Eslink CEO: Estlink2 could save Estonian society EUR 50 mln per year

Photo: Toomas Huik / Postimees

 The new undersea electricity transmission cable between Estonia and Finland, Estlink2, should give the society a financial benefit of 50 million euros annually, the CEO of the Estonian power transmission system operator Elering says.

CEO Taavi Veskimagi said in his blog that the figure of approximately 50 million euros a year was a result of socio-economic research carried out.

Costing 320 million euros, Estlink2 is the most expensive of Elering's large investments. The other largest investments include the already operational Estlink1 and a 250 megawatt backup generating facility being built at Kiisa to the south of Tallinn.

"Fortunately, we are building [Estlink2] half and half with Finns and the European Union supports the project with 100 million euros. Hence the Estonian consumer gets the 320 million euro connection for 110 million euros," Veskimagi said.

The big investments affect the transmission tariffs, and network tariffs and the price of electricity should be viewed together because all the money that Elering gets from consumers goes back to the electricity network as investments, said the CEO of the transmission system operator.

"The increase in network charges, marginal for each individual household, is for building connections and it allows to defend oneself against steep fluctuations in the electricity price and higher electricity bills in the future," Veskimagi said.

Of the electricity bill received by the consumer network tariffs make up approximately one third. Of network tariffs, in turn, the portion going to the distribution network makes up two thirds and the portion going to Elering one third. The transmission tariff is 1.28 cents per kilowatt-hours this year, 0.15 cents higher than a year ago. For an average household it means an increase by approximately 40 cents in the monthly bill.

Today the investments made by Elering exceed the money received in network tariffs several times. "The period of active investment for Elering will continue for two more years and from 2015 the tariff will stabilize at a level of 13 cents and will not rise any more," said Veskimagi.

Regular investments by Elering, covering the costs of amortization, total approximately 30 million euros annually.

"From time to time we hear claims that in Estonia transmission network tariffs are high without proper reason. This is not true," said Veskimagi, adding that the Estonian tariff was close to Europe's average.

The Estonian transmission network mainly works at 110 kilovolts and the network tariff for the 110 kilovolt network in Estonia is even lower than that for the 330 kilovolt network in many other countries. "By the rule of thumb, in the case of higher voltage transmission costs should be lower. Compared with the 110 kilovolt tariff of the same national networks the Estonian tariff is lower still," Veskimagi said.

The Estonian transmission network tariff is not the lowest in Europe because the transmission tariff is calculated dividing costs by the amount of electricity moved.

"In Estonia there is no large industry comparable with that of Finland, for instance, that would consume a big amount of electricity in a single point. We need to transport small amounts of electricity to a large number of locations at low voltage. Therefore we need significantly more network equipment and line kilometers to supply electricity to one consumer," Veskimagi said.

"The transmission network of Finland has only 106 substations, the Estonian transmission network has close to 150. Yet in Estonia over ten times less electricity is moved," Veskimagi said, adding that in Finland much of the 110 kilovolt network belonged to regional grids.