Evaluation of investments profitability in conventional power generation sector in Estonia

This paper presents an evaluation of investments profitability in the conventional power generation sector in Estonia under the conditions of liberalized electricity market and European energy and climate policy. Main economic and technical data of the largest new conventional power plant in Estonia were analyzed to study this issue. The results of the study are based on the theoretical analysis using the Net Present Value and the Internal Rate of Return methodology. Additionally, the Levelized Cost of Electricity method was applied to determine the price of electricity that would ensure breakeven to the investors. The results show that it is reasonable to construct new conventional power plants in Estonia only in a complex of shale oil production where the retort gas received as a secondary product is used as a fuel in power plants.