What happened in energy this week?
Week 43 of 2022 (I. e., the week starting on 24th of October)
Lithuania needs to maintain existing power plants until 2028 to keep grid quality at a decent level. This will require a reshuffling of reserves and some overhauls.
The absence of Russian gas in the region forces a postponement of Lithuania's inclusion in the Baltic and Finnish gas markets.
Lithuanian energy infrastructure companies have sent equipment and repair tools for Ukraine's electricity and gas system.
Let us look at all that in detail.
Inadequate
Litgrid, Lithuania's power transmission system operator (TSO), published the results of an adequacy assessment of the Lithuanian electricity system for 2026-2030. The study was carried out by French engineers and consultants RTE International. According to the study, the completion of the Harmony Link undersea power interconnector with Poland in 2028, rather than in 2025 as previously planned, creates an unacceptable level of adequacy risk in 2026 and 2027.
In that period, the LOLE rate would reach 33 and 28 h/y respectively, when it should be no more than the 8 h/y. LOLE, or loss-of-load expectation, is, in short, an indicator of the security of electricity supply and system reliability (smaller number means better).
It is estimated that if the ~500 MW of generation currently in reserve were to be retained until the Harmony Link becomes operational, the LOLE would be reduced to an acceptable level of 6.5 h/y and 5.5 h/y, respectively.
These facilities are not economically viable, and thus financial support will be needed. If European regulators also find problems with adequacy, Litgrid proposes to expand the "isolated operating reserve" support scheme. That is a more flexible method of supporting gas-fired power plants.
According to the study, situation in the neighbourhood is varied. Latvia, Sweden, and Poland have no challenges with the adequacy of the system. Estonia and Finland have some, but Lithuania's challenges are greater.
Why is this important? When the TSO says "~500 MW of electricity generation facilities", it is likely referring to the old units 7 and 8 of the Elektrėnai power plant. "Litgrid's proposed solution would allow them to be remain in reserve and operate with limited flexibility on the market. This support scheme, if I understand correctly, should act as a patch for the two years.
Harmony Link and the green generation capacity coming online, according to the study, "significantly reduces adequacy problems in Lithuania" - to a LOLE of 2.22 h/y. However, the study assumes that the first offshore wind farm in Lithuania will be operational by 2028. I am doubtful since it would mean the project is to be completed 2 years before the given deadline.
For reserve units to be operational, repairs will also have to be carried out on the part of the Elektrėnai power plant mentioned above. Unit 8 will be repaired by the plant operator at its own expense, at a cost of €3.2m. Repairing unit 7 is included in the Government programme.
Further reading:
Litgrid’s announcement (links in LT unless specified otherwise): https://www.litgrid.eu/index.php/naujienos/naujienos/dalinames-lietuvos-elektros-energetikos-sistemos-adekvatumo-vertinimo-2026-2030-m-rezultatais/32147
Presentation of the results of the study (EN): https://www.litgrid.eu/uploads/files/dir638/dir31/dir1/18_0.php
Connecting Gas Markets
Energy regulators in the Baltic States and Finland have agreed to postpone Lithuania's addition to the region's existing common natural gas market by a year - until October 2024. LV-EE-FI have operated as a single gas market since 2020, when the Balticconnector, the gas pipeline between Estonia and Finland, became operational. In 2020, the agreement was reached to connect Lithuania to the single tariff area by 1st of October 2023.
Market coupling would mean that the Lithuanian and Latvian gas systems remove tariffs on the border, harmonise gas import tariffs in Klaipeda and on the border with Poland, and agree on how revenues will be shared between system operators.
The agreement, which was already taking shape, was postponed due to the changing geopolitical situation, i.e., the end of Russian gas imports, which dominated the region until this spring. The ousting of Gazprom also means that gas import routes have changed drastically.
Why is this important? The hiccup on the issue of common gas market is a good illustration of how radically the gas supply situation in the region has changed. Lithuania was not in the single tariff area from 1 January 2020, because Lithuania and its neighbours disagreed over the Klaipeda gas import terminal. Now the situation has changed.
Previously, gas imports in liquefied form were referred to as "alternative sources of gas" and the Lithuanian gas system operator had to offer discounts to make the terminal attractive to use. This year "alternative sources" became the main source. In addition, a Finnish gas import terminal is also expected to be introduced to the region by the turn of the year. So, there is a lot to rethink.
Further reading:
Regulators’ announcement (EN): https://www.vert.lt/en/Pages/postponement-of-gas-market-merge.aspx
War Crimes
Litgrid and Amber Grid, the companies operating Lithuania's power and gas transmission systems respectively, have sent ~€100k worth of equipment to Ukraine to help deal with Russia's massive bombing campaign of energy systems, following a request from their Ukrainian counterparts. Ukrainians estimate that 40% of the country's energy system has been damaged by Russia's bombardment since mid-October.
The aid package includes pipeline sealing tools and materials, 110-330 kV primary devices, current and combined transformers, isolators and separators, and 330/110 kV autotransformer. The contents of this assistance package were coordinated with the Ukrainians. It is being channelled through the NGO Blue/Yellow.
Why is this important? The intense bombardment of Ukraine has caused severe damage to the gas and especially electricity transmission infrastructure. One can assume no energy system operator has enough stocks set aside for such needs. But such ongoing help is likely to be needed. It is being supplied this time with partners from the EU and elsewhere.
In my view, the systematic bombing of energy infrastructure with the intent to harm civilians, rather than the military, is a war crime. I will leave it to future international war crimes tribunals to witness how fervently this campaign of terror will be defended as “an attempt to affect the ability of the Ukrainian military to defend itself.”
Further reading:
TSOs’ announcement (EN): https://www.litgrid.eu/index.php/news-events-/news/litgrid-and-amber-grid-are-sending-aid-to-rebuild-ukraines-energy-infrastructure/32146
What next?
Baltic power system operators are setting up a common power balancing market. This will replace the current model of maintaining national reserves for the electricity system. Balancing capacity is needed to ensure that electricity production keeps pace with consumption. It means that TSOs will buy this service from power storage operators or power generators in the Baltics. It is estimated that 1,512 MW of generation/storage capacity will be booked by operators from 2025, once it becomes operational.
Lithuanian Government approved power subsidies for businesses. Companies will be reimbursed 50% of the electricity price above €240/MWh in the last quarter of this year. For the first quarter of next year, the cap will be raised to €280/MWh. About 139,100 consumers, consuming ~7.8 TWh of electricity per year, are eligible for subsidies. Government allocated €446m for these two quarters for this. However, if the market price of electricity remains at the current level, the subsidies might not be needed at all.