EstLink 3 interconnector to bring ‘major benefits’ to Nordic and Baltic energy market
EstLink 3, a new undersea interconnector between Finland and Estonia, is projected to provide overall benefits reaching five times higher than the cost. Beginning from its commission in 2035, the project is expected to recover its costs within the first five years of operation in a highly renewable and decentralised European energy system.
In 2022, Estonian and Finnish transmission system operators Elering and Fingrid began planning a third submarine cable link connecting the two countries. When it goes live, the EstLink 3 interconnector (700 MW) is set to have a major impact on the Nordic and Baltic regions, according to a new cost-benefit modelling analysis from Magnus Energy.
With EstLink 3 in place, Finland is expected to enhance the price convergence with Estonia. Other Baltic zones may actually see a slight increase in price, the analysis shows.
The price convergence between these two Baltic neighbors will be driven by the improved allocation of demand-side response with the newly added interconnector capacity. Finland is the most attractive grid for load shifting (scheduling electricity use to times when it is cheaper or the grid has more capacity).
Despite the clear benefits that EstLink 3 will bring to the region and its power sector, there are a number of factors at play that make it hard to predict just how successful the undersea cable will be. For example, the modelling analysis shows that the new connection could be around seven times more profitable in a decentralised energy system than a centralised one.
Going beyond the power market, how renewable hydrogen is produced in Finland and Estonia could also have a big impact on the use of EstLink 3. For instance, spot prices in Estonia and Finland are expected to drop by around 40% when electrolyser operation is guided by the market price rather than hydrogen demand.
Informing policy
Commenting on the report’s findings, lead author and Principal at Magnus Energy, Ksenia Tolstrup, said: “The implications from this modelling analysis can serve as a cost-sharing basis for transmission system operators and inform EU policymakers of the utility behind the extra cross-border capacity to share flexibility resources among Nordics and the Baltic States.”
The existing two interconnectors between Finland and Estonia are bother smaller than EstLink 3. The inaugural EstLink connection has a transmission capacity of approximately 350 MW, while EstLink 2 is capable of transmitting up to 650 MW.
