Estonia's energy sector is navigating a period of significant change in 2025, with key decisions raising concerns and opening new opportunities for renewable energy development.
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From the government's sudden cancellation of offshore wind and storage facility support to the opening of state land for wind energy development, the landscape for energy investors and developers is evolving rapidly. These shifts come amid efforts to meet climate targets and strengthen energy security, while also responding to challenges such as infrastructure delays and regulatory updates.
ESTONIA
Estonia Cancels Offshore Wind and Storage Facility Support, Raising Energy and Investment Concerns
The Estonian government's decision to delay offshore wind energy auctions and cancel the €2.6 billion support plan, along with measures for the energy storage facility, has raised concerns among renewable energy developers and investors. The reversal comes despite an initial commitment to large-scale wind projects, with officials now admitting that previous financial calculations were flawed.
Under the original plan, Estonia aimed to hold reverse auctions for 2 terawatt-hours (TWh) of wind energy production each for offshore and onshore projects, with price corridors set at €20 per megawatt-hour (MWh) for onshore and €65 per MWh for offshore. The subsidy period was intended to last 20 years for offshore wind farms and 12 years for onshore ones. Additionally, the state or transmission system operator, Elering, was set to support energy storage capacity development, including a specific measure for Energiasalv OÜ. A broader initiative to explore potential locations for a future nuclear power plant was also part of the plan.
The abrupt policy shift has raised concerns over investment stability, particularly after a major foreign investment deal in offshore wind was announced just a day before the cancellation. Businesses warn that delays and uncertainty could weaken Estonia's energy security, increase reliance on imports, and harm economic competitiveness. With the current EU state aid approval for offshore wind expiring in April, Estonia must either secure new approval or risk losing future support altogether.
Estonian Competition Authority published an in-depth analysis of the public charging infrastructure for light vehicles in Estonia
Estonian Competition Authority published an in-depth analysis of the public charging infrastructure for light vehicles, offering valuable recommendations for key players: real estate developers, public authorities, and energy solution providers. The key takeaways from the Report are:
- Charging network expansion is uneven – development is concentrated in urban areas, leaving rural regions underserved.
- High entry barriers could stifle competition – the market faces significant entry barriers, particularly related to grid connection costs and long approval processes.
- Positioning battles among operators – companies are competing for prime locations and partnerships, leading to concerns over exclusivity agreements.
- Real-time access to charging data is critical – transparency and consumer empowerment require a national data access point that provides real-time information on charger availability and pricing.
- Collaboration & open markets – public and private sector cooperation is crucial; fair and open procurement processes will ensure diverse market participation.
The full analysis is available on the Competition Authority's website: https://lnkd.in/dGNvBUQS
EstLink 2 Repair Update: Key Challenges in Restoration
EstLink 2 is the second high-voltage direct current (HVDC) connection between Estonia and Finland, significantly increasing electricity transmission capacity between the Baltic and Nordic regions. EstLink 2 is owned by Estonian company Elering AS and Finnish company Fingrid Oyj in equal parts. With a capacity of 650 MW, it covers up to half of Estonia's winter electricity demand, effectively integrating Estonia and Finland into a single market. The total length of EstLink 2 is approximately 170 km.
On 25 December, EstLink 2 suffered an emergency shutdown due to suspected external damage. Since then, preparations for repairing the damaged subsea cable have been ongoing, but key challenges remain.
According to Elering, preparations for the repair work were expected to begin in March with the fault scheduled to be fixed by 1 August. However, as of late January, Fingrid had not yet secured a suitable vessel, raising concerns about potential delays. The damage, suspected to have been caused by the detained oil tanker Eagle S, has significantly impacted electricity transmission. Repair costs are expected to reach tens of millions of euros, similar to the €30 million repair of EstLink 2's previous failure.
Estonia Opens State Land for Wind Energy Development
Estonia has launched a state land auction for wind energy development, giving renewable energy companies the chance to secure land-use rights for up to 39 years. The auction covers state-owned land assessed as suitable for wind farms through environmental studies and ongoing local government planning (around 500 sq. km.).
If planning and permitting processes move forward, the allocated areas could host wind farms with a total capacity of up to 1,100 megawatts. Until now, most onshore wind farms in Estonia have been developed on private land, but this initiative expands opportunities for using public land. The goal is to boost electricity supply and support more affordable energy in surrounding areas.
The auction results are expected to be confirmed soon, with contracts initially signed for a three-year development phase. Developers must complete planning and obtain building permits within this period; otherwise, they lose their rights to the land. Once approved, wind farms can operate for up to 35 years, after which they must be dismantled within two years.
New Energy Efficiency Regulations for Buildings Take Effect in June 2025
Estonia's Climate Minister has approved updated energy efficiency requirements for buildings, now set to take effect on 1 June 2025 (delayed from the originally planned 1 March). The changes aim to improve climate resilience and provide a more accurate overview of energy consumption.
Key Updates:
- Revised energy calculations: More precise methods for assessing heating, cooling, and hot water distribution losses.
- Updated climate data: New energy assessments will reflect recent temperature increases and more frequent heatwaves (based on 1990–2020 data instead of 1970–2000).
- Adjusted temperature standards: Heating setpoints rise from 21°C to 21.5°C, while cooling limits lower from 27°C to 26°C for certain buildings.
- New solar energy calculator: A web-based calculator will replace outdated static tables, allowing hourly calculations for energy production, storage, and self-consumption optimisation.
- Updated energy labels: Estonia's A-H classification scale will shift to the EU-wide A-G scale.
These changes impact all new and significantly renovated buildings and align with EU energy efficiency directives, ensuring buildings meet modern energy and climate requirements.
Estonia to Increase Fuel and Electricity Excise Duties from May 2025
As part of broader tax hikes, Estonia will raise excise duties on fuel and electricity starting May 1, 2025. The adjustments will impact various energy sources, including gas, diesel, heating oil, and electricity, affecting both households and businesses.
Key changes include:
- Diesel and light fuel oil excise duty will rise from €399 to €428 per 1,000 liters.
- LPG (liquefied petroleum gas) excise duty will increase from €65.01 to €79.91 per 1,000 kg.
- Natural gas excise duty will go up from €47.81 to €56.42 per 1,000 m³.
- Electricity excise duty will rise from €1.45 to €2.10 per MWh.
Additionally, gasoline excise duty, which has remained unchanged since 2018, will increase by 5% annually over the next four years, with the first rise taking effect on July 1, 2025. Combined with the VAT hike, this will add 6.3 cents per litre to fuel prices.
Excise duties will continue to rise, further increasing energy and fuel costs in the long term. Businesses and consumers should prepare for ongoing price hikes affecting transport, heating, and electricity expenses.
Baltics
Baltic States Successfully Synchronise with Continental
Europe's Power Grid
On February 9 at 14:05, Estonia, Latvia, and Lithuania officially synchronised their electricity systems with the Continental European power grid, marking a historic shift away from dependence on Russia. The transition was completed by activating the LitPol Link between Lithuania and Poland in alternating current mode, ensuring frequency stability in coordination with over 400 million consumers across 26 European countries.
This milestone significantly strengthens energy security in the region, eliminating the risk of unexpected disconnections by Russia. Years of technical preparations, supported by €1.23 billion in EU funding, enabled the early completion of the project – ten months ahead of schedule. Further grid enhancements, including the 700 MW Harmony Link interconnector between Lithuania and Poland, are planned by 2030 to further integrate the Baltic region into the European electricity market.
In addition to the synchronisation, Estonia, Latvia, Lithuania, and Poland signed a joint declaration to enhance critical energy infrastructure protection, emphasising regional cooperation in safeguarding energy independence.
Funding for energy innovation
The European Commission has allocated funding for cross-border energy infrastructure projects under the Connecting Europe Facility program. The North-Baltic Hydrogen Corridor received a €6.8 million grant for feasibility studies, while the CCS Baltic Consortium received more than €3 million for the development of carbon capture and storage infrastructure. The hydrogen corridor will connect Finland, Estonia, Latvia, Lithuania, Poland, Germany, and Finland to promote the use of renewable hydrogen and reduce CO2 emissions. These investments will contribute to the integration of EU energy markets and achieving net-zero targets.
Originally Published 28 March 2025
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