Eesti Energia cancels the price increase for small producers planned for 1 March


Eesti Energia decided to cancel the changes to electricity buyback agreements for small producers planned for 1 March in order to take more time to inform their customers about the background of the changes. The proposed change would have affected 4,128 customers. Eesti Energia has a total of 8,000 small producer metering points.

"We understand from customer feedback that such changes need more time and explanation. In the current economic situation and in the era of high energy prices, any change related to electricity is a very sensitive topic and requires a thorough explanation. I admit that I and my team have informed our customers too little ahead about the nature of the change, and therefore we thought it was right to take a step back," said Agnes Roos, member of the board responsible for Eesti Energia's customer services.

"Small producers as our customers are the leaders of the green revolution, so they deserve transparent and caring communication," said Roos, emphasizing that the current disapproval of customers is understandable, and apologizing on behalf of the team. "We are taking more time for deeper analysis, for creating background knowledge for customers, and for better collaboration. Our desire is to boost the development of renewable energy in Estonia and to support our customers, including to raise their awareness," she added.

While the company had approximately 1,300 small producers in their portfolio in 2020, there were more than 5,000 of them by the end of last year. In 2022, Eesti Energia's small producers supplied 155 GWh of electricity to the power network, for which Eesti Energia paid them a total of €32.4 million.

"Microgeneration has become a significant part of electricity production. The market we operated in three years ago and the one we face today are radically different. The biggest work and challenge for us is day-ahead forecasting of balance energy," Roos explained.

Electricity sellers are not just mediators of electricity between the market and customers as it is believed. Every day, electricity sellers have to forecast and buy electricity for the next day from the electricity exchange with hourly accuracy to cover the consumption and production of their customers. If not enough electricity has been purchased for the customers, electricity sellers will have to buy more from the balance market at higher prices. If electricity is left over, it must be sold on the balance energy market at significantly lower prices. The difference between the forecast and reality is what determines the cost of balance energy. This cost is priced as a balance energy cost in the customers' electricity buyback margin.

"Forecasting for small producers is the most difficult, because first of all, you have to forecast both the customer's consumption and production. Secondly, the fact that their number on the energy market has grown exponentially makes it difficult to predict their behaviour, and making even the slightest wrong forecast means a big impact," Roos explained.

According to her, one of the main balance energy cost generators is the difference between electricity exchange prices and balance energy prices. The average difference between the exchange price and the balance price in 2020 was 29 €/MWh, while 54 €/MWh in 2021 and 189 €/MWh in 2022. The difference between exchange and balance energy has increased more than sixfold in the last three years. This means that each wrongly forecasted unit of energy generates more than six times higher costs for electricity sellers.