Estonia needs electrification for its economy, competitiveness, energy independence and efficiency, and, of course, for the environment too. It's rare to find a situation where the road to so many different goals runs through the same solution. Amending a single ministerial regulation would be a good place to start.
Europe's newly published electrification action plan deserves Estonia's support, not primarily for the climate's sake, but because coping with energy crises matters more right now. Russia's war against Ukraine, and the conflict with Iran, have opened European decision-makers' eyes: energy dependence is no longer just a matter of price, but of security.
"When we import oil or gas, we also import other countries' crises," the French Prime Minister said this spring. It's hard to disagree.
Estonia learned this lesson earlier. We weaned ourselves off Russian gas decisively, and have no wish to return to dependence on imported gas. Natural gas consumption in Estonia has fallen steadily, down nearly twofold from its 2018 peak.
Electricity-based energy instead of burning fuel
Estonia should therefore view Europe's electrification plan primarily through the lens of the economy and more efficient use of resources. This is precisely the reasoning behind several other Western countries' push toward electrification, including countries that don't have a shortage of natural resources themselves. According to Canada's Prime Minister, electrification is the backbone of a stronger, more competitive economy. Likewise, Fatih Birol, head of the International Energy Agency, has called on Europe to electrify its economy as extensively as possible.
Against this backdrop, the European Commission published its electrification action plan last week, aiming to shift existing energy consumption in transport, industry and buildings over to electricity. As a result, electricity's share of final energy consumption should rise from today's 23% to 46% by 2040.
Energy Commissioner Dan Jørgensen declared that Europe will become the world's first electrified continent.
Where to start?
When it comes to electrifying existing energy consumption, Estonia should start with the heating sector.
First, because of scale. According to the Stockholm Environment Institute, the heating sector holds 6.6 terawatt-hours of potential electricity consumption.
Second, because the heating sector is in crisis. Why should heating a 46-square-metre apartment in Loksa cost €247 in winter, while in neighbouring towns the price is a third lower? The reasons lie in the growing inefficiency of heating networks, falling consumption density, and restricted competition.
One signature would speed up electrification of the heating sector and lower prices
Solving the heating crisis through electrification means confronting a stagnant market head-on. In fact, calling it a "market" is generous: any normal market signals in the heating sector are buried under bureaucracy that burdens consumers. Today, both falling consumption and state subsidies can drive district heating prices up.
As the Ministry of Climate puts it, consumers are effectively trapped in unreasonably expensive network areas, where local heating would actually be cheaper.
At the same time, regulation has made electricity-based alternatives artificially worse off. A good example is the weighting factors for energy carriers, which haven't been updated in Estonia for eight years, despite rapid technological progress and two major global energy shocks.
We still multiply the electricity used in a building's energy performance calculation by a factor of 2.0 (for district heating, the same figure is 0.65). This makes it almost impossible for a heat pump to achieve energy class B, even though a heat pump produces three units of heat from every unit of electricity it uses. It's a bureaucratic assessment with no real justification.
In other words, heat pumps are made to look unreasonable on paper, even when they actually use less final energy and give consumers a lower price.
While Europe's electrification action plan proposes tax incentives to accelerate heat pump adoption, Estonia can do this far more simply. Modernising the electricity weighting factor requires no new law and no support scheme. It can be changed with a single regulation from a minister returning from holiday.
The EU expects an average electricity weighting factor of around 1.6 in the near future. But for Estonia, it would make more sense to go further and match Finland's level: 1.2.
This would be the first concrete step toward faster electrification, one Estonians would benefit from immediately.
It's worth remembering that in every one of Estonia's 29 district heating networks where the approved heat price exceeds €100/MWh, electricity could already offer a cheaper and more convenient service today.
Rising electricity consumption would, in turn, help bring down grid maintenance costs for all consumers. Elektrilevi has calculated that every additional terawatt-hour of consumption would lower the network fee by close to 13 percent.
A plan that could work for everyone
The electrification action plan published last week isn't another utopian Brussels scheme. It reflects a changed geopolitical situation and real technological progress, and it has real potential to boost the economy
Thousands of companies from various sectors rallied behind France's electrification plan, announced this spring. In Estonia's otherwise polarised energy debate, electrification could likewise be a unifying theme, bringing together energy producers, technical solution providers and consumers.
What are energy carrier weighting factors?
Weighting factors are used to calculate a building's energy performance certificate. In Estonia, electricity used in a building is multiplied by a factor of 2.0, while energy from efficient district heating is multiplied by 0.65.
The higher the weighting factor, the worse a building's calculated energy efficiency turns out to be. As a result, a building with a clearly more efficient modern heat pump can receive a worse energy label than a building of the same parameters connected to district heating, regardless of actual energy costs, heat prices, or network losses.