VILNIUS - Lithuania is staring down the barrel of an energy crisis. The fact is the previous government did little to fix the problem, and the country now faces the prospect of being left in the long feared hands of Russian gas company Gazprom for electricity and heating.
Russia has been licking its chops thinking of the profits it will make while political infighting and bureaucracy saw Lithuania’s energy future go nowhere.
The United States jumped in and gifted the country with 2 million litas (580,000 euros) to fund a liquid natural gas import terminal feasibility study, but even this operation has been blundered by suspected corruption among officials. It is currently under investigation.
Brussels has also been asking when Lithuania will catch up to EU targets for renewable energy.
The next three years are going to be tough for the people and industry of Lithuania – especially in the wake of the financial crisis that is slowly dawning on the world.
In November the two largest electricity producers in Lithuania applied to the government to raise the price of electricity 18 percent. This hike still falls far short of the price rises to come after 2009, when experts expect costs to double.
Lithuania is currently energy independent because of the Ignalina Nuclear Power Plant (INPP), but won’t be after 2009 when the country will have to shut down the plant as specified in their accession agreement with the European Union in 2004.
AFTER THE FACT
Following the shutdown of INPP, Lithuania will face an energy deficit forcing it to look at using gas bought from Russia, which is set at abnormally high prices.
“Gas as a prime resource will go to 45 percent – this gas will come from Russia and there could be technical supply problems or political problems,” Voldemaras Katkus, a leading expert on energy issues in Lithuania told The Baltic Times.
“Latvian studies showed that with gas there might only be enough for households, but not enough for industry,” he added, referring to the potential problems in supply from Russia.
Currently Lithuania is considered an “energy island” because it is only connected to Russian energy grids. Plans to connect Lithuania to central and northern Europe have been dogged by inter-country bickering and electioneering.
The simplest solution is an underwater energy link between one of the Baltic States and Sweden. On numerous occasions, former Prime Minister Gediminas Kirkilas claimed that Lithuania had secured the rights to host the grounding of the energy cable, while the Latvian government announced that the issue was not settled.
This political tug of war prompted the former Swedish ambassador to Lithuania to give a stinging comment in the final hours of her tenure in the country. She demanded unity on the Baltic side of the project and accused them of “fighting like two young boys in a sand box.”
The Swedish link should be completed by 2012.
Recently the European Union released a stimulus package aimed at taking Lithuania out of the financial crisis.
5 billion euros will be devoted to energy security in the union – most of this will go to the Baltic States.
“This is very good news to Lithuania. We recommend that countries earmark significant resources for energy interconnections, and this has a direct effect on the interests of Lithuania,” EU Budget Commissioner Dalia Grybauskaite said.
Katkus thinks this is very important for Lithuania.
“Through the European network we can get about 10 percent of our energy. The ideal situation would be to get connected to Europe and Sweden [and not use Russia].”
NEW POWERPLANTS
The Gediminas Kirkilas government had been staking their hopes on the EU granting their request to violate their accession agreement and keep INPP open longer. Their hopes were dashed, however, when the European Commission categorically said it wouldn’t happen – the plant will be shut down.
The new power plant, which would take Lithuania out of the mire, is forecast to be ready by 2020. The capacity of the plant is still unknown though, because neighbors Poland and Latvia have changed stance on the plant and whether they need it for themselves or not.
To supplement the nuclear power plant, the gas import facility will be built. This is also intended to give Lithuania a degree of freedom during the gap years when there will be an internal energy deficit. It should be ready by 2014.
“The government is moving in the right direction for the time being. We need the LNG plant in Lithuania or in Riga so we can get gas from all the world,” Katkus said.
He thinks Lithuania is a victim of politics.
“We do not consider gas as an economic commodity – it is a political commodity. We pay more for gas than Germany and we are much closer to the border with Russia than they are,” Katkus said.
“All of the extra margin that we pay that is higher than other countries, we consider the political margin,” he said.
RENEWING INTEREST
Brussels is pushing renewable energy as an alternative to traditional electricity generation. About 8.7 percent of Lithuania’s energy currently comes from renewable sources, but the EU wants this to increase to 23 percent.
“We have ambitious targets. We expect to reach 20 percent [renewable energy] by 2020 with 10 percent of this being electricity,” Evaldas Piesliakas, head of the Energy Development division at the Ministry of Economy, told The Baltic Times.
The Lithuanian government is planning on mimicing Baltic neighbor Denmark, which generates 20 percent of its energy with wind turbines.
“We have plans to build 200 megawatts of renewable energy by 2010 in wind turbines. We are a little behind on this, but at the moment we have 54 MW and will have 140 MW soon,” Piesliakas said.
Claus Vandsoe, business manager for the Baltic region for Vestas, the world’s largest wind turbine company, thinks Lithuania, Latvia and Estonia all have large potential for wind farms.
“At the end of 2007, there were 52 MW of wind power [in Lithuania]. This could be 10 times higher. It should be done as soon as possible, but we aren’t the only player. There is financing, it’s 0the developers and politicians who need to get involved,” he said.
“It is possible [to have 200MW] by 2010, but things would have to move fast,” he said.
The Lithuanian government is following in the footsteps of other countries and putting renewable energy in the hands of the people.
Landowners with suitable sites for renewable energy sources will be able to get a large rebate to build. Up to 690,000 litas could be given for a project. After this, electricity could be sold back to society and would probably repay the initial investment after 15 years, Pieslaikis said.
Vandsoe thinks the conditions for renewable energy will be right following the shutdown of INPP.
“One of the [motivations] to build wind power is return on investment. The higher the cost of electricity, the higher the interest. With what you read and what the banks are saying, there are no signs that prices will go down.”