100 percent of electricity from renewable sources in 2050 – this is the kind of an ambitious goal that Lithuania is moving towards. It may seem that there is still a great deal of time, but there are also a number of questions that need to be answered in order to streamline the necessary processes. And these questions are not the easiest.
The first technology-neutral auction for developers of renewable energy projects ended in a good teaser for both public authorities and businesses. The auction was won by the company that is planning the subsidy-free wind park and submitted a zero bid on top of the market price.
Such a result basically means several things. Firstly, technology is becoming more efficient, so there are more and more opportunities to ensure a competitive and attractive price of clean electricity for consumers. Secondly, after a longer investment break, the market was hungry and the competition among developers of renewable energy projects operating in Lithuania was quite high.
This situation has led the authorities to consider changes to the auctioning procedure and the possibility of a negative bids in the auctions. Representatives of the National Energy Regulatory Council mentioned this some time ago.
However, the idea has received a critical response from Lithuanian wind power association, as well as WindEurope, an organization that unites both developers and manufacturers from wind energy sector in Europe. As Giles Dickson, head of WindEurope, said, a negative bids to the market price would actually mean that the authorities would ask businesses to pay for the opportunity to contribute to the European green goals set by governments.
The good news for the country, which is pursuing an ambitious target of 100 percent renewable electricity, is that some developers are already openly talking about plans to build wind parks on a commercial basis without participating in auctions. Truth be told, the success of such projects will be affected by the market of bilateral Power Purchase Agreements (PPAs), which is just beginning to take shape in Lithuania.
Bilateral PPAs would allow companies consuming large amounts of electricity to obtain it directly from generating parks. This practice is popular abroad and has been used for some time by global companies such as Facebook, Amazon, BMW, Honda, Lego, Microsoft, IKEA, Nestle, McDonald’s and many others. By signing a long-term 5-10 year agreement with green electricity producers, they ensure a stable green electricity price, thus being protected against its surges in the market.
Such opportunities are yet to become available in Lithuania. However, as electricity prices rise for consumers and wind power production prices fall, it is likely that industry companies will become increasingly interested in reducing electricity bills. The latest changes of the legislation regulating bilateral Power Purchase Agreements, which remove administrative barriers, are currently being finalized by decision-makers, so we might get to see new opportunities a little later this year.
The third, but no less important issue is the development of wind energy in the Baltic Sea. The planning and preparation work of the responsible authorities is closely monitored by international companies. Last month, their representatives listened to the latest knowledge and insights of local experts at the WindMission Lithuania 2020 conference held in Vilnius.
Some time ago, it was announced that a total of 3.35 GW of wind power plants could be installed in the 62,000 ha of the Baltic Sea area belonging to Lithuania, located 30-40 kilometres from the shore of Šventoji. The first auction could take place in 2022-2023, during which 700 MW are planned to be distributed. Of course, in order to ensure the efficient development of offshore wind energy, it is important to regulate the legal framework.
It is important for foreign investors to have the opportunity to participate in the auction and for the development model to set out the key points clearly. These include the requirements for auctioneers, information on the process of connecting to the electricity grid, information on who carries out marine research (environmental impact, wind speed, seabed, etc.), and so on. And in order to attract turbine or individual component manufacturers, a long-term development perspective would be needed, i.e., a three-year auction schedule, just like the one that has been prepared for onshore wind energy development.
Author of the review – Aistis Radavičius, Director of Lithuanian Wind Power Association