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Lithuanian electricity interconnectors and accumulation capacity covers 260% of electricity peak load and is expected to reach 360% by 2020 in comparison to just 20% interconnection capacity of the French electricity grid or almost 100% of peak load in Denmark. The international electrical power connections of Lithuania create exceptional potential and promising conditions for renewable electricity growth in the country. In 2015, besides hydroelectricity, wind energy was the cheapest electricity source in Lithuania. The increase in the international energy trade capacity of Lithuania and the possibility to accumulate energy in hydro plants, enables wind energy producers to increase output without crashing the electricity grid. A further decline in wind electricity costs will ultimately push the Lithuanian energy industry towards strong development of renewable energy production.
During the last five years, peak electricity load in Lithuania reached 1,800MW. During the first half of 2015, Lithuania had a total of 3,750MW of electricity connections with neighbouring countries and a 900MW capacity to accumulate energy at the hydro-accumulation plant of Kruonis (KHAE) in comparison. Furthermore, 1,200MW of electricity connections with Poland and Sweden will be added by 2016 and another 500MW with Poland by 2020. With the expanded connectivity with its neighbours and the ability to compensate for renewable energy fluctuations, Lithuania has all the incentives to expand renewable electricity production once political will is shown.
Source: Nord Pool Spot and LESTO
Lithuanian electricity producers supplied a total of 1.6TWh of electricity and 4.7TWh was consumed in the first half of 2015. Currently, deficit electricity is imported from Estonia and Russia through Latvia and Belarus as Lithuania lacks cheap electricity generation capacity. Most of the potential for cheap electricity generation lies in wind energy followed by cogeneration in biomass plants and photovoltaic generation. The EC has indicated that Lithuania has potential to generate up to 35TWh of electricity from renewable resources by 2050.
Development of renewable energy is not an altruistic or a green alternative. According to LCOE (Leveraged Cost Of Electricity), wind was the cheapest source of energy in Europe during 2014. As a result, development of renewable energy in the Baltic region is inevitable, as wind energy already accounted for 15.6% of generation in Lithuania during 2014 and increased to 19.9% during the first half of 2015.
Source: World Energy Council and Lazard
Under the current renewable energy subsidies scheme, wind plants receive a fixed feed-in tariff that is above the usual market price for 12 years. After that period, the wind plants are expected to produce electricity at market price for a 13-18-year period. According to Lazard, financial advisory and asset management firm, the highest and lowest LCOE of onshore wind plants declined by 15% and 18% in Europe, respectively, in 2014, reducing the difference between market and production cost year-on-year.
Lithuania lags behind other European countries such as Germany and Denmark when it comes to wind generation capacity development, but it is well prepared and has all the tools for future growth of renewable energy. High interconnectivity of the Lithuanian electricity market ensures safety and provides the possibility for export of electricity overproduction. Declining LCOE of wind energy and the high capacity for international electricity trade will lead Lithuania into fast development of renewable energy production capacity growth.