The electricity independence of Estonian homes is increasing, but its cost-benefit is decreasing

Märt Masso, an expert at the Foresight Centre, noted that in addition to large power plants, smaller electric power stations scattered across the country are producing more and more energy. “Currently, electricity produced by consumers accounts for about a quarter of their own consumption,” said Masso. “At the same time, the amount of hours when household production exceeds their consumption and the surplus is directed to the distribution network is only 13% per year.”

Today, distributed electricity generation is dominated by solar panels, supported by the nearly six-fold drop in the price of photovoltaic cells over the past decade. Small-scale electricity production is driven by the volatility of electricity prices as well. “The increase in electricity generating consumers can be explained by households wanting to save on electricity costs,” explained Masso. “The state has also supported an increase of small producers and the profitability of production with various support measures.”

However, with the addition of renewable energy capacities, increasingly volatile electricity prices have reduced the cost-benefit of solar energy production for households – electricity prices are generally the lowest on sunny days, i.e. when the productivity of solar power stations is the highest, and they are more expensive in colder and darker times.

The Foresight Centre notes in the report that, according to Elektrilevi’s forecast, small-scale production is expected to triple in the coming years, which will increase the energy independence of households. The forecast takes into account the production capacities in the process of connection, the nearly zero energy requirements of new buildings and the expected increase in electricity consumption. “Further development will be influenced by the cost of production capacity and the costs of connecting to the distribution network, as well as the development of storage devices and their cost,” said Masso. “Undoubtedly, the price of electricity is an important factor as well, on which the profitability of the investment for households depends.” He added that the spread of know-how for the development of small-scale production and the smoothness of the connection processes are also significant.

However, the growth of distributed small-scale production requires solutions to balance demand and supply in order to ensure the frequency and security of supply of the electricity system and distribution network. Solutions include controllable generation, storage and external connections that are compensating.

More conscious consumption in households would help to increase the cost-benefit of electricity production – for example, heat production during the day and heating water for the evening, or energy storage in the household’s local batteries. Electricity-producing consumers can also be helped by storing energy in the storage of the distribution network or transmission network, which would require, in addition to the development of the storage solution, the development of a network that would allow electricity to be directed from a network with a lower voltage to a network with a higher voltage. “In practice, however, breakthroughs are necessary for the use of both technologies that would make such storage or conversion of energy efficient and competitive in price,” said Märt Masso.

The short report ‘Electricity Producing Households in Estonia’ (in Estonian) is part of the Foresight Centre’s research direction ‘Active Consumers in the Future Energy System’. The research direction aims to identify the key factors on which the role of consumers in the future energy system depends and to create scenarios of the possible impact of households and other micro-producers on the Estonian energy system up to 2040.