Presentation of Mr. Juhan Parts,
Minister of Economic Affairs and Communications of Estonia

Dear Excellencies, Ladies and Gentlemen,

First of all, I would like to welcome you to this seminar on Emerging Energy Markets, organised by Eesti Pank, Global Interdependence Center and our Ministry. It is my strong belief, that such "think tank seminars" provide an excellent possibility for experts and interested parties to explore the real issues. Lets use this opportunity and discuss the issues as they are. Changing world with increasing energy prices and increasing political tensions makes this seminar extremely timely and important also in the international context.

Allow me to start my presentation by pointing out the main issues, which in my mind have a significant impact to the development of the Nordic-Baltic energy markets in the coming decade. I would discuss firstly about the role of new interconnections, secondly about the sustainable energy supplies, and thirdly about the impact of the changes of the CO2 emissions trading system to the Nordic-Baltic energy markets.

I would firstly address the issues about new interconnections. In order to create better functioning energy markets and to increase the energy security in the Baltic and Nordic States, stronger interconnections have to be installed between these countries. Today the Nordic States are quite well interconnected among them, and are also developing new power internal power lines. Baltic States already have extremely strong interconnections with Russia and Byelorussia, but only one small interconnection with the rest of the EU, which started operations last year.

Estlink cable has proven to be very important link for the development of the Baltic power market. The trade between the Nordic and Baltic states has been very extensive, the usage of the cable during the first years of operation was above 75% of the potential. The operational experience shows, that the power market works in the both ends of the cable very efficiently. Due to the positive experience, the companies have now also initiated the enlargement of the Nordic power exchange to the Baltic power market, which is planned to be carried out in coming years.

This example shows, that such interconnections provide completely new possibilities for the companies and increase the competition in the power markets. In the context of the coming changes in the Baltic power markets there is certainly a need for additional power links. Second Estlink cable, also Sweden-Latvia and Sweden-Lithuania links are currently discussed, but the most crucial interconnection for the Baltic States is synchronous interconnection between Lithuania and Poland. This is a very long-term project, even a dream, but in order to create a functional power market with fair trading, this project is essential.

From the experience of Estlink project one could see, that the main driver for investments in interconnections is a political will. Interconnections are only built, if both countries are interested in that cable. As they say, it takes two to tango : But in order to make the investment decisions by the companies, the political will should be translated into economical conditions, which are attractive for investors.

The second topic I would like to address is about the improvements of sustainability of energy systems. The overall efficiency and sustainability of the energy system has to improve, including also energy consumption and infrastructures. In order to provide incentives for these investments, people should be more aware of the economical impact of these investments to their energy bills. Though the energy efficiency of end users and network companies has improved substantially in recent years, there are still huge potentials of energy efficiency to be captured in all countries.

Also the wider use of renewable energy sources in the Nordic-Baltic region is achievable. Renewables share will certainly also increase in the Nordic and Baltic States energy mix, however, there are also potentials, which can be only captured by strengthened co-operation. As an example, Estonia has some extremely good areas for off-shore wind parks, but their potential is limited due to the small Estonian power market: the potential power production from these areas exceed the power consumption in Estonia. In co-operation with neighboring states the potential for these areas could be used better.

The third issue, and the most challenging one, is about the new Emissions Trading System introduced by the European Commission in January. Nordic and Baltic States power sectors will have couple of difficult issues to solve in the context of this new Energy and Climate Package. The example of Estonia is the clearest one to explain the issues arising from the package.

There will be two major questions to be solved:

It is also worthwhile to quote some articles from the European Treaty, whereby new EU regulations shall not influence the right of the Member States to define its own energy mix. Planned climate package has a very direct influence to the electricity production options. The only realistic large-scale energy investment in such conditions would be nuclear power, which is now also strongly considered as an option in Estonia.

These were the issues, I planned to share with you today. I would conclude my intervention by stating that the co-operation with our Nordic and Baltic partners is of paramount importance for us to move forward in energy field, and to find new, more efficient and sustainable solutions.

Thank you for your attention!