Renewable energy in the BalticsMartin Kruus

Nov 2008

Onshore wind portfolio under 4energia management

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Wind Park Status MW MWh/y FE/VE Capacity

Pakri EST In operation 18,4 53 000 10/90 32,9%

Virtsu I EST In operation 1,2 3 440 75/25 32,7%

Virtsu II EST In operation 6,9 16 163 75/25 26,7%

Esivere EST In operation 8,0 20 863 75/25 29,8%

Viru-Nigula EST Under construction 24,0 64 400 0/100 30,6%

Sudenai LIT Under construction 14,0 35 566 50/50 29,0%

Tooma EST Under construction 24,0 67 277 50/50 32,0%

Vanaküla EST Under construction 9,0 24 020 0/100 30,5%

Paldiski EST Under development 50,4 132 534 25/20 30,0%

Virtsu III EST Under development 6,9 18 073 75/25 29,9%

Mockiai LIT Under development 12,0 38 205 50/50 36,3%

Dundaga LAT Planning 50,0 130 000 50/50 29,7%

Kunda EST Planning 6,0 19 237 100/0 36,6%

Total 230,8 230,8 622 778 30,8%

Sudenai

Mockiai

Dundaga

KundaViru-NigulaPaldiski Pakri

Vanaküla

Tooma

Esivere

Virtsu II

Virtsu I Virtsu III

•4energia operating wind farm•4energia wind farm under

* - FE – Freenergy, VE – Vardar Eurus

Our first - Pakri wind park

Our biggest - Hiiumaa offshore wind park 1000 MW

Viljandi

Hiiumaa WP

Estlink

Lihula

AulepaKanapeeksi

Latest layout based on EIA investigations, depth up ca 30

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Content

Why wind energy?

Status of wind energy

Challenges/solutions

Why wind energy?: IPCC consensus 2007

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EU 202020 target

EU Energy Commission has set the important “3 x 20” target to support renewable energy development

to increase the share energy produced of renewable sources to 20% of total energy production (currently it is about 13%)to reduce the emissions of fossil fuels by 20%both targets should be achieved by year 2020

EU climate package to reduce carbon dioxide emissions by 40 percent by 2020 compared to 1990 levels

EU 20% target

Share of renewable energy in total energy consumption (2005)

Demand increase of fossil fuels

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World marketed energy use by fuel, 1980-2030

Demand versus phase-out of existing equipment

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Power capacity renewal in EU25

Security of supply in EU

Electricity prices are increasing

12Source: NordEnergi, SEB Enskilda

German fixed 2008 tariff for wind: €80.3 / MWh

EEX average spot prices (Base load) Futures

Electricity regulated sale price Estonia 08

Wind energy has proven history

1300 1900 1980...

Baltic reason (1)

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Shutdown of Elektrenai PP

Shutdown of Ignalina NPP

Shutdown of old blocks in Narva PP

Baltic reasons (2) – high carbon content

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Baltic reasons (3) – long coastline with good wind

Source:

Status of wind energyin Baltics

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Wind Energy framework development in Estonia

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01.10.1998 01.07.2003 16.12.2004 01.01.2005 01.05.2007

Energy Act

Feed-in 5,1 cent/kwh. Indexed.PP period not fixed

ElectricityMarket Act

Feed-in 5 cent/kwh.Indexed.PP period 31.12.15.

Long-termEnergyStrategy

RES 5,1% by 2010,10% by 2020

ElectricityMarket ActAmend.

Feed-in 5,2 cent/kwh.Flat. PP period 31.12.15.Limit with gridLosses 20-50MW

El Market ActAmend.

Feed-in 7,4 cent/kwhLimit 200 GWh/aor RE support 5,4 cent/kwh+el priceLimit 400 GWh/a

Day ahead hourly forecast!

Wind Energy Production in Baltic States

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Total Installed Wind Capacity in Baltic States and 4energia Share

Support limitation of 400 GWh

Cap 400 GWh/y

Nice trend but support in all Baltic countries is limitedto 150-200 MW!

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Baltic electricity mix today

New RE is still not visible in statistics!

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Challenges/solutions

Lack and instability of legal framework

Administrative barriers for independent power producers

Lack of grid development

Transparency of competition with utilities

Insufficient financial support

Increasing investment costs

Financing

Lack of interconnections to EU market and lack of local balancing power for wind energy

Day ahead prognosis of wind energy

Pakri wind park Oct 2008

Baltic, Nordic PMs discuss energy with Barroso. BNS, 15.10.08

BRUSSELS, Oct 15, BNS - Heads of government from the Baltic states, Finland, Sweden, Denmark and Poland and the president of the European Commission, Jose Manuel Barroso, talked about the Baltic Sea region's energy issues and in particular building new power links

The Commission has suggested a plan of action to work out by 2010 detailed plans to building new electricity and natural gas links.

The European Commission has already drawn up a Baltic energy links plan, the Baltic Investment Program (BIP), which covers a second underwater power cable connecting Estonia and Finland as well as a Polish-Lithuanian electricity bridge and Sweden's electricity links with Latvia and Lithuania.

Speaking about the financing of new projects, the prime minister confirmed that investments can be obtained from both EU and the European Investment Bank.

New energy plan for Estonia (draft)

Local balancing power solutions

Spinning reserve of thermal power plants

Hydro pump storage

Gas turbines

Hydrogen production

Smart grid and demand side regulation and micro production

Heat accumulators

Special state co-funded research center is planned

Green certificate trading

Source:

Still there is a myth that wind energy is so expensive

Wind energy is subsidized only first 10 -12 years

Its not correct to compare the wind energy to existing power plants built in 60’s or 70’s

In order to integrate national electricity systems into common EU wide electricity market new heavy investments into the grids and reserve capacities has to be made anyhow. Not only incase of wind energy.

Also new fossil power plants need investment supportEesti Energia has turned to government for billions of state aid in order to build new capacitiesLatvia has a plan to cover investment costs of new gas/goal power plants from EU funding or/and grid fees

The forward prices in European Electricity Exchange are in the level of 80 EUR/MWh. This is comparable with subsidized wind energy price, not speaking about the wind energy price after subsidy period

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Conclusion – wind energy will come one way or another

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Thank you!

Martin KruusChairman of the management board

Nelja Energia OÜ (4energia)Tel. +372 640 90 90E-mail martin@4energia.ee