Latvia: Hydropower-Wise, A Stand-Out Baltic Country
If not for the small Baltic country of Latvia’s abundant hydro resources it is successfully harnessing, the country’s electricity imports would likely be on par with Lithuania’s - a dreadful 60-65 percent. While it does significantly better than its southern neighbours, it still has a lot to do in terms of diversifying its energy resources and finding better energy solutions. On behalf of Minister Vjačeslavs Dombrovskis, Evita Urpena, a senior communications specialist for the Latvian Ministry of Economics, kindly answered our questions on a range of energy issues.
How much is Latvia relying on Russian energy?
At the moment Latvia receives 100 percent of the natural gas utilized in the country from the Russian suppliers. A significant amount of oil products – about 15 percent, also comes from Russia.
Speaking about the electricity supply, Latvia is importing about 20 percent of its net electricity consumption. The biggest share comes from Estonia – 42,8 percent and Russia – 16,3 percent, but it must be clarified that more than a half of this import is then further exported to Lithuania (37,4percent).
However, as electricity transmission grids of the Baltic States are functioning in a parallel synchronized regime with transmission grids of Belarus and the North West Russia, the Baltic States do rely on these third countries in terms of transmission system balancing and frequency regulation.
What are the main issues Latvia deals with in diversifying its energy sources?
In Latvia a large scale generation capacities, including base load generation, are as follows:
Cascade of Daugavas hydropower plants (hereafter – HPP): consist of four HPPs: Ķegums – 1, Ķegums – 2 with a total installed capacity of 240MW, Pļaviņas with installed capacity of 893,5MW, and Rīga with installed capacity of 402MW. All year round, according to AST’s data, only 200 – 250MW can be used as base load generation.
Riga Thermoelectric Power Plants (hereafter – CHPs) 1 and 2 are the only base load generation units in Latvia with an installed capacity of more than 100MW. Riga CHP – 1 has installed capacity of 144MWel and 493MWth, two units in Riga CHP – 2 have installed capacity of 881MWel (as production maximum in condensation regime) and 1124MWth (as production maximum with cogeneration units and hot water boilers).
As for the diversification of the secondary energy resources, Latvia is also partly dependent on external supplies – electricity is imported both from neighboring Baltic countries and Finland, and the third countries – Russia and Belarus. It amounts about 20percent of country’s yearly net consumption.
In 2013 the Latvian electricity consumption was 7,6TWh, of which about 1,6TWh were covered by net import. Base load generation capacity technically available in Latvia can meet all the Latvian electric energy demand even in the peak of the winter season, which can reach up to 1300 – 1350MW.
According to data provided by the transmission system operator (hereafter – TSO) AS “Augstsprieguma tīkls”, in 2013 the maximum winter demand was 1344 MW.
However, the market based electricity price formation drivers prevent high efficient natural gas cogeneration plants of Latvia to be used more intensively than it was done in previous years because of their significant variable costs of energy production.
Latvia as all other countries of the EU is addressing primary and secondary energy resources diversification issue with a great attention, with a special attention paid to development of RES and financial support to the large scale national and regional energy infrastructure enhancement projects included into PCI scope. It has been one of the Latvia’s priorities both in a mid- and long term perspective, and is reflected in the Latvian energy policy planning documents.
In a scope of the electricity cross – border infrastructure enhancement projects such as NordBalt and the third interconnection between Latvia and Estonia, the actions directed to the technical support of the large scale RES integration into the Latvian power system are performed. For instance, with realization of so called “Kurzeme Ring” project – enhancement of the high voltage grid in Kurzeme region will provide a technical possibility to integrate wind capacities of up to 400MW into the Latvian transmission system, and boost a diversification of the power generation from RES.
How much does Latvia pay for Gazprom gas? How long is the contract for?
All natural gas import operations in Estonia, Latvia and Lithuania are handled on the basis of a long term supply agreements. These contracts contain clauses regulating gas supply technical conditions (pressure, caloricity etc.), volumes of supply and storage (annual and monthly), gas storage and transmission charges, gas price calculation algorithms, conditions of payments, conditions for revisions of contracts, other liabilities, etc. When needed, gas supply contracts are subject to updating. Annual amount of natural gas, its quarterly breakdown and other issues are specified in additional agreements.
As it is common in gas business, contracts for all three countries contain so called take – or – pay clause, where the buyer has agreed to take a certain volume of gas and pay for it even in case this volume is not consumed (usually 80percent – 85percent of the whole volume).
In February of the year 2009 JSC “Latvijas Gāze” signed new gas supply contracts with OJSC “Gazprom” and ITERA Latvija. These new contracts ensure the supply of needed gas amounts to Latvia until the year of 2030, which is a significant element for long term security of energy supply in Latvia. Previously such agreements were concluded until 2015.
Terms and conditions of sales contract between JSC “Latvijas Gāze” and OJSC “Gazprom” are confidential.
Does Latvia see Gazprom a reliable gas supplier?
During all the period of time since Latvia regained its independence OJSC “Gazprom” has been fairly reliable natural gas supplier to the Baltic region and particularly Latvia, and no gas delivery disruptions or serious disputes on gas price and terms and conditions of supplies have not been experienced. Furthermore, Gazprom has never violated natural gas delivery contracts with Latvia.
The Latvian natural gas storage capacities – particularly Inčukalns UGS serves not only as gas resources seasonal supplier to the Baltic region, but also some parts of the North West Russia.
How will Latvia address a possible fallout from the Ukraine crisis in terms of Gazprom's gas supply to Latvia? Are there any concerns?
Latvia follows the Ukrainian events with a great attention and general concerns. But regarding possible fallouts of the Ukrainian crisis and impact to its existing cooperation with the Russian natural gas suppliers, Latvia does not foresees such a possibility at the moment as practically expectable. Even with a natural gas supply dependency of 100percent from single supply route and source, Latvia’s natural gas security of supply has been highly estimated even on the EU level.
According to the research done by Ramboll in 2009, Latvia’s natural gas security of supply level is a fifth highest in Europe and the third highest in the EU region accordingly. The Latvian natural gas supply routes do not cross the Ukrainian territory, so the direct impact of the Ukrainian crisis to the physical gas supplies to Latvia is impossible.
Furthermore, Inčukalns underground gas storage is a sufficient guarantee against the natural gas delivery disruptions in Latvia – especially during the winter season when the storage facility is full.
What is the country’s hydro resources impact on energy supply?
HPPs of Daugava cascade with 1535 MW form the largest summary installed generation capacity in Latvia. A 100 percent loading of Daugava cascade’s HPPs is possible only a few month a year – during spring flood period in April and May.
For Latvia large HPPs have multiple functions: firstly, they produce electricity with low variable costs, which meet about 30percent of the Latvian average yearly demand, secondly, they ensure a large percentage of the Latvian generation coming from renewable sources (hereafter – RES), and, thirdly, it’s a RES source which is free electricity market orientated and does not require support mechanisms as application of the mandatory purchase component.
Daugava cascade is also crucial peak load generation source in the Baltic region. On a yearly basis, however, only 200 – 250MW out of 1535MW can be used as the base load generation.
Has Latvia scrapped LNG terminal plans?
Under the BEMIP (The Baltic Energy Market Interconnection Plan) and the Projects of Common Interest (PCI) scope, the regional and national LNG terminal project studies have been carried out in the Baltic States and Finland between 2008 and 2012. In particular, every of above mentioned states, including Latvia, were analyzed as a potential location of EC co-financed regional LNG import terminal. As for now, the aquatory of the Finnish Gulf is chosen as the optimal location of such a terminal.
Latvia strongly supports the regional option as the most welcome solution for the natural gas market opening in the Eastern Baltic Sea region, therefore is looking forward to the European Commission’s decision regarding precise location of the regional LNG terminal – be it Estonia or Finland. It is crucial not to delay the decision any further, so Latvia hopes that the involvement of the Commission will once again bring positive results and will be the final step in our joint efforts in finding optimal solution for regional gas supply diversification. Only if the constructive decision is not made till the end of 2014, Latvia would scrutinize available options for the development of its own LNG project.A possible location and technical characteristic for the Latvian LNG terminal project has been different. The following terminal locations had been reviewed: Riga (as a part of PCI regional terminal location scope), Skulte and Ventspils.
Has Latvia discovered any shale gas (oil) resources? Have there been any exploratory drills been made?
As for today, the Latvian shale gas and oil potential has not been a subject of technical, environmental and economic evaluations, including such exploratory activities as drilling of the test bores and carrying out hydraulic fracturing. No licenses are issued for above mentioned activities in Latvia.
What hampers the country’s speedier and more effective transition to the western power links?
If a phrase “transition to the western power links” is understood as integration into the continental European and the Nordic power systems, it should be repeated that BEMIP and PCI related activities are directly linked to energy supply diversification in the Baltic region. It can be realized only by means of physical integration of the energy infrastructure: new natural gas and electricity cross – border interconnections.
What are the country’s major energy challenges in the short and long-term? How are they (being) addressed?
In order to ensure balanced energy policy that corresponds to economic and social interests, the main priority is to promote competitive economy based on effective energy policy – one which is economically, socially, and ecologically justified, and strategically sustainable. Also the market orientation, enhancement of energy infrastructure and improvement of security of energy supply in all sectors of the national economy are one of the core elements of the Latvian energy sector development.
The main challenge therefore is to ensure sustainable and rational energy development in accordance to above mentioned national energy policy priorities.
What is the renewables’ input towards Latvia’s generation? Last year? In 2012? 2011?
The total gross electricity generation from RES in 2011 was 3078GWh, in 2012 – 4109GWh, in – 3534GWh, while the total gross electricity generation in 2011 was 6095GWh, in 2012 – 6168. The data for 2013 is yet not available.
In Latvia most of the electricity produced from renewable energy sources is generated by hydroelectric power plants (mostly in 3 largest hydroelectric power plants), but the production is seasonal and the largest amount of electricity by these hydroelectric power plants is generated during the spring season.
The amount of electricity produced by wind, biomass and biogas power plants increases recently due to the granted rights for producers to sell electricity produced from renewable energy sources within the scope of mandatory procurement.
In the near future such a large increase in electricity generation capacity is not expected, because the Ministry of Economics will not organize tenders for the acquisition of the right to sell the electricity produced from renewable energy sources within the scope of mandatory procurement, and the producer may not qualify for selling electricity within the scope of mandatory procurement. In order to protect fish resources it is prohibited to build new hydroelectric power plants on the majority of rivers, so in the coming years significant increase of HPP electric capacity is not expected, while maintaining the current level and renewing existing aggregates.