Green Energy Development in Lithuania – Challenges and Opportunities in the Context of COVID-19

Green Energy Development in Lithuania – Challenges and Opportunities in the Context of COVID-19

Lithuania
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The ongoing COVID-19 pandemic and various related restrictive measures have created an extraordinary human, business, and legal situation in Lithuania. The Energy sector (like all others) has become subject to various restrictions and challenges, including restrictions on the movement of workers, partner liquidity issues, reduced demand for energy resources, etc. As everywhere else in Europe, Lithuanian electricity market participants have faced a significant decrease in wholesale electricity market prices. Moreover, it is already clear that COVID-19 has negatively affected the international supply chain, as the energy market participants experience disruptions and delays in the performance of contracts and project delivery. In these extraordinary circumstances, industry players (including operating power plant operators, project developers, and so on) have a reasonable expectation that the government will take the effect of the ongoing international crisis into account if developers do not bid in time in auctions or miss their project deployment deadlines.

However, despite the gloomy introduction, we are highly pleased and proud to report that even against the background of this unexpected crisis, Lithuania is maintaining its direction towards green energy. Our small and young country is among the five most ambitious countries in the European Union in terms of renewable energy targets for 2030, and it is projected that by that year, 45% of all the electricity consumed in Lithuania will be produced from renewable energy sources.

While it can be assumed that all of these are loud phrases and formal numbers in political strategies, the actual transformation of the energy sector – including the regulation and development of actual production capacity – in Lithuania is obvious. With the latest changes in regulations, Lithuania has followed the Danish, Dutch, and German examples of encouraging local electricity generation development. The Law on Electricity and the Law on Energy from Renewable Sources created the conditions for residents and local communities to manage and develop power plants using renewable resources for energy production – to produce, consume, and accumulate energy in their storage facilities and sell the energy produced. In order to encourage businesses and households to become prosumers and self-supply green electricity, procedures have been simplified and streamlined. Prosumers can currently install power plants using renewable energy sources with a capacity of up to 500 kilowatts (kW). Building power plants with a capacity of less than 30 kW requires almost no permits and the process takes up to three weeks – whereas a year ago it took up to six months. Thus, it is expected that these communities will be more and more involved in the development of small-scale renewable energy, and locals will have more opportunities to attract investments in renewable energy.

In addition, the government is also paying attention to large-scale energy generation. This Spring, the Ministry of Energy began to prepare a draft resolution for coordinating locations in the Baltic Sea where it is expedient to develop wind farms. Although legislation governing offshore power generation, permit procedures, auction rules, and many other important documents has not yet been adopted, it is expected that the first auctions for offshore wind power will be announced in 2023. The power plants should be built and start generating electricity by 2030.

Active changes are also taking place in the electricity trading market. The Parliament of Lithuania unanimously approved amendments to the Law on Electricity, meaning that the regulation of retail electricity prices for household consumers will be abandoned in stages by 2023. This means that there will be a transition from a regulated retail electricity market to one that is based on competition. Along with the abandonment of electricity price regulation for household customers, smart meters will also be introduced. Smart electricity metering systems, smart grids, and a common platform for data collection and exchange will, in the long run, make it much easier for residents to monitor and assess their electricity consumption needs and choose the most appropriate electricity supplier offer.

What does all this mean for business? In our view, these significant regulatory changes clearly indicate that local renewable energy production remains a state priority. This justifies the expectation that the transition to clean energy will accelerate over time and thus benefit all stakeholder groups – the state, consumers/communities, and business. We sincerely hope that the favorable investment conditions in the energy sector can restart and will serve to revive a stagnant economy in a sustainable way.

By Simona Oliskeviciute-Ciceniene, Partner, and Ignas Jurkynas, Associate, Cobalt Lithuania

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.