Promoting the development of clean energy: 11 recommendations for the ruling coalition

The three ruling parties have declared the Green Deal to be one of the country’s highest priorities, thereby clearly showing their determination to strengthen Lithuania’s energy independence. However, Lithuania, which is on the road to producing 100 percent of electricity from renewable sources, is already experiencing certain issues that, although small, may prevent it from moving quickly forward. In our appeal to the Government, we identified 11 steps that may help Lithuanians overcome these emerging challenges.

Green Course is the third priority

The parties that won the Seimas elections and signed a coalition agreement – the Homeland Union – Lithuanian Christian Democrats (Conservative Party), Liberal Movement and the Freedom Party – named the Green Course as their third priority and have vowed to strengthen Lithuania’s energy independence.

In various ways, the parties also spoke about these goals in their election programmes. For example, the Conservatives identified a broad programme of priority investments to support the economy, including through developments to create the necessary electricity generation capacity. They also discussed the development of renewable energy technologies and their use in the transport sector, agriculture, buildings, etc.

The Liberal Movement’s programme addressed the importance of reducing the country’s carbon footprint and making Lithuania a leader in terms of its green policy, involving businesses and encouraging investments in climate change mitigation solutions, as well as giving a priority to measures that do not require state subsidies. In the case of the Freedom Party, it set itself the goal of growing the energy sector in order to create a climate-neutral balance of energy resources ahead the deadlines required by international commitments, and also ensuring Lithuania’s full energy independence from its neighbouring countries.

The issues mentioned are just a few mentioned in the programmes of the parties that have formed the coalition. Nevertheless, they are a clear signal that over the next four years we can expect that the work under way to achieve the country’s strategic goals will continue.

Challenges requiring solutions

The Lithuanian Energy Independence Strategy was also approved a few years ago by the representatives of the parties that currently form the new Government. Enshrined in this strategy is the development of wind energy, which will play an important role in achieving the national goals. It is expected that by 2030, more than half of the electricity required by Lithuania will be generated in wind parks. However, a number of processes still need to be streamlined.

For example, it is necessary to review the renewable energy auction model and create a favourable investment climate, particularly after it was announced that the last auction was undersubscribed due to the lack of interest from the developers. Clearly, the developers considered the current model to be too risky and financially unattractive. This can be attributed to a variety of reasons, including the need for the auction winners to independently trade electricity in the exchange pool and bear the risks associated, in addition to covering 100 percent grid connection costs and paying for underproduction of electricity contracted in the auction.

In addition, the projects eligible to participate in the auctions cannot have permits already issued for the development of an electricity generation capacity, approved technical projects or grid connection conditions. As a result, given the relatively low market price premium that the bidders had to compete for, the risks listed above were simply too high.

11 measures to overcome the challenges

After examining the situation, the experts from the Lithuanian Wind Power Association submitted 11 written proposals to the parties forming the Government, which could help achieve a significant breakthrough in the country’s strategic goals:

1. Change the model for promoting renewable energy production to a revenue stabilisation mechanism called a Contract for Difference (CfD). The experts believe this would provide the optimal solution for both electricity consumers and energy producers, as it would protect the producers from low market prices and the consumers would be exempt from higher PSO costs when the electricity prices are high.

2. Review the highest price and the reference price calculation methodologies of the State Energy Regulatory Council and to assess whether the variables in the calculation formulas correspond to the real business environment and are appropriate. 

3. Review the requirements for the auction participants, with a focus on making them easier. 

4. Establish the requirement that only developers with a approved environmental impact assessment program may participate in the auction.

5. Establish a separate regular procedure for the promotion of electricity generation from individual wind turbines. This would facilitate the development of single wind turbine use in the distribution network.

6. Encourage Litgrid’s significant investments in the 110-330 kV electricity transmission network by expanding the onshore capacity to provide more opportunities for the development of renewable energy in the medium- and high-voltage grid.

7. Apply the PSO benefit to the purchasers of green electricity under bilateral PPAs. By providing such a benefit not only through direct purchases from the producers, but also through independent electricity suppliers, the producers of renewable energy sources would be able to reach not only industrial and large electricity consumers, but also the household market.

8. Reduce the administrative and bureaucratic barriers to the implementation of wind energy projects during environmental impact assessments and the coordination with other institutions. 

9. Review the amounts of the taxes applied for the transportation of wind power plant components on roads of state significance in Lithuania when large and/or heavy vehicles are used for such tasks.

10. Renew the dialogue with the Lithuanian Armed Forces aimed at reducing the restrictions on wind energy in airspace surveillance/radar zones.

11. Continue the work and discussions on the amendments to the Republic of Lithuania’s Renewable Energy Law that has been submitted to the Seimas, related to offshore research, the auction model, the development of an offshore electricity transmission infrastructure, permit procedures and other issues important for the development of offshore wind energy.

Author: Aistis Radavičius, Director at the Lithuanian Wind Power Association