Vulnerability of Estonian electricity system: economic impact assessment of a paramilitary conflict in Ida-Virumaa

Abstract

The intention of the thesis is to look at the functioning of the Estonian electricity system in a situation where a paramilitary conflict has forced the two biggest power stations in Estonia into a production halt. The hypothetical scenario that the thesis anticipates is developed on an assumption borrowed from literature on critical infrastructure: a government has to assure the functioning of important infrastructure object in the occurrence of a worst case scenario. Given the current unstable situation in international relations and considering opinions that the Russian government could test NATO’s integrity by inflicting a military confrontation in the Baltic States, the scenario which anticipates a regional military insurgence taking place in the eastern region of Estonia remains plausible. The goal is to assess the vulnerability of the Estonian electricity system with a purpose-built model which links the measure of vulnerability to economic losses of a country. The author builds on the general model developed by Edward Christie which intended to measure the economic losses in the case of a gas supply disruption. After making some critical amendments to Christie’s model, the author establishes a concrete function to calculate the economic losses in the occurrence of an electricity supply cut. After testing the model in the case of Estonia, the thesis concludes that due to the high level of interconnectivity and sufficient domestic production options, the losses for Estonian economy deriving from the supply cut are extremely marginal. Thus, the vulnerability of Estonian electricity system is low and can supply end-users even in the occurrence of the hypothetical event. The author suggests further work on the developed model by possibly adding the dimensions of electricity market prices, seasonal coefficients and most importantly, a refined relationship between the consumption and available supply capacity.