Estonia breaks record with 513 MW of new solar capacity in 2024 but faces market saturation

Despite the rapid expansion, the market is already showing signs of saturation.

In the summer of 2023, there were 236 hours of zero or negative electricity prices, indicating an oversupply of energy at certain times of the year.

This could slow down the expansion of solar capacity in the short term.

"The market is already somewhat saturated, suggesting that the rapid expansion of solar capacity may slow down.

However, most new solar farms are being combined with storage batteries, making the business model more favorable, warns Sillak in a conversation with Strategic Energy Europe.

In the long term, growth will depend on three key factors:

• The expansion of energy storage capacity.
• An increase in electricity demand and economic electrification.
• Resolving issues with grid connection infrastructure.

According to the executive, there are currently areas where even small-scale solar farms cannot be connected due to insufficient grid infrastructure and ongoing reinforcement work.

In this regard, the future success of Estonia's solar sector will largely depend on the government and grid operators accelerating the construction of new infrastructure and improving the efficiency of connection processes.

Estonia"s Energy Development Plan forecasts 1,500 MW of solar capacity by 2030 and over 2,500 MW by 2040.

However, the Estonian Solar Electricity Association estimates that, with proper battery storage development, solar capacity could reach up to 3,500 MW by 2050.

"This might seem too optimistic at first, but in reality, all past predictions about solar capacity growth in Estonia have been exceeded by a large margin," Sillak emphasises.

Despite solar energy"s strong growth, its seasonal variability remains a challenge for Estonia. "Solar plays a key role in the energy mix, especially from March to October.

But from November to February, production is very low, which is why other solutions are needed," Sillak explains.

In that context, the synergy between wind and solar power is an advantage for Estonia. "Wind and solar complement each other well, as wind generation is highest from October to February, exactly when solar production is at its lowest," the director notes.

The upcoming renewable energy auctions in Estonia will focus on wind energy, as this source is behind solar energy, a technology that has reached a point where it no longer requires subsidies or guarantees for further expansion.

Additionally, recent seabed auctions have granted two new areas to Ignitis Renewables and Deep Wind Offshore, further strengthening offshore wind development in the region.

The synchronisation of the Baltic electricity grid with Europe has been a major milestone for Estonia"s energy security.

In February 2024, the Baltic transmission system operators (TSOs) successfully disconnected from Russia and Belarus, operating in island mode for over 24 hours before synchronising with Continental Europe.

"This was a vital milestone for our energy security. We freed ourselves from Russian influence risks and strengthened our independence," Sillak states.

The integration with Europe has created new opportunities for renewable energy, such as the establishment of a Baltic balancing capacity market, which benefits battery storage operators and renewable energy investors.

Estonia"s energy storage capacity is expanding rapidly.

By the end of 2024, the country had 6 MW of battery storage, but this has now grown to over 30 MW.

Additionally, major storage projects are underway, including:

• A 200 MW battery park, set to be one of the largest of its kind in Europe.
• A 500 MW pumped hydro storage plant in Paldiski, expected to be built in the early 2030s.

Estonia"s Energy Development Plan sets a target of 1,000 MW of storage capacity by 2030 and over 1,500 MW by 2040.

This will enable higher renewable energy integration and reduce the need for fossil fuel-based dispatchable capacity, such as oil shale and gas power plants, by around 600 MW  approximately one-third of Estonia"s peak demand.

Estonia"s solar sector has experienced explosive growth, with 513 MW added in 2024, but the country now faces new hurdles. Market saturation, grid infrastructure limitations, and the need to scale up energy storage will be decisive factors in shaping the future of the renewable energy sector.

Despite these challenges, Estonia has strong potential to become a regional leader in renewable energy, driven by the combination of solar, wind, and battery storage.

With the right policies and grid infrastructure improvements, the country may exceed even the most optimistic growth forecasts.