Beatrice Lang
Estonia's electricity sector is undergoing a significant transformation, with a growing emphasis on renewable energy sources and a corresponding reduction in the country's historical reliance on oil shale. Estonia has set ambitious targets for renewable electricity generation, aiming for 100% by 2030, and has established a Ministry of Climate to oversee the green transition. The country's electricity market is influenced by its integration with the European Union and its connections with neighbouring countries, which provide opportunities for cross-border trade and enhance supply reliability. Estonia's electricity prices have been subject to fluctuations, with wholesale prices increasing significantly between 2021 and 2022, and residential prices in 2024 being higher than the European average. So, yes, people do pay for electricity in Estonia, and the price varies depending on usage and the time of day.
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What You'll Learn
Estonia's electricity prices
Estonia's electricity sector is interconnected with regional energy markets, especially Finland and Latvia. Estonia is also part of Nord Pool's open electricity market, which includes Norway, Sweden, Finland, Denmark, Latvia, and Lithuania. In this market, the price of electricity is determined by supply and demand. The more renewable energy an area produces, the cheaper the electricity. Estonia's energy strategy aims for climate neutrality by 2050, with a target of 100% renewable electricity by 2030.
The average EU electricity price was €21.9 per kWh, with taxes and excise duties accounting for 39%. In comparison, Estonia's natural gas prices for household end users, including all taxes and VAT, reached a peak of €0.1939 per kWh in the second half of 2021. Between January 2021 and August 2022, electricity prices in Estonia increased nearly sevenfold, reaching over €360 per megawatt-hour in August 2022. This increase was attributed to higher heating demands, rising natural gas and coal prices, and a gas supply shortage following Russia's invasion of Ukraine. By September 2024, the average wholesale electricity price in Estonia had decreased to €84 per megawatt-hour.
Estonia's primary energy source has been oil shale, which constituted 70% of electricity generation in 2019, 80% in 2018, and 49% in 2021. However, Estonia has been transitioning towards renewable energy sources, with oil shale-based electricity infrastructure being phased out. The share of oil shale in total energy supply decreased from 71% in 2011 to 60% in 2021, and from 85% to 48% in electricity generation during the same period. Estonia's renewable energy mix consists primarily of bioenergy, with wind energy, hydropower, and solar energy also contributing. In 2020, renewable energy accounted for 32% of Estonia's Total Energy Supply, with bioenergy making up 93% of that mix.
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The country's energy sources
Estonia's electricity sector is interconnected with regional energy markets, particularly Finland and Latvia. The country's electricity production has largely depended on fossil fuels, with oil shale being the primary energy source. In 2016, wood-based fuels were the second largest source of power, with the rest coming from waste, biofuels, and a small amount of hydropower. Estonia's grid is an important hub as it is connected to Finland in the north, Russia in the east, and Latvia and Lithuania in the south.
In recent years, Estonia has taken significant steps to reduce its reliance on oil shale and diversify its energy sources. Between 2011 and 2021, the share of oil shale in total energy supply decreased from 71% to 60%, and in electricity generation, it dropped from 85% to 48%. Estonia has set ambitious targets for renewable energy, aiming for 100% electricity production from renewable sources by 2030 and climate neutrality by 2050. To achieve these goals, Estonia has established a Ministry of Climate to oversee the green transition and promote cleaner technologies.
The country has seen a growing adoption of renewable energy sources, such as biomass, wind energy, and solar photovoltaic (PV). In 2020, renewable energy, dominated by bioenergy, accounted for 32% of Estonia's Total Energy Supply (TES). Wind power has also received significant investment, with a planned capacity of 255MW expected to be operational by 2024. Estonia's first pumped-storage hydroelectric power plant is under development and is aimed to enhance energy security and facilitate the integration of renewable energy into the grid.
Estonia has also explored the potential adoption of nuclear power, with a decision expected in 2024. The country's energy strategy aligns with the European Climate Law and other initiatives, such as REPowerEU, to achieve its climate goals. Estonia's reduction in reliance on Russian energy sources, particularly in response to geopolitical tensions, has further accelerated its transition towards cleaner and more sustainable energy sources.
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The impact of geopolitical tensions
Estonia's electricity sector has been significantly impacted by geopolitical tensions, particularly in relation to its energy sources and supply. In response to Russia's invasion of Ukraine, Estonia took decisive steps to reduce its reliance on Russian energy sources. This included halting gas imports from Russia in April 2022 and banning all natural gas and oil product imports by September 2022. Estonia also prohibited the purchase and transfer of crude oil and oil products from Russia in December 2022. These actions were part of Estonia's broader commitment to transitioning to renewable energy sources and reducing its dependence on fossil fuels.
The disconnection from the Russian electricity grid had a notable impact on electricity prices in Estonia. Following the disconnection, electricity prices in the Baltic region started to rise rapidly. The average electricity price in Estonia increased by around 50%, reaching €191 per megawatt-hour, the highest in 2025 up to that point. This price hike was attributed to various factors, including cold weather, higher electricity consumption, and a slight increase in gas prices. The limited connections within the Baltic region, due to the damaged underwater Estlink 2 cable, also contributed to the rise in prices.
Estonia's transition away from Russian energy sources and its integration with the European energy system have had both positive and negative consequences. On the one hand, Estonia has made significant progress in reducing its dependence on fossil fuels and increasing the adoption of renewable energy sources. The country has set ambitious targets for renewable electricity generation and climate neutrality. On the other hand, the geopolitical tensions and subsequent disconnection from the Russian grid have led to fluctuations in energy prices and supply stability. Estonia has had to invest in alternative energy sources, such as the development of its first pumped-storage hydroelectric power plant, to enhance energy security and stabilize its power network.
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The role of the European Union
Estonia's electricity sector is interconnected with regional energy markets, particularly through connections with Finland and Latvia. The country has set a target of 100% electricity production from renewable sources by 2030 and climate neutrality by 2050. Estonia's grid is an important hub as it is connected to Finland in the north, Russia in the east, and Latvia and Lithuania in the south. Estonia has taken steps to reduce its reliance on Russian energy sources, particularly in response to Russia's invasion of Ukraine.
The European Union (EU) has played a significant role in Estonia's energy sector and its efforts to transition to renewable energy sources. Here are some key aspects of the EU's role:
- European Grid Synchronization: Estonia, along with Lithuania and Latvia, has decoupled from the Russian-controlled Integrated Power System/United Power System (IPS/UPS) grid. In February 2025, these Baltic states synchronized their former Soviet electricity systems with the Continental Europe Network (CEN), marking a historic step towards energy security and independence from Russia. This synchronization was co-financed by the EU, which allocated over €1.2 billion from its Connecting Europe Facility. The EU's support for this project is aligned with its goal of achieving a fully integrated European energy market, free from uncontrolled third-party influences on its member states.
- Recovery and Resilience Plan: Estonia has developed a recovery and resilience plan with the support of the European Commission. This plan includes initiatives to accelerate the decarbonization of the energy system and promote the transition to renewable energy sources. Estonia has requested additional funding from its share of the Brexit Adjustment Reserve, amounting to €6.6 million, to enhance these efforts. The EU's REPowerEU grant of €83.3 million also supports Estonia's energy transition.
- Funding for Green Initiatives: The EU has provided significant funding for various green initiatives in Estonia. This includes €90 million for the Green Fund to support innovative green technologies, €67 million for boosting offshore wind parks development, and €75 million for the energy-efficient renovation of 3500 dwellings. These investments align with Estonia's Ministry of Climate's goals of executing the green transition, formulating climate policy, and promoting cleaner technologies.
- Support for Nuclear Energy Exploration: Estonia is exploring the potential adoption of nuclear power into its energy portfolio, with a decision expected in the near future. The EU's Nuclear Energy Program Implementing Organization (NEPIO) is tasked with delivering a nuclear program framework to support Estonia's objectives of diversifying its energy sources and reducing dependence on fossil fuels. If approved, the start of nuclear electricity production is anticipated for 2035.
- Regional Market Integration: Estonia joined the Nord Pool Spot market in 2012, securing its own price area within this regional electricity market. This integration has facilitated electricity trading and provided Estonia with access to a broader energy market. The EU's support for regional market integration contributes to the development of a more robust and diverse energy landscape in the region.
In summary, the European Union has played a pivotal role in supporting Estonia's energy sector, particularly in its transition to renewable energy sources and its efforts to reduce dependence on Russian energy supplies. Through funding, market integration, and synchronization with the European grid, the EU has enabled Estonia to pursue its energy goals while also advancing the EU's objectives of a fully integrated and secure European energy market.
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Estonia's energy future
Estonia has taken decisive action to reduce its dependence on Russian energy imports due to geopolitical tensions. By September 2022, Estonia had banned the purchase of Russian natural gas, crude oil, and oil products, including liquefied natural gas (LNG). To address its energy needs, Estonia has turned to alternative sources, such as pipeline connections to LNG terminals in Klaipeda, Lithuania, and the new Inkoo LNG terminal in Finland.
Estonia's energy strategy aims for climate neutrality by 2050, with a target of reducing greenhouse gas emissions by 70% by 2030 and 80% by 2050. The country is exploring various renewable energy sources to achieve these goals, including wind, solar, hydro, and biomass. In 2020, renewable energy accounted for 32% of Estonia's Total Energy Supply (TES), with bioenergy representing 93% of renewables. Wind energy contributed 5%, while hydro and marine sources combined for 2%. Solar energy had a minimal impact, but investments in this area have been made since 2014. Estonia is also considering the potential adoption of nuclear power, with a decision expected in 2024.
To enhance energy security and the stability of the power network, Estonia is developing its first pumped-storage hydroelectric power plant (PSH), with a planned capacity of 225 MW and an expected operational date of 2026. This project aims to facilitate the integration of renewable energy into the grid and improve energy storage. Additionally, Estonia is working to reduce its reliance on oil shale, with a target of ceasing production by 2030. Oil shale has historically been the country's primary energy source, but its utilization for electricity generation has significantly decreased in recent years.
Estonia's electricity sector is interconnected with regional energy markets, particularly Finland and Latvia. The country's grid is an important hub, connected to Finland, Russia, Latvia, and Lithuania. Estonia's energy future is focused on diversifying its energy sources, promoting cleaner technologies, and conserving the environment. The country is committed to achieving its renewable energy targets and executing a successful green transition.
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Frequently asked questions
Yes, people in Estonia pay for electricity. The residential electricity price in Estonia as of June 2024 is €0.253 per kWh or $0.262.
The price of electricity in Estonia can fluctuate a lot during the day. As of June 2024, the residential electricity price is €0.253 per kWh, while the electricity price for businesses is €0.142 per kWh. In September 2024, the average wholesale electricity price in Estonia was €84 per megawatt-hour.
Estonia's energy mix includes fossil fuels, wind energy, solar power, hydropower, and bioenergy. Estonia has set a target of 100% electricity production from renewable sources by 2030 and climate neutrality by 2050.
Estonia's electricity grid is interconnected with its neighboring countries, including Finland, Latvia, Lithuania, and Russia. These connections facilitate electricity exchange and enhance the reliability and efficiency of the energy supply.
Estonia is gradually diversifying its energy mix by incorporating more renewable sources, such as wind and solar power. The country has also established a Ministry of Climate to oversee the transition to sustainable energy practices and formulate climate policies.
