The first offshore wind farms in the Baltic Sea, due to come on stream by 2028, are expected to meet half of Lithuania’s electricity needs and ensure greater energy independence. With the government’s approval of the tender conditions for a wind farm in the Baltic Sea, wind energy developers are proposing to maximise the benefits – opening up opportunities for more investment and faster economic growth – but there is growing uncertainty about whether this will happen.
The offshore wind farm to be developed without state support will be put out to tender as early as 30 March – just 2 weeks after the tender conditions were approved, and subject to the approval of the State Energy Regulatory Council (SERC). There are concerns that potential bidders will not have time to familiarise themselves with the published terms and conditions and to prepare their participation in the tender. This could significantly reduce the number of bidders and have a decisive impact on the poor competition and the financial return for the State.
Lithuania will develop its own practice
“Based on the best practice of countries that have already developed offshore wind farms, information on such tenders is published a year in advance, or at least half a year before. It takes more than 60 calendar days just to prepare the documents and bids for the tender, especially for foreign companies where decisions are approved by several levels of governing bodies. And then there are business plans and economic assumptions. The Association’s proposal was to postpone the deadline for the tender until at least 30 June, once the requirements for developers have been approved and published”, comments Linas Sabaliauskas, representative of the Lithuanian Wind Energy Association (LWEA), regretting that the opinion of the market players has not been taken into account.
He believes that there is a high level of interest among wind energy developers in the offshore wind park, but that the conditions and deadlines of the tender make it less attractive to participate in it. There is a risk that the tender will attract significantly fewer market participants, which will in turn attract less investment for the national budget.
“Lithuania should seize the opportunity to create auction conditions and deadlines that maximise competition between bidders and allow the country to generate more revenue – the bidder with the best financial offer and the highest project development fee to the state budget will win the tender. Being extremely pressed for time and having incomplete data, we run the risk of seeing a small number of bidders in the auction, which could lead to Lithuania giving up part of its territory for the development of the marine park at an inadequate price,” says Sabaliauskas.
Large foreign companies are looking not only at Lithuania’s maritime territory, but also at the entire Baltic Sea region as an exceptional area for investment. Such interest is very beneficial for Lithuania and should be exploited to the maximum benefit of the country.
The initial proposal for the development of the park has been set at a minimum of €5 million, and the investment in the offshore wind park is expected to be well over a billion. In addition, developers will also have to support the local communities of the municipalities bordering the park’s offshore area by contributing at least €5 million to environmental protection.
Billions of dollars of investment need to be prepared
According to the LVEA, which is in its nineteenth year of operation in the Lithuanian wind energy sector, the presence of favourable natural conditions and the region’s potential are not enough to make a decision to participate in a tender of this scale.
“In order to attract strong bidders and to have strong competition, all possible clarity is needed. This includes clear terms and conditions, a complete legal framework, and sufficient time to study and prepare for the tender. Business will invest billions in an offshore wind farm – investments of this magnitude are not made in haste. Moreover, there are also obligations for bidders – fines will be imposed if a successful project is not implemented on time. This encourages businesses to think about the risks and reconsider their participation in the tender or to offer a lower price”, said LVEA representative Edgaras Maladauskas.
He notes that the winner of the tender for the marine park will have to carry out surveys of the offshore area and other actions necessary for the development and construction of the infrastructure, as well as prepare an environmental impact assessment, at its own expense, without state support.
“In order to prepare a competitive bid, developers would need to obtain information and preliminary bids from other legal entities: suppliers of wind farms, cables, substations and other related engineering infrastructure, shipping and construction companies, financial institutions, etc. Multinational energy companies need at least 5 months to submit a proposal of this size and complexity, which should be the minimum timeframe foreseen after the announcement of the auction. All this would encourage developers to consider and participate more actively in the tender”, says Mr Maladauskas.
Opportunity for economic growth
The development of an offshore wind farm in the Baltic Sea not only means greater energy independence from fossil fuels, but also opportunities for economic growth.
“Attracting investment inevitably creates new jobs, develops public infrastructure and improves quality of life. The financial benefits will be felt not only by the coastal regions and local communities, which will also benefit from payments and environmental protection, but also by Lithuania as a whole. Renewable energy alone will enable the country to meet about half of its electricity needs, which are growing at an average annual rate of 6%. As the electricity consumption curve rises, Lithuania, like the rest of Europe, must inevitably take a green course,” says Sabaliauskas.
The first two offshore wind farms are planned to have a capacity of 700 megawatts (MW) each, generating 3 terawatt hours (TWh) of electricity per year. Meanwhile, Lithuania’s electricity demand last year was 12 TWh. The target is for Lithuania to generate all the electricity it needs by 2030.