Lithuania – ahead of the European Green Deal

Thomas Sattich
Associate Professor
University of Stavanger
Norway

Rasa Morgan
MSc graduate
University of Stavanger
Norway / Lithuania

Espen Moe
Professor
Norwegian University of Science and Technology
Norway

In terms of renewable energy (RE) deployment, the European Union is outpacing most other jurisdictions. With the European Green Deal, the EU is aiming at further speeding up the transition of its economy towards decarbonization. Renewable energy and other carbon-neutral energy sources play an important role in that regard. Fundamentally changing the EU’s energy supply system does, however, not come easily or automatically. Lithuania may appear like an unlikely candidate for learning about the energy transition, but historical experience makes the country well prepared for the decarbonization ambitions of the Green Deal. Moreover, Lithuania serves to highlight some of the economic, political, and security challenges the Green Deal will meet during its implementation.

Challenge 1: political decisions
The Green Deal requires high-level decisions regarding Europe’s future energy options. Due to its historically difficult energy situation, Lithuania has much experience with the sometimes-difficult trade-off between domestic political sentiments and international commitments. This includes decisions regarding the economic promises and environmental dangers of nuclear power, LNG imports and new electricity interconnectors. Based on this experience, Lithuanian policymakers embraced large-scale deployment of RE sooner and in a more encompassing manner than many other countries in the region. Today, RE has become the country’s main strategy in terms of energy policy. In the long run, Lithuania hopes that this policy will provide a basis for achieving both energy security and reaching EU and international climate goals.

Challenge 2: economic dynamics
The case of Lithuania shows that markets can drive the transition. As in most countries, wind and solar power are now cost-competitive in Lithuania, which provides the country with a good basis for a profound energy transition. In September 2019, the country announced the first of three planned annual technology-neutral auctions (each for 700 GWh of renewable generation capacity), offering a 12-year priority to the grid and feed-in premiums. The winner of the first auction, an onshore wind farm, won with a bid of 0 EUR/MWh, which showed that renewable sector development has reached a stage where it can freely compete without state support. The second auction, planned for 2020, was cancelled as per Renewables Law, because Lithuania reached the target of 5 TWh of annual domestic electricity production from renewables at the time. However, while the energy transition is progressing, a slowdown has been noticed, particularly in the area of distributed solar power.

Challenge 3: economic side effects
Despite the positive development of RE, total energy related GHG emissions are rising by 1% a year. According to the IEA, the government needs to review targets and monitor progress closely, otherwise it risks missing the targets for 2030 and 2050. To cope with the slowing progress, the Energy Ministry is offering a one-time compensation for PV installations. Deep energy transitions, do, however, also involve macro-economic costs. In that regard, Lithuania can look back at strong experiences with fundamental changes in the energy supply system. Specifically, it had to deal with the closure of its most important power source, the Ignalina nuclear power plant. Despite changing from a net energy exporter to one of the EU’s main net per capita importers, Lithuania was able to maintain economic growth. EU support was an important factor in that regard. Today, Green Deal related discourses in Lithuania circle again around external funding.

Challenge 4: geopolitical fall-out
Facing a distinctly asymmetric and one-sided import dependency on Russia, Lithuania aspired energy independence and managed to strategically reposition itself in the regional energy system. This move anticipates some of the external effects of the European Green Deal. Progress towards decarbonization will, eventually, lead to the reduction of external energy dependence, and hence growing strategic autonomy for the EU. However, the Lithuanian case also highlights some of the EU’s deep-rooted limitations. Blocking electricity supply from Belarus created tensions with Latvia and Estonia, while full cooperation is needed on the synchronization of Baltic countries electricity grid with the West and North European power systems. Divisions between EU member countries such as these may jeopardize the achievement of projects of common interest, and thus slow down system integration.

Conclusions
The case of Lithuania is well-suited to highlight some of the political and energy dynamics stemming from the European Green Deal. It shows that energy transition is possible. Political hurdles, (macro-) economic challenges, and geopolitical implications can be controlled, even under difficult circumstances. However, there is a risk that the European Green Deal consolidates splits between member countries.

E-mail: thomas.sattich@uis.no

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