17 Dec 2018
EUR 10 million
Infrastructure, transportation and telecom
|Date of loan:||1 Jul 2013|
|Amount in EUR:||EUR 10 million|
|NACE sector / loan type:||Electricity, gas, steam and hot water supply|
|Business area:||Energy and environment|
The loan has been provided for the construction of a 170-kilometre electricity interconnection between Estonia and Finland called Estlink-2. The new loan will reduce Elering’s own funding need for Estlink-2 and comes in addition to a EUR 25 million loan signed with Elering for the same project in 2010.
Construction of the new 650 MW link is progressing according to plans and is expected to enter into operation in 2014. The capacity of the interconnection between Estonia and Finland will increase up to 1000 MW and is estimated to cover more than two thirds of the annual average electricity consumption in Estonia.
The increase of the transmission capacity is one of the preconditions of the integration of the future power market between the Baltic countries and Nord Pool Spot. The new electricity interconnection is being built between the substation in Püssi in north-eastern Estonia and Anttila in southern Finland. Of the entire 170-kilometre length of the link, 145 kilometres has been laid as a submarine cable on the sea bed.
The total budget of the Estlink-2 project is about EUR 325 million. NIB has earlier lent EUR 40 million to the Finnish national electricity transmission system operator Fingrid Oy for the project. The new loan to Elering will increase NIB’s share to EUR 75 million, representing 23% of the total Estlink-2 project costs. Besides the NIB loans, the Estlink-2 project is financed by the EU, Fingrid, and the European Investment Bank.
In 2005, NIB co-financed the construction of Estlink-1, the first ever connection between the Baltic countries and the EU. Since Estonia was connected to the Nordic Elspot market in 1 April 2010, Estlink-1 has been one of the most congested connections in the Elspot market. A reduction in congestion rents will considerably improve the market efficiency of the electricity markets of the member countries.
Elering is the Estonian transmission system operator, which owns, manages and develops the electricity system grid in Estonia. The company is also responsible for system balancing operations. The Estonian state purchased Elering from Eesti Energia in 2010.
Estlink-2 increases the transmission capacity between Finland and Estonia from 350 MW to 1,000 MW. It will alleviate congestion and facilitate price convergence between Nordpool Scandinavian and Baltic price areas.
Estonia is highly dependent on electricity production from the oil shale-fired power plants and closely connected to the Russian energy system.
Also, the development of wind power is highly dependent on an efficient and market based use of the interconnection between Finland and Estonia. Currently, wind power capacity in Estonia is about 275 MW.
The negative aspects of the project are mainly related to the construction activities and their impacts on the marine environment. Given the fact that the project has both positive effects, such as potentially increasing the energy generation from renewable sources, and negative impacts, the overall assessment of the project is that it is neutral to the environment.