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network. Involving local authorities in the long-term planning of the heating infrastructure and in undertaking heating sector audits is therefore a welcome initiative.
Estonia supports the development of efficient DH through the “effective production and transmission of thermal energy” programme, with the goal to increase the share of renewable energy in heating and reduce emissions. The programme is funded through EU structural funds and administered by the Foundation Environmental Investments Centre, with a total budget of around EUR 60 million for 2014-20. The NDPES targets that in 2030 80% of heat demand will be generated from renewable energy sources. Substantial progress has already been made towards this target and the IEA commends Estonia for this.
Industry
The share of industry in TFC is continuously declining; however, potential for energy savings exists, especially in the wood, paper and food sectors; in mining; and in the construction material sector. The government has identified a savings potential of 36 GWh annually in the manufacturing sector. Energy intensity in industry decreased by 6% from 2015-17 (EC, 2019).
The EU Energy Efficiency Directive imposes a requirement for non-small and mediumsized enterprises to undertake regular energy audits. This was transposed into Estonian law in 2016 with the ESOA. Since 2017, the government supports energy audits and investments in energy efficiency in the industrial sector through the EU structural funds, with a total budget of EUR 433 million for the period 2014-20. Government support is focused on interventions that would not be realised under market conditions only, as their pay-back period would be too long. In addition, the government is also implementing non-monetary support schemes to raise awareness and improve the energy efficiency competence level of experts to assist with project implementation. Since 2017, 85 audits have been conducted, with a target of 270 audits by 2020. However, there is no obligation to implement the energy efficiency measures following an energy audit.
The Environmental Investment Centre manages the funding for energy and resource audits and energy efficiency investments in the industry sector. Thirty investment projects recommended by the audits are ongoing, a large proportion in the wood industry. Funding for investments is made available separately for small and large projects. Small projects need to achieve at least a 1% energy efficiency or resource use improvement and can apply for up to EUR 100 000 of support. Large improvement projects need to achieve at least a 5% improvement in their energy use and can apply for a minimum of EUR 201 000 and up to EUR 2 million of funding.
The government is also offering tax exemptions for industry. Industry is only taxed on distributed profits, but not on those that they retain. This has stimulated the willingness of businesses to reinvest their profits, including on more energy-efficient machinery and equipment and the renovation of existing buildings, or the construction of new ones.
In addition, energy intensive companies in the manufacturing or IT sector can apply for a 90% reduction of the excise tax on electricity from 2019 onwards if they implement an ISO 50001 energy management system. This measure could concern up to 240 companies. The Tax and Customs Board has published the implementation guidelines for the scheme. Among them is a requirement that the energy management
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system covers the electricity consumption of the energy company and not just of one subsidiary. It will be important that the tax exemption only be provided after the ISO 50001 certification has been obtained. Alternatively, the government can consider offering an increasing proportion of tax reduction throughout the process of complying with the ISO 50001 requirements. In both cases, strict monitoring and verification that the measures are indeed implemented and producing savings need to be ensured to verify that the desired outcomes are achieved.
The market for energy service companies (ESCOs) is not yet well developed in Estonia. ESCO solutions have penetrated mainly among large commercial and industrial energy users, notably in the food production industry. The small commercial, public and residential sectors are much slower in taking up ESCO services (MEAC, 2017b). The government is actively working towards changing this in light of the many benefits ESCOs can offer in realising the energy efficiency potential in Estonia. In 2018, the Ministry of Economic Affairs and Communications organised a roundtable to discuss how the government could better support this nascent sector and what type of barriers need to be overcome. Barriers identified include high transaction costs and the complexity of establishing a mutually accepted baseline for contracts. The lack of a sufficient number of trained professionals is another barrier for the development of the ESCO market.
Transport
The share of transport in TFC rose from 22% in 2000 to 28% in 2017, primarily driven by strong economic growth that propelled the ownership of private cars and encouraged freight transport by road, and urban sprawl. Estonia is among the top ten most transport energy intensive IEA countries (defined as transport energy use per GDP PPP; see Chapter 7). Vehicles on local roads and streets outside of urban areas account for over 40% of total vehicle fuel consumption (BSERC, 2017).
The NDPES 2030 sets a target for 2030 that the fuel consumption of vehicles should not exceed the level of 2012 (8.3 TWh) and that the energy demand from individual passenger cars should not be more than 5% higher than in 2010, measured in passenger kilometres (km). In 2010, demand was 6 100 passenger-km. This would imply either a reduced demand for travel through, for example, increased teleworking, or a modal shift. The NDPES 2030 does indeed aim that 25% of the working population will use public transport to travel to and from work (MEAC, 2017b).
The targets were set on the basis of extensive background studies undertaken for the preparation of the NDPES 2030. The studies assessed the energy savings potential of 24 potential measures and concluded that if all potential measures were implemented, up to 40% of transport energy consumption could be saved compared to the base scenario. Around 20% of the potential savings would come from more efficient conventional combustion engine vehicles and hybrid electric cars. However, the contribution of electric vehicles would remain small despite the progress made with the government support programme (BSERC, 2017; MEAC, 2017b). The remaining share would be achieved through a combination of:
taxation of cars and car use
expanding public transport infrastructure
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