4. Electricity markets and energy security: investing in interconnections

Electricity markets become increasingly important. An interest in analyzing electricity policies also lies in its close link with the sustainable development policies. Electricity is the main sector where the greenhouse gas emissions can be reduced by promoting non-fossil energies.

Specificity of the sector: division between base-load, mid-load and peak-load capacity. Not all the capacity is used, as spare capacity is necessary to mitigate deficits. A number of regulatory issues emerge: avoiding over-capacity, attracting investments, consideration of future and cancelled investments.

The main dilemma of electricity policies is that a low price stimulates competitiveness of energy consuming sectors, but hinders innovation. The high price stimulates innovation though can be problematic in the short run.

Energy security issue arises when one defines blackouts. Blackouts can be caused by technical disruptions, by lack of adequacy between supply and demand, as well as by regulatory failures. In case of California 2001, we observed an important regulatory failure. This creates a ground for a more careful analysis of energy regulation.

Situation in Estonia is rather characterized by an over-capacity, which is historically explained. A link with Nordel creates a promise for a better market efficiency, while Estonian generation costs remain lower than in Nordic countries. Nordel is an example of a successful trading platform created by companies. However, political conditions for such a market were created by a historical cooperation between these States.

Currently, electricity markets evolve towards larger regional markets. Baltic Ring project could be promising in the Baltic-Russia context. Coordination between dispatching of transmission system operators has been also observed. This demonstrates another example that securitization of energy cooperation is not applicable to all energy sectors.

Ingrid Arus, Head of Electricity Markets Department of Elering is highly valuable interview, which gives a general background of electricity market of Estonia. Ms Arus also mentions Nordel market, which is one of the most effective cross-border electricity markets. Information on infrastructure, policies and markets.

Ingrid Arus, Head of Electricity Markets Department, Elering

Interview questions:

1. Please tell us briefly about the Elering Company and about its role in Estonia!
2. What is the situation with the power generation capacity in Estonia? Is there any situation like an over capacity on a low market?
3. How is Estonia linked to Nord pool and what does it mean for Estonian market (positive effects, barriers)?
4. Please explain any possible power market risks in the Baltic region? Could it be any similarities with the crisis of California's power shortage in 2001?

Obligatory learning material

Jacques de Jong, Senior Fellow of CIEP "Restructuring the EU Energy Infrastructure"

[Focus on regulatory design of both electricity and gas sectors in the EU, role of energy regulators, industry associations, concept of basic infrastructure facilities]

back forward