The Lithuanian energy sector, similarly to the European Union’s, faces the challenging task of finding effective and competitive way to transition to clean energy, while at the same time ensuring a secure energy supply. Energy efficiency, renewable energy, and prosumers are first priorities.
This clearly means a shift towards new models of energy productions and new business models influenced by innovation, such as new information technology, big data processing possibilities, and blockchain technology.
In 2017, the Lithuanian Ministry of Energy drafted a National Energy Independence Strategy (the “Strategy”) which was approved by the Government on November 29th, 2017 and then submitted to Parliament for further consideration. Therefore, the most relevant issue for the first part of 2018 in the energy sector is adopting the Strategy, which provides the country’s energy targets and guidelines for implementation by 2030, and outlines the trends of energy development by 2050.
The draft Strategy sets out four key elements of Lithuania’s energy policy: (i) energy security, (ii) the development of renewable energy, (iii) competitiveness, and (iv) innovation.
Besides the infrastructure projects ensuring energy security (i.e., the synchronization of power systems with Continental Europe (by 2025) and the construction of a gas pipeline between Lithuania and Poland (by 2021)), the draft Strategy identifies the development of reliable and competitive local energy production in order to reduce the country’s dependence on imported electricity as a goal. Taking into account the lack of local primary energy sources and dependency on fossil fuel imports, development of alternative energy production is an underlying target for the energy sector of Lithuania.
In this regard, increasing energy production from renewable resources is one of the key targets of the draft Strategy. It is expected that consumption of energy produced from renewable sources will account for up to (i) 30% by 2020, (ii) 45% by 2030, and (iii) as much as 80% after 2050. The draft Strategy provides that wind energy should make up the largest share of electricity generated from renewable resources – no less than 55% in 2030 and 65% in 2050.
In 2016, approximately 17% of the consumed electricity was produced from renewable energy sources. Wind power generation jumped in recent years due to the 500 MW support quota (with feed-in tariff allocated via tender procedure) provided for wind power plants. However, at the moment, there is no free support quota left. Therefore the energy companies and renewable project developers are looking forward to new guidelines.
If the final Strategy will retain the same amounts, the total installed capacity will increase by an additional 250 MW (and in total up to 770 MW) by 2020, with increases scheduled to continue until 2050.
Only onshore wind power generation capacities have been developed in Lithuania so far, and the first part of the projected capacity increase will be dedicated to them. However, offshore possibilities have recently become quite active due to several legislative amendments adopted by Parliament on July 11th, 2017, which provide a rough plan for offshore wind project development. First, the Government will have to approve the rules for research to identify appropriate offshore wind power plant locations in order to organize tenders. Second, during the next three years, the institution authorized by the Government shall perform the respective research works. Finally, by February 1, 2021, the Government will have to decide: (i) on the parts of the sea where development and operation of the power plants will be allowed; (ii) possible capacities to be installed and (iii) approve rules for the procedure for tenders and issuance of permits.
In addition to these plans, the Government is also seeking to boost the development of renewable energy by encouraging energy consumers to become energy prosumers — i.e., to generate their own power (mainly solar based). It is forecast that the number of energy prosumers will increase to 34,000 by 2020 and more than 500,000 by 2030.
The adoption of the Strategy is still pending. However, if the approved Strategy keeps the projected numbers, renewable power generation perspectives in Lithuania will become very promising.
By Dovile Greblikiene, Partner, Ellex Valiunas