Baltic States Grapple with "Energy Island" Situation

---

Researched by Industrial Info Resources (Sugar Land, Texas)--During a recent meeting held in Estonia's capital city, Tallinn, the prime ministers of Estonia and Lithuania discussed the frustrating "energy island" status of the Baltic States within the European Union (EU). The electricity system being used in the states is a relic from the 50 years of Soviet occupation that ended in 1991. The system does not allow smooth energy integration with other nations. The Estlink, a cable that runs from Estonia to Finland, is the only significant connection between the Baltic States and the Nordic grid. Estlink 2 is currently in the advanced stages of planning.

Meanwhile, the leaders of Lithuania and Latvia intend to jointly approach the European Commission to call on the EU to prioritize the construction of an energy link between Sweden and the Baltic States. Both nations are eager to step out of the "energy island" situation soon. The EU is currently backing Lithuania for implementing the Baltic Interconnection Plan (BIP), which involves a land link to Poland. Latvia and Lithuania are competing to lay underwater cables across the Baltic Sea to Sweden. The EU has created a grant of about $225 million to implement the BIP. This plan is part of the EU's recovery strategy that has been endorsed by the European Council.

The BIP is being coordinated by representatives from Denmark, Finland, Germany, Norway, Poland, Sweden, and the three Baltic States. A major priority of the BIP is the extension of electricity grids. While the grid extension is of critical importance for Lithuania, an agreement with Latvia has not yet been reached for the project. It is still not clear to which Baltic country the cable will be extended. Implementing the BIP will establish the joint electricity market of the Baltic States. The project will also help the three states explore new sources of electricity generation and encourage the use of renewable energy.

Lithuania has an installed power generation capacity of 5,030 megawatts (MW), while Latvia has an installed power generation capacity of 2,463 MW. Estonia's current power generating capacity is 1,800 MW and is set to increase to 2,830 MW by 2016. By 2023, the country's generation capacity should reach 3,580 MW after the commissioning of the nation's first nuclear power plant.

The European Commission recently announced that it would grant almost $129 million to fund the U.K.-Ireland interconnection project. According to Ireland's Energy Minister, Eamon Ryan, the project will assure Ireland of a more secure supply of energy. Both importing and exporting power will become a feasible possibility, and the power sector will see increased competitiveness. This will be favorable for consumers, as it will bring down prices.

The second unit of Lithuania's Ignalina nuclear power plant will be decommissioned this year for safety reasons, and this closure will create a severe energy crisis in the country. A new nuclear power plant is being planned, but this will be operational in 2015 at the earliest. In order to avoid a crisis and to prevent complete energy-isolation of the Baltic States, the EU Energy Commission has drawn up several short-, medium- and long-term strategies. Construction of new-generation power plants and building interconnections with neighboring countries are some of the plans being finalized and implemented by the Baltic States.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.