Energy expert: New power lines break up Baltic isolation

For the Baltic countries, building new cross-border power lines to other EU countries means solving the inherent systemic problem of Baltic dependence on a single source of external power supply, says Romas Švedas, Lithuanian energy expert.

A Lithuanian diplomat, former vice-minister of energy and now a university lecturer, Mr Švedas is a frequent commentator on energy issues in the national media and abroad. The NIB Newsletter asked him to share his expert opinion on projects breaking the isolation of the EU Baltic energy “island”.

In August, NIB and Lithuania’s Litgrid signed a EUR 50 million long-term loan agreement for the construction of the LitPol Link, the first ever overhead power line between the Baltic countries and the rest of the EU. The launch of the new 500-megawatt line is scheduled for late 2015.

“Isolation from the rest of the EU is the basic problem of the Baltic countries. Isolation makes virtually impossible the diversification and security of supply, as well as the implementation of the EU policies of energy market liberalisation”, says Mr Švedas.

Although the total isolation was broken when the Estlink-1 (2007) and Estlink-2 (2014) subsea cables between Estonia and Finland (see more here) began operating, the Baltic countries remain part of the old-fashioned Soviet grid locking Estonia, Latvia and Lithuania into one power ring together with Russia and Belarus.

“The new LitPol link is vitally important for Lithuania and the other two Baltic countries. So are the Estlinks and so is the future subsea link between Lithuania and Sweden, NordBalt, and what’s important to add is that all of them are of regional importance”, Mr Švedas explains.

“Only when all these planned links, including LitPol and NordBalt, are in place, we can talk about some balance between the westward capacity and eastward, which is approximately 3,000 MW.”

Importing about 70% of its electricity, mostly from Russia, Lithuania’s dependence on external energy supplies is the highest in the EU. The remaining 30% is mostly generated from natural gas, for which Lithuania fully depends on a single source, the Russian gas giant Gazprom.

“Dependence on a single source of supply is wrong economically and extremely dangerous politically. As we have all witnessed, Russia doesn’t hesitate to use its monopolistic position as political leverage to exert pressure on neighbouring countries”, says the Lithuanian expert.

“Diversifying energy supply and creating alternative energy sources is the best Lithuania can do to decrease its dependence on single-source supplies.”

The three Baltic countries have been making steps towards this diversification in the framework of the Baltic Energy Market Interconnection Plan (BEMIP) developed at the initiative of the European Commission to promote connecting Lithuania, Latvia and Estonia to wider EU energy networks.

“The EU has set a goal of eliminating energy islands within its borders by the end of 2015. I think we are on schedule, and I see no particular risks of it not being implemented on time”, Mr Švedas continues.

The interconnections will also secure the Baltic countries’ full access to the NordPool Spot power exchange of the Nordic countries.

“Power trading on the NordPool Spot exchange is transparent because the spot price depends on supply and demand, not on current political issues”, says Mr Švedas.

“We experienced quite an opaque energy trade for longer than two decades until we joined the power exchange. Participation in the power exchange is bringing a new culture and competition. Even now, before the new power links are taken into use, we see the Baltic energy companies competing, which forces prices down. Openness and competition is a great benefit for energy consumers and the economy as a whole.”

Once the interconnections are in place, the next natural step would be to synchronise the Baltic power systems with the European continental network.

“This must be a priority for the EU, as this is a matter for negotiations with Russia. The Baltic countries should leave the old Soviet eastern power ring and join the Baltic Sea ring instead”, Mr Švedas suggests.

“The creation of the Baltic Sea power ring is part of the EU Strategy for the Baltic Sea Region because all EU member countries around the Baltic Sea are interested in introducing common standards in electricity trading.”

“Needless to say, the Baltic Sea power ring would guarantee power supply for the Baltic countries regardless of the current state of affairs in international politics”, concludes Mr Švedas.

See more:

NIB finances first electricity link between Lithuania and Poland

Estlink a step towards Baltic energy ring