A postcard from… Estonia

As Europe accelerates its energy transition, energy storage is emerging as a critical piece of the puzzle. These interviews explore energy storage business cases across the EU, demonstrating that these projects are viable, profitable and essential to achieving Europe’s energy security and climate goals. These success stories highlight the importance of an EU-wide Action Plan on Energy Storage. to create a supportive framework to allow energy storage to thrive and scale.
This interview with Mr Peep Siitam, CEO and founder of Zero Terrain takes us to the Paldiski peninsula in Estonia.
Hi Peep, thank you for accepting this interview. Could you give our readers an overview of your energy storage project in the Paldiski peninsula?
Zero Terrain’s Paldiski PHS project Energiasalv is Estonia’s first large-scale energy storage facility. It features a 500 MW underground plant with a capacity of 6 GWh, expandable to 15 GWh. Zero Terrain is based on the same idea as traditional PHS solutions. Still, with a critical distinction: it creates the necessary height variance and storage underground, eliminating the need for altitude differences on the terrain. Zero Terrain is the solution to the urgent need for a 100% renewable energy system. We provide affordable and renewable energy with minimal environmental impact, ensuring security against supply disruptions and crises.
Why is this project outstanding?
Zero Terrain’s project stands out due to its innovative underground pumped-hydro energy storage (PHS) technology, which enables large-scale energy storage even in flat terrains. This approach minimises environmental impact and land use. Moreover, it uses a small amount of critical minerals.
The Paldiski facility, with a capacity of 500 MW and 6 GWh, is Estonia’s first long-duration energy storage project. Zero Terrain projects can be developed as an entire infrastructure that enables the interaction of several sectors and thus strengthens companies’ competitiveness. Our modular design allows for higher storage capacity at a lower cost than any existing alternative.
What are the main regulatory challenges you’ve faced in your current market, and how have you addressed them?
The main regulatory challenges include navigating complex and lengthy permitting processes, obtaining approvals for innovative underground infrastructure and obtaining sufficient revenue certainty.
The latter has been the most challenging aspect due to the EU’s current market set-up, which was designed to ensure efficient usage of existing plants with marginal production costs, but that is no longer adequate for the age of renewables and storage. The uncertainty in revenues for large-scale, long-duration energy storage carries over to the private off-take market, where no market player is willing to take any market risk beyond 10 years, which is insufficient for an asset such as PHS.
Due to the lack of revenue risk reduction in the private market, the project promoters have proposed a Cap and Floor to the Government of Estonia or a one-sided contract-for-difference for gross profit. The negotiations have been going on for more than 1.5 years, but so far, no decision by the Government of Estonia
The lack of a state guarantee hinders the project’s execution. We are currently supplying all the necessary information to help state policymakers determine appropriate support mechanisms for long-duration energy storage, which plays a crucial role in attracting investments in the project.
Looking at the bright side, instead, what from a regulatory point of view do you think helped the project (if any)?
Recognising the Paldiski PHS plant as an EU Project of Common Interest underscores its significance in enhancing energy security and integrating renewable energy sources.
Zero Terrain has collaborated closely with governmental bodies to address these, as exemplified by the Memorandum of Understanding with the Estonian Ministry of Climate. This partnership facilitated aligning project goals with national energy policies and streamlined the regulatory pathway.
What measure for energy storage should EU policymakers prioritise – if you could only pick one?
EU policymakers should prioritise a supportive regulatory framework for large-scale energy storage projects. This simplifies and standardises approval processes to reduce delays and enable timely deployment. It also ensures market access and fair compensation for the critical services provided by energy storage systems, such as frequency regulation and renewable energy integration. Additionally, targeted financial incentives can lower upfront costs and reduce investment risks in innovative storage technologies.
A cohesive regulatory approach will accelerate the deployment of energy storage, enhance grid resilience, and support the transition to a renewable energy future.
- Find here more information on Zero Terrain
- Find here our Call for an Action Plan
- Find here our previous postcard from Germany
