The Sustainable Electricity measure of the Green Transformation as part of the National Resilience and Recovery Plan is meant to promote production, transmission, and use of electricity consumption using the most cost effective technologies, improving institutional mechanisms, and providing incentiv Contact online >>
The Sustainable Electricity measure of the Green Transformation as part of the National Resilience and Recovery Plan is meant to promote production, transmission, and use of electricity consumption using the most cost effective technologies, improving institutional mechanisms, and providing incentives for businesses and citizens to invest. Lithuania will implement 242.39 million EUR from EU funding, 157.44 million from private entities and 55.716 million EUR from its national budget. Planned investments include onshore solar and wind power plants, a solar power park, and storage facilities.
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Although the Baltic region has not traditionally been considered a leading player in the global solar industry, this is set to change soon. The Solarplaza Summit Baltics 2023, held in Vilnius, Lithuania, highlighted both significant challenges and opportunities for the region.
The report below, written up and provided by our partner PVcase, highlights many key discussion points and conclusions from the event.
The renewable energy market in the Baltics (Latvia, Estonia, and Lithuania) is shaped by the region's unique geopolitical and geographical position. A crucial factor is the planned exit of the BRELL agreement in 2025, which currently covers Belarus, Russia, and the Baltics.
At present, the Baltic states are synchronized with the Continental Europe Synchronous Area (CESA), which makes them more vulnerable to fluctuations in electricity prices from Nordic and Central European countries. However, synchronization with the CESA grid will increase energy security by preventing Russia from disrupting critical electricity supplies to the Baltics.
In addition, there was a government-imposed limit on solar installation projects in Lithuania, with a maximum capacity of 2GW for solar parks. However, after much debate, this limit has now been lifted.
However, the Baltic countries still face some obstacles when it comes to the adoption and implementation of solar energy:
The Baltic governments have implemented various policies and incentives to encourage renewable energy development, including solar energy. Estonia provides a premium tariff for renewable energy producers, while Latvia offers a feed-in tariff for solar energy producers. Lithuania's net metering program enables households and businesses to sell their excess solar energy back to the grid.
Furthermore, Ignitis, a Lithuanian energy company, acquired a 200 MW hybrid solar-wind project in Latvia, and the company's operational solar capacity is set to rise.
The European Regional and Development Fund (ERDF) and the Cohesion Fund will invest 839 million euros in renewable energy sources in Latvia between 2021 and 2027, aimed at enhancing energy security, efficiency, and resilience to climate change.
Alexander Esser from Aurora Energy Research delivered an optimistic outlook on the Baltic power market. The following are the main points from his presentation:
Banks are increasingly motivated to fund renewable projects due to environmental, social, and corporate governance concerns, with over half of the European Investment Bank's investments being focused on climate action. However, while renewable energy has had a good return on investment in the past, banks are now worried about the potential for low electricity prices.
Power Purchase Agreements are becoming more complex, with accurate pricing models expected prior to project development. This means that there is likely to be an increase in merchant projects, and the solar industry needs to improve to provide banks with more predictable cash flow. Banks prioritize cash flow predictability, and tools such as PVcase Yield, which provide accurate estimates on generated KWH and KW, can help improve CAPEX, OPEX ratio, and LCOE, the main KPI of an energy asset.
The obstacles faced by the Baltic states are comparable to those in other European markets, but the specific challenges are different in scale. These challenges involve problems related to grid capacity and flexibility, supply chain issues, lengthy authorization procedures, and a lack of consistent regulatory frameworks, incentives, and tax credits. In addition, the recent Russian incursion into Ukraine has made it even more pressing to accelerate the advancement of renewable energy projects.
According to a bill drawn up by the Ministry of Energy the Lithuanian RE funding system will be governed by a market premium model in the future. The market premium amount will be determined based on competition by way of energy source-independent auctions. All market players have been explicitly invited to participate in the legislative initiative and to submit proposals for this new incentive model.
After a long period of stagnation and only some move-ment in the area of already existing projects or projects under construction renewable energies (RE) in Lithuania will finally receive new political support: On 16 May 2018, the Ministry of Energy published the draft of a new incentive model for renewable energies.
The proposed amendment to the Renewable Energy Law (RE Law) provides for an entirely new system of support for the production of electricity from renewable energy sources. The aim is to increase the production of electricity from RE sources up to at least 3 terawatt hours (TWh) by 2020 (by comparison: today, slightly more than 2 TWh of electricity are generated in renewable energy plants). Moreover, it is planned to increase the market integration of renewable electricity producers.
The current incentive system in Lithuania is based on a long-term fixed approach where funding is granted for 12 years from issuing the energy production licence. So far, the Lithuanian subsidy instruments have been characterised by competition between the individual types of energy production and capping of incentives under a quota regime. The quotas were allocated at technology-specific state auctions. But those incentives were exhausted already about 3 years ago and no new auctions have been held since then.
By contrast, the new incentive model will be technology-neutral, i. e. the contract will finally be awarded to the project offering the lowest price, irrespectively of the type of energy production. As previously, the intention is to offer operators of RE plants the possibility to receive a calculable return from their investment by granting them extensive funds. But the fixed feed-in tariff would be replaced by a market premium which would be added to the market price – as previously, this incentive should be paid for the maximum period of 12 years (cap) (should the cost of the plant be amortised earlier, the incentives would be capped earlier as well).
There will also be reductions in the grid connection costs. So far, in most cases, they have been borne by network operators. In the future, this obligation will rest with power producers. The scope of tasks of power producers will also be increased by their mandatory inclusion in the mechanism of balancing electricity supply and demand. However, the very lucrative feed-in priority applicable so far to renewables will be maintained.
The already mentioned market premium is to be deter-mined competition-based by way of auctions. These auctions will be held for certain energy volumes to be produced, independently of the type of RE. An entirely new feature of this concept is that subject to certain conditions also projects launched in other EU member states will be allowed to participate in these auctions based on bilateral agreements to be signed for this purpose.
Crucial for the calculation of incentives are the following factors:
In Lithuania, apart from constructing new plants, investors have the possibility to purchase, on the secondary market, plants (regardless of whether completed, still under construction, or in the planning phase) that already enjoy a feed-in tariff under the present funding model. In such a case, a purchaser receives the so far applied guaranteed feed-in tariff over the remaining period determined in the permit and, thus, earns a calculable return.
As regards the expansion of RE, apart from reducing CO2 emissions, Lithuania''s declared focus is on regaining energy independence which it lost in 2009 when the nuclear plant, Ignalina, was shut down and dismantled.
In presenting the legislative bill, the Lithuanian Ministry of Energy has acknowledged that the development of renewable energies, which has been stagnating in the past years, needs a new stimulus – in particular in view of the country''s aspiration to regain energy independence. However, the planning of the new funding model is currently still in infancy: The amendment of the RE Law, if adopted by the Lithuanian Parliament, will probably become effective as of 1 May 2019.
In any case, the bill promises the long-awaited new tailwind for the Lithuanian RE sector and this might open up new opportunities both to construction companies and producers.
For many years, Rödl & Partner has been a pioneer in providing consulting services in the renewable energy sector in the Baltic states. In this attractive market for energy projects we have built a reputation among im-portant international investors and plant manufacturers as one of the leading legal and tax specialists. Should you therefore wish to receive more information on this topic, our interdisciplinary experts will be glad to help and assist you.
About Lithuania solar incentives
As the photovoltaic (PV) industry continues to evolve, advancements in Lithuania solar incentives have become critical to optimizing the utilization of renewable energy sources. From innovative battery technologies to intelligent energy management systems, these solutions are transforming the way we store and distribute solar-generated electricity.
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By interacting with our online customer service, you'll gain a deep understanding of the various Lithuania solar incentives featured in our extensive catalog, such as high-efficiency storage batteries and intelligent energy management systems, and how they work together to provide a stable and reliable power supply for your PV projects.
