  specialisation  growth  area  of  "Efficient  Use  of  Resources, 
Smart and more efficient construction of buildings". Expected results can be utilized and applied in 
construction and energy sectors especially when moving to build nearly zero energy buildings as well 
as in deep integrated renovation of existing buildings. The total cost of the project is EUR 4.4 million, 
of which EUR 4.1 million from the European Regional Development Fund (ERDF). 

Through  its  support  to  sustainable  transport  systems,  the  Connecting  Europe  Facility  (CEF)  also 
contributes to the goals of the Energy Union. Following Estonian participation in the CEF – Transport 
2014-2015 Calls, the Estonian action portfolio comprises 10 signed grant agreements, allocating EUR 
204.6 million of CEF Transport Funding to Estonian beneficiaries (state-of-play February 2017)21. The 
transport mode which receives the highest share of funding is rail (91.1 % of actual funding). Estonia 
is participating in two multinational, cross-border rail actions, both dealing with the Rail Baltic line, 
the  most  significant  and  strategic  Global  Project  of  the  North  Sea-Baltic  Corridor.  The  Estonian 
activities  of  these  CEF  actions  cover  preparatory  and  technical  studies  combined  with  land 
acquisition  and  with  the  first  set  of  works.  Estonia  is  also  demonstrating  a  strong  commitment  to 
maritime projects and participates in the further upgrade of the maritime line Helsinki-Tallinn with 
operational and environmental upgrades of both port infrastructure and an LNG powered passenger 
vessels.  Moreover,  Estonia  continues  to  support  the  use  of  LNG  as  a  fuel  solution  for  maritime 
transport.22   

21  Note that European Economic Interest Groups and International Organisations are excluded from the analysis. 
22   Source: INEA 

24