Lithuania Electricity Security Policy

Lithuania imports around three-quarters of its electricity needs, as domestic generation decreased significantly after the country shut down its second (and last) nuclear reactor in late 2009. Renewable energy now dominates domestic electricity generation, with more than three-quarters of electricity generated from renewables, primarily from wind and hydro. The government has an ambitious target of 80% renewables in final energy demand by 2050. For power generation alone, the country aims for a renewables share of 45% by 2030 and 100% by 2050. A unique feature of Lithuania’s market relates to the fast increase of prosumers, who should reach 30% of the total electricity consumers by 2030.

Lithuania’s electricity sector has embarked on three major transitions: the fast reduction of import dependency with significant investments in domestic renewable capacity, an increase in interconnectivity and synchronisation with the European network, and the opening of its market to competition and choice for final consumers. Thanks to reforms of the electricity sector governance and investments in major new interconnectors with Poland and Sweden, Lithuania’s electricity market is increasingly integrated into the Baltic and Nordic electricity markets. In November 2020, Lithuania, together with neighbouring Latvia and Estonia, ceased electricity imports from Belarus after the country commissioned its Astravets nuclear power plant, which is close to Vilnius, the capital of Lithuania, and deemed unsafe by the government of the three Baltic countries.

In the coming years, Lithuania will need to adapt its rules and regulations to reflect these three energy transitions and ensure the efficient development of the country’s electricity sector. The government aims to boost medium-term electricity adequacy with the introduction of a capacity mechanism and regional cooperation, increase flexibility to prepare the power system for higher shares of variable renewable energy, and further synchronise with the European network and regional balancing and reserve markets. At the same time, it plans to phase out regulated prices, promoting competition and choice for retail electricity consumers.

Organisation

The Law on Electricity establishes the statutory basis for emergency response policies with regard to the generation, transmission, distribution and supply of electricity. The supply of electricity in the event of an emergency is limited or suspended in accordance with the Rules of Electricity Supply and Use (Order No 1-38 of 11 February 2010). The Emergency Situation Operations Centre (ESOC), within the Ministry of Energy, is also responsible for overseeing emergency response in the electricity sector.

The National Energy Regulatory Council (NERC) is responsible for monitoring the reliability of the electricity system and reports annually to the government. Article 76(1) (2) of the Law stipulates that NERC should cooperate with foreign national energy regulators to ensure that the TSO (transmission system operator) has one or more integrated system(s) at regional level covering two or more EU member states for capacity allocation and for ensuring the security of the electricity network.

Litgrid, as Lithuania’s TSO, is responsible for maintaining stable and reliable operations of the electricity system through national balancing and the provision of system services. Litgrid is responsible for the maintenance and management of the network including the development of interconnections with electricity systems of other countries, and to reduce the capacity constraints in the transmission network, taking into account the needs of the electricity system and electricity grid users.

The Lithuanian Ministry of Energy and other national institutions have the authority to request any information about energy enterprise activities. The Government Resolution passed early in 2021 and defined in clear terms electricity enterprises’ obligations to provide information during an emergency. The procedure is foreseen as follows: in the case of an emergency within the electricity sector, the TSO and the distribution system operators should on a daily basis, or at greater frequency (i.e. a few hours), submit information to the Ministry of Energy about the causes for the electricity disruption at hand, and the planned measures to mitigate emergency situations, as well as any assistance expected from other EU member states.

Once the state of emergency has ended, the Ministry of Energy would be obliged to provide a report to the European Commission within three months, which would then be presented at the Electricity Coordination Group of the European Union. The ex-post report would include all actions undertaken and its respective evaluation.

In an emergency, Litgrid relies on secondary reserves to ensure electricity supplies and can restrict or disconnect consumers in case a power shortage occurs. Litgrid holds contracts with the power plants in the Lithuanian Electricity System and with BRELL operators for the jointly maintained secondary reserve. The direct current (DC) connections management contracts with the Polish and Swedish TSOs also provide an opportunity for receiving emergency assistance from neighbouring countries. The DC connections LitPol and NordBalt offer therefore emergency supply arrangements to Lithuania.

Litgrid is now part of ENTSO-E and the regional TSO collaboration. Under the ENTSO-E framework of regional security coordinators (RSC), the Baltic TSO-s (Elering, AST, Litgrid) have signed the Baltic Regional Security Coordinator Agreement in 2016 to support the common operation of the electricity transmission systems of the Baltic states and the common electricity market. The Baltic RSC set up the framework for regional security coordination among the Baltic TSOs, including short-term regional resource adequacy assessments under the new EU Electricity Regulation.

The Ministry of Energy is formally responsible for security of electricity supply, while the regulator NERC sets standards for the quality of service and reliability with minimum requirements for transmission and distribution.

Lithuania’s Energy Independence Strategy seeks self-sufficiency in power generation with a target of reducing electricity imports by 30% by 2030 by two means: 1) investing in local generation – mainly renewables – to cover 70% of electricity consumption by 2030 on the path towards 100% by 2050 and 2) market integration with the European Union and de-synchronisation from the Russian power system by 2025.

At the transmission level, Lithuania uses electricity security standards, such as energy not-supplied and the average interruption time. At the distribution level, two key indicators (SAIDI/SAIFI) measure the performance of the reliability of the Lithuanian electricity supply. In 2018, the average duration of electricity supply interruption for the consumers (SAIDI) was not allowed to be longer than 52.12 minutes per year, and the average number of interruptions per consumer per year (SAIFI) when caused by a fault of DSOs not greater than 0.72 times. Following an inquiry in 2019, NERC found that these key indicators were incorrectly calculated by the major DSO and that the available data for 2012 to 2018 are not reliable.

Generation adequacy

Power system adequacy faces a challenging situation with peak demand expected to rise 15% by 2025 while capacity is seen declining 38% because of major retirements in Lithuania and stricter EU environmental rules throughout the Baltic region. Peak demand is expected to increase from 2 GW to 2.46 GW in 2029, as electrification of the economy progresses, according to Litgrid’s network development plan from 2020 to 2029. The ENTSO-E expects that in 2025 the loss of load expectation (LOLE) in Lithuania could increase to 29.5 hours per year. Lithuania planned to address this situation by introducing a capacity mechanism with state support by 2025. ENTSO-E performed the European adequacy assessment in 2021 according to the approved by ACER new European Resource Adequacy Assessment (ERAA) methodology with different criteria, so results could influence significantly next steps towards safeguarding of adequacy. During 2019 and 2020, Lithuania adopted amendments to the Law on Electricity to implement a market-wide capacity mechanism to maintain a sufficient level of security of power supply by the time when the de-synchronisation of the Lithuanian power system from the IPS/UPS system occurs.

Demand-side response

Based on the amended Law on Electricity, Lithuania aims to limit LOLE to a maximum of eight hours per year. It was planned that the capacity mechanism will be implemented through technology-neutral auctions for existing generation facilities, storage facilities (such as batteries), equipment operated by independent demand response aggregators, and new facilities to be operational by 2025 (to replace old, inefficient and non-compliant facilities). The European Commission has approved the latter mechanism under the state aid rules.

Climate resilience

The Lithuanian national risk assessment of 2014 and 2015 carried out an evaluation of all threats to Lithuania, which included the threats caused by climate change. The government has targets for adaptation, notably with regard to flooding, and promotes underground cabling for distribution networks and smart networks to withstand more severe weather conditions. The National Climate Change Adaptation Strategy of January 2020 includes a new impetus for the government to take into account coordination of disaster risk management, emergency and natural events management in times of climate disaster, including prevention, warning systems, rescue actions and adaptation measures.

Cybersecurity

The ever-increasing digitalisation of the electricity sector raises the importance of assessing and taking steps to address cybersecurity risks specific to the power system. Lithuania aims at installing more than one million smart meters by 2023, to cover 70% of consumers. As such, Lithuania has already established, in 2018, the National Cyber Security Centre at the Ministry of National Defence, with the responsibility for unified management of cyber incidents, monitoring and control of the implementation of cybersecurity requirements, and accreditation of information resources. Lithuania should now seek to establish energy sector specific cybersecurity policies, including in the electricity sector.