Skip to main content
Part of complete coverage on

Estonia's dirty energy drive for self-sufficiency

By Isa Soares, CNN
updated 2:03 PM EST, Thu December 5, 2013
STORY HIGHLIGHTS
  • Estonia is using oil shale to generate energy. Oil shale is found in rocks just 30 metres underground
  • Oil shale industry contributes approximately 4% of Estonia's GDP. 90% of the power produced in Estonia is made of oil shale.
  • 18 million tonnes are mined of oil shale every year-that in Auvere in North-Eastern Estonia.

Editor's note: Isa Soares is a reporter for Marketplace Europe. Follow her on Twitter.

(CNN) -- The drive from Tallinn to Auvere in North-Eastern Estonia was long and dark. The winter sun had yet to rise and we saw little of the outside world from our misty car windows.

But as we arrived at Narva, Estonia's border with Russia, a picture began to form of the economic strength of this region. In front of us, swaths of land were being bitten into and scooped up by colossal Soviet diggers.

That's because underneath this grey-brown land is a soft-brown sedimentary rock that is rich in oil.

But unlike shale oil and shale gas which is drilled and often associated with fracking, oil shale is found in rocks just 30 metres underground.

Read more: General Electric exec to Europe: Open your borders, create jobs

The rock is blasted and crushed, before releasing oil when heated. It will then be burned to create electric power or processed even further to produce liquid fuel.

They have so much of the stuff here -- 18 million tonnes are mined here every year -- that they are completely energy independent.

Eesti Energia's CEO, Sandor Liive, tells me that around 90% of the power produced in Estonia is made of oil shale and they even have enough to provide for their neighbors.

Read more: How saffron could save Greek farmers

"Our production of electricity in Estonia is 11 terrawatts. Estonia consumes less than eight terrawats, so we are a very strong electricity exporter today."

Estonia's economic transformation

But this is not a new industry for Estonia.

How Estonia supports wealthier countries

Read more: Driverless cars: From Hollywood to real world

Doing business in Estonia

They have been squeezing rocks here for a century and, now that they're making money, companies such as Eesti Energia are investing heavily on new plants, Liive told me.

"Commercial utilization of oil shale started nearly 100 years ago. Estonia got our independence in 1918 and actually Estonia independence is very much close links with the oil shale industry, because in 1924 we already had oil plants in operation, and even gasoline was produced," he said.

"As you can see from here, during last three years, we have invested one billion euros here. So this is not only 100 years of history but this is actually modernization and continuous development of technology and new investments."

Read more: Spain's booming Rioja economy

During our visit here, one of their proudest achievements -- the Enefit 280 oil shale plant, which will double output of kerogen oil -- was already taking shape.

But talk of new plants, more open-cast pits and more shifting of land makes environmentalist cringe. Valdur Lahtvee is one of those calling for Estonia to ditch this primitive way of mining, arguing that there are enough renewable resources in the country to have 100% power supply based on renewables.

Watch more: Maastricht: The birthplace of the euro

He should know -- he used to work at Eesti Energia. Now, he's the Director of Climate and Energy Programme at Stockholm's Environment Institute.

"Oil shale is the dirtiest fuel used today in European Union. The external cost of the oil shale power is 18 euro cents, coal is about is 10 cents per kw hour, wind is 0.4 euro cents -- that gives you a picture of the ecological footprint of the oil shale used," he told me.

Watch more: A history of defaulting on debt

"Oil shale industry contributes approximately 4% of Estonia's GDP, but, at the same time, total national emissions it provides 90% of the hazardous waste, about 80% of the major air emissions and 70/80% of the water used. So, it has a really huge impact to the environment."

It's a charge that I put to Eesti Energia's CEO who counter-argued by telling me that for the land they shift is replanted with trees.

One thing is very clear, the environmental impact is very predictable. Off course, we mine, we have some mining impact -- we move the land, but we put it back and we plant a lot of trees. I think in [the] energy business anyway, and in any industry, [there is] an environmental impact, even in the wind turbine has an environmental impact."

He continued: "Yes, they don't emit Co2 in the place where you produce electricity but you know a lot of environmental impact has been done getting metals, transporting it and building it. I think it's very important in the oil shale case that you know what you get, you know that this environmental impact is very predictable."

Read more: Bumpy road ahead for London cabbie business

The problem is Estonia won't want to let go of its oil shale dependence, because it's competitive. It's cheaper than Russian gas, onshore and offshore wind. On top of that, it would cost companies too much to change their Soviet infrastructure.

And then there is political pressure, Lahtvee told me. "There is biomass, there is a nice wind condition, we are a coastal country, by the Baltic sea so there is a lot of wind. But mainly the question is we have inherited these power production systems, these power plants; it's much more costly to replace."

Lahtvee pointed to political pressure, too. "Elections are every four years, and the voters will ask what will happen with their electricity or their energy costs. Politicians always try to answer that "we keep the power prices down." Therefore, the system stays without major changes."

But these advantages may not last. Estonia's oil shale gamble assumes that oil prices will remain high, and that the price they pay the European Union for carbon emissions remains low.

This may be the case (carbon is hovering around four euros a tonne). But some in the European parliament are calling for prices to be pushed back up as much as fifty euros a tonne, a price that could be damaging for a business like this one which has built itself mostly on shale.

While Liive may be worried about oil prices and emission costs, he tells me it's not enough to make him lose sleep.

So, for the time being, Eesti Energia is powering on. Its international arm Enefit is betting on shale selling beyond its borders, with a plant in Jordan and recently bought land in the U.S. state of Utah.

A risky strategy. But if shale does stay strong, Estonia could win big.

ADVERTISEMENT
Part of complete coverage on
Marketplace Europe
updated 11:31 AM EST, Thu January 16, 2014
Marketplace Europe visits Latvia to see how the Baltic country has made its transition to the Euro from the Lat.
updated 11:30 AM EST, Thu January 16, 2014
CNN's Nina Dos Santos visits Latvia to speak to the country's outgoing Prime Minister and the prospects for the eurozone's 18th member.
updated 11:40 AM EST, Thu January 2, 2014
Malta is the gateway to Europe and on the frontline of the immigration flows. Isa Soares reports from a detention center on the Mediterranean island.
updated 11:41 AM EST, Thu January 2, 2014
CNN's Isa Soares speaks with people on the streets of Valletta who say their country can't cope with more migrants from Africa and the Middle East.
updated 5:06 AM EST, Thu January 9, 2014
Malta cannot afford to continue supporting migrants from war-torn countries in its over-crowded detention camps, the country's foreign minister has told CNN.
updated 4:23 PM EST, Thu December 26, 2013
Slow recoveries, bailouts, and youth unemployment. Richard Quest speaks to Europe's top CEOs about the issues of 2013.
updated 4:14 PM EST, Thu December 26, 2013
CNN's Richard Quest speaks to economist Bob Parker about defining moments of 2013 and about what to expect in 2014.
updated 1:15 PM EST, Thu December 5, 2013
Estonia is setting the pace for other European nations with a thriving economy and its tech industry, according to the Baltic nation's leader.
updated 2:03 PM EST, Thu December 5, 2013
The Baltic nation of Estonia is developing its oil shale energy reserves in a bid to become energy self-sufficient.
updated 4:25 AM EST, Fri November 29, 2013
Europe must stop being nationalistic if it wants to help a lost generation of workers, the regional boss of U.S. conglomerate General Electric says.
updated 12:06 PM EST, Thu November 14, 2013
Peer at the windows and you'll spot big colorful chairs, plastic plants and a huge bed, but this is no department store.
updated 5:06 AM EST, Tue November 19, 2013
There once was a time, many years ago, when the sounds of bagpipes struck fear into the stomachs of Englishmen.
updated 6:16 AM EST, Mon November 11, 2013
Greece is on the way to economic recovery as investor faith returns to the recession-ridden eurozone nation, an executive at Greece's largest bank has told CNN.
updated 7:00 AM EST, Fri November 8, 2013
Could Greece's famous spice help the country's farmers through a four-year long economic crisis.
updated 9:07 AM EDT, Fri November 1, 2013
One of the masterminds behind the euro says Europe would have suffered a far worse fate if the single currency had never been created.
updated 1:41 PM EDT, Thu October 31, 2013
Nina Dos Santos visits the Dutch city where the European treaty carrying the city's name came into force 20 years ago.
updated 11:10 AM EDT, Fri October 25, 2013
As Spain continues its drive to slash budgets and cut spending, one of the nation's favorite pastimes is under threat as ministers look for ways to boost productivity.
updated 12:17 PM EDT, Thu October 24, 2013
The high commissioner of Brand Spain talks about getting the country back on its fee and attracting business.
ADVERTISEMENT