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Focus on 2019: the first auction and news about the offshore
2018-12-19

Next year, the implementation of the new National Energy Independence Strategy will be fully operational. This means that we will participate in auctions for the renewable energy project developers, as well as establishing further auction timetables and revealing first news about the development of offshore wind energy in the Baltic sea.

In four years – 300 MW of wind energy

Earlier this month, the Government approved a plan for the implementation of the National Energy Independence Strategy prepared by the Ministry of Energy. This document sets out the tasks and the means to achieve these goals by 2022.

According to a Ministry’s press release, among the key goals set out in this plan is the reduction of electricity imports and an increase in local electricity production. It is expected that electricity imports will be reduced by almost one-third by 2022. This goal will be pursued through the development of renewable energy – according to the plan, by 2022 there will be about 300 MW of newly installed wind capacityand about 200 MW of solar power plants in Lithuania. The exact distribution of these renewable energy technologies will depend on the auction results.

In order to promote innovation, the Implementation plan sets the goal of creating a favourable and friendly legal environment for energy innovators, and will provide incentives for the development of energy start-ups by 2022.

While waiting for the auctions, we will monitor the results in other countries

At present, amendments to the Law on Renewable Resources for the new auction model are awaiting the approval of the Parliament. Following their adoption, the first auction for 0.3 TWh can be expected to take place in the third quarter of the following year. 

While waiting for the auctions in Lithuania, we will monitor the results from other countries. At the beginning of December, a mixed auction for 165 MW of power installations was held in Denmark. The developers of projects for solar and onshore wind farms were allowed to bid in the auction. The number of bids received from investors substantially exceeded the quantity of the megawatts to be auctioned – in total, there were 17 projects with a combined capacity of 540 MW and a budget of 34 million euros. Among the six winners were 3 wind and 3 solar projects, with a total capacity of 104 MW. The average subsidy distributed during the auction was 0.31 euro cents per kilowatt-hour.

In very similar mixed wind-solar auction held in November in Poland, 23 offshore wind farm developers submitted 31 bids for outputs of 1 GW. Their prices ranged from 37 to 50 EUR/MWh. “This is a highly competitive price. It is lower than those recorded recently in the auctions in Germany and France. Such a low price also means that the Polish government has used up just 55% of its budget that was planned for the auction. This also means that, for an additional 850 MW auction, it will be possible to provide a budget of nearly 2 billion euros,” said Giles Dickson, CEO of WindEurope.

It is important to look at the results of the auction held in neighbouring Poland, as similar results can be expected in Lithuania. However, the results will greatly depend on the auction model itself. This is currently being finalised by the Seimas, and by this summer the necessary legislation for implementation of new auction model must be prepared.

News on offshore development in the Baltic Sea

Very recently, the Ministry of Energy announced an public procurement to conduct a study on the development of renewable energy in Lithuanian territorial sea or exclusive economic zone. The study should establish zones in the Baltic Sea, where it will be possible to install and develop 200, 300, 400, 500, 600, 700, 1000, 1300, 1600 and 3350 MW power parks.

The intermediate study should be completed by 15th of February of the following year, and finalised by 1st of May. This will allow to return to the debate on the development of offshore wind energy, which was abandoned in 2017, when the amendments to the Law on Renewable Resources came into force establishing an exclusive right only to the Government to study the energy resources of the sea.

Price of electricity on the electricity market will be around 53 EUR/MWh

This year was marked by rising electricity prices. In August and September, the price in the Nord Pool power market in the Lithuanian price zone exceeded 59 EUR/MWh.

The electricity price was affected by fluctuation in local production, including wind enrgy, as well as by the repairs of the Lithuanian-Swedish NordBalt connector, which took several months and, of course, by global factors. Among them were the rising cost of raw materials and emission allowances in the EU emissions trading system (EU ETS), prevailing meteorological conditions, shortage of water in the hydropower reservoirs of the Nordic countries.

Global factors will continue to affect the electricity prices next year. If they push the prices up, at least at the beginning of the year, the growth should be halted by wind power generation in wind parks, asthe first months of the year usually tend to be windy. Therefore, as well as taking into account the forecasted systemic price of electricity for 2019, we can predict that the price of electricity in the Lithuanian zone for the next year will range from 50-55 EUR/MWh.

However, the price of electricity in the power market may be influenced by the commissioning of the Belorussian Astravyets Nuclear Power Plant, if it is launched next year, as the Belarusian government has planned. In such a case, the provisions of the recently adopted Law recognising the threat of the Astravyets Nuclear Power Plant to the national security of the Republic of Lithuania would come into force, and accordingly, the energy flows between Lithuania and Belarus would be equal to 0 MW. This could in turn raise the price of electricity in the power exchange market.