Energy Market Analyst
Public Utilities Commission
Latvia’s chance to get the best out of the European Green Deal rests on the ability and willingness to embrace the mentality of sustainability where economic growth depends on the principles enshrined in carbon neutrality, circular economy and biotechonomy. Let me shortly elaborate on some of the aspects of the Green Deal in Latvia.
The Green Deal provides framework of opportunities for sustainable and successful development of economy although is perceived and interpreted by many as a threat to national economy and people’s welfare. Ambivalent feelings and reactions are exacerbated by currently high energy prices, which do not provide a good context for convincing society to embrace the goals and processes associated with the Green Deal. There are several aspects to this context that are relevant for the implementation of the Green Deal in Latvia. Transport, energy production and consumption are perhaps those sectors of economy, which are primarily identified with the impacts and policies that the Green Deal incurs.
The best energy is the one we do not need to produce. The logic may tell that if the overall level of energy efficiency is low and energy prices are unusually high, one should invest in improving energy efficiency. An intuitive reaction to the situation is to try cutting expenses by requesting measures that would decrease the price of energy through reducing energy or environmental taxes, introducing subsidies to energy consumers and producers. This is yet another example that policy making at times has to be counter-intuitive to ensure that the right goals are pursued. There will be blaming and shaming, but decision-making ought to be based on evidence stemming from research and analysis and should not give in to pressure in favour of easy solutions. In Latvia, there is also a local political context – with general election approaching in October 2022 politicians are tempted to opt for easy solutions that do not go against the current of public opinion.
Increasing energy efficiency in buildings is one of the most challenging tasks, and the biggest part of the burden, albeit not exclusively, is on the shoulders of Riga, where roughly one third of the country’s housing stock is situated. The current pace at which buildings are renovated is too slow to be able to meet energy efficiency targets by 2030 set out in the National Energy and Climate Plan, which is criticised by environmental NGOs and researchers for lacking sufficient ambition for RES and energy efficiency targets. Also, making industry energy efficient remains a challenge although energy and environmental management systems are being introduced at an increasing rate. Slowly the awareness that modernisation and energy efficiency are key to competitiveness is sinking in. Perhaps the biggest problem resides in peoples’ minds.
If we consider that the focus of the Green Deal is on reducing carbon emissions, then some of the biggest challenges are associated with the transport sector. Transition from conventional fossil fuels to more environmentally friendly transport solutions is nowhere near entering mass market. Limited use of CNG, no biomethane for use in transport, reduced excise tax for natural gas in transport, almost no hydrogen (except for public transport in Riga), only gradually growing number of EVs and slowly expanding EV charging infrastructure are the highlights of energy transition in transport. Although public transport is rather broadly available it is difficult to motivate passengers of private cars to switch to trams, trolleys, buses, and trains. New approaches will have to be searched for to establish a motivating mix of policies representing hugs, carrots and sticks. Good thing is – there is plenty of space for improvement.
In energy production challenges are mainly related to the currently significant role of natural gas in the heating sector and in power production. District heating in Riga relies mostly on natural gas. Two combined heat and power plants (CHPs) in Riga are the biggest source of consumption of this expensive energy resource. Riga district heating company has been diversifying fuel for heat production away from natural gas by building wood chip boiler houses, but that seems to be only part of the solution. The gas-fired CHPs constitute significant power production capacities with installed capacity of just under 1 GW (144 MW for CHP-1 and 881 MW for CHP-2). Although natural gas CHPs function according to merit order the overall electricity deficit in the Baltic States means that these CHPs are factored in the production capacities when there is an insufficient supply as other types of production are limited or unavailable. Decisions about deploying and integrating more renewable energy solutions into a smart energy system of tomorrow is going to be at the centre of tasks to be accomplished under the mind-changing umbrella of the Green Deal.
Expert article 3165
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