• Energy security is a major priority for the governments of the three Baltic states—Estonia, Latvia and Lithuania. Russia’s invasion of Ukraine in February 2022 led to all three states cutting energy imports from Russia, including halting all natural gas imports in 2022.
  • The 2022/23 winter proved much milder than predicted and natural reserves in all three states have remained high. This makes it likely that storage facilities will be restocked by this winter.
  • The Baltic states are rapidly moving ahead with plans to diversify energy supply through new liquefied natural gas (LNG) infrastructure, as well as scaling up investment in renewables. Synchronisation with continental Europe’s electricity grid is expected in 2026.

The Baltic states experienced a comparatively mild winter, which, together with high heating costs, depressed domestic energy demand. Europe’s gas stockpiles were 68% full in mid-February, compared with the usual 48%. This has considerably eased concerns about restocking for this coming winter, bearing in mind that three-quarters of the region’s gas imports came from Russia before the invasion of Ukraine. Baltic gas storage facilities will be restocked through the new shared Estonia-Finland LNG terminal in Inkoo, Finland, as well as the Klaipeda LNG terminal in Lithuania. With energy prices declining throughout January and February, reaching their lowest price since 2021, the LNG terminals will be busy over the coming months. 

A new LNG terminal is being planned in Latvia. An international group of investors is ready to commit €150m (US$163m) in a floating regasification unit in the Skulte Port area, 2.5 km offshore off the coast, with a 34-km pipeline connection to the vast Incukalns underground gas storage facility. The investors have demanded state guarantees in case demand falls below current estimates. However, Latvia’s prime minister, Krisjanis Karins, has previously criticised the investment plans for failing to come up with detailed financial information on the project. The government has been panicked by its previous commitments to support green energy companies, which resulted in years of significantly higher costs for consumers. However, as Latvia prepares to liberalise its natural gas market, competition is likely to increase, potentially leading to lower energy prices. 

Continued investment in renewables

All three governments are charging ahead with plans to diversify energy production and move away from reliance on gas imports, through ambitious plans to continue increasing renewable-energy production capacity. The new Latvian government, formed after October’s parliamentary election, created the new Climate and Energy Ministry that is specifically charged with developing and implementing a new climate and energy strategy in view of Russia’s war with Ukraine. The focus is on developing solar and especially wind capacity. The region already has significant hydropower capacity; Latvia is the leader with a current production capacity of 1,588 MW.

At the start of 2023, Lithuania had a wind-power generation capacity of 800 MW, Estonia 500 MW and Latvia only 137 MW. Latvia currently has three small wind parks, but has rapidly developed an ambitious new strategy to build at least 100 wind turbines that would produce 30% of Latvia’s total 2022 electricity consumption. There are two prongs to this strategy. First, a new public company—Latvijas veja parki (Latvia’s wind farms)—was founded by the electricity utility Latvenergo and Latvia’s State Forests, which manages Latvia’s 1.63m hectares of state-owned forests. It is hoped that this will allow for a more rapid construction of the wind farms. At the same time, Latvenergo has also signed a memorandum with the German multinational energy giant RWE AG to produce offshore wind farms. If both projects move ahead as expected, Latvia is likely to achieve its target of 800 MW of wind-generated power by 2030.

While Latvia plays catch-up, Estonia and Lithuania continue to invest in wind power. Lithuania is constructing a new wind farm and signed a power purchase agreement with Eesti Energia, an Estonian energy company, and is currently undertaking a strategic environmental impact assessment for what would be the first of four planned offshore wind farms in the Baltic Sea. Enefit Green, the renewables arm of Eesti Energia, has ambitious plans to produce 1,900 MW of renewable energy across its wind and solar plants in Estonia, Lithuania, Finland and Poland. For example, the Sopi-Tootsi wind farm project in Estonia will begin construction later this year and plans to produce 255 MW annually, which would cover 8.5% of Estonia’s total current electricity demand. It also has plans to produce green geothermal energy, energy produced by the Earth and stored in the Earth’s crust.

Although the sun shines for only nine months a year in the Baltic region, there are planned investments in solar power. All three governments are encouraging domestic households to produce solar energy, with Lithuania aiming for one-third of households generating their own electricity by 2030. However, Estonia currently leads the way, with 10,000 solar producers producing nearly 500 MW of energy in 2022.

Energy independence is almost fully obtained

The construction of new LNG facilities and investments in renewables look likely to ensure the Baltic region’s energy independence from Russia. The only remaining major energy link to Russia is through the electricity grids’ connection to the Russian synchronous area, with synchronisation with continental Europe’s grid not planned until 2026. However, government experts state that if Russia were to disconnect the Baltic states from the Russian synchronous area, an emergency connection with continental Europe’s grid could be made within a few hours. In addition, in mid-May the Baltic states announced that they were considering accelerating the disconnection from the Russian power grid.

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