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Scenario Building for the Evolution of Lithuanian Power Sector for 2020-2050

Scenario Building for the Evolution of Lithuanian Power Sector for 2020-2050Key information about the project:

  • Challenge. On 21 June 2018, the Parliament of the Republic of Lithuania approved the National Energy Independence Strategy (hereinafter referred to as “the NEIS”), which establishes Lithuania’s ambition to become an energy sustainable and autonomous country by 2050. In seeking to implement and enable this scenario, the EPSO-G group of companies is planning its activities in the long term, when the majority of electricity will be produced using renewable energy sources.
  • Aim. To determine the energy sector development scenarios that could be developed and the necessary measures that could be applied within the electricity sector in order to achieve the objectives established in the NEIS.
  • Solution. The study “Scenario Building for the Evolution of Lithuanian Power Sector for 2020-2050” (hereinafter – RAIDA 2050) has been carried out, the quantities of power and energy necessary for the balancing of the Lithuanian power system have been established, and a review of the technologies that could be applied when balancing the system has been drawn up.
  • Period of implementation. 2019-2020.

Liutauras Varanavičius, head of Strategy Department at AB “Litgrid”, provides more information about the study:

Electricity consumption growing at an impressive rate, development of renewable energy sources (RES), and targeted subsidies. Such future of Lithuanian energy is anticipated in the next 30 years in the study “Raida 2050”, which has been commissioned by “Litgrid”. The data of the study, the value of which amounts to 120 thousand euros, is publicly available: it is a gift from the electricity transmission system operator to the market participants and the general public.

“All of the data, insights and conclusions contained in “Raida 2050” have been made accessible to the market and anybody who wishes to learn more about the future of the Lithuanian energy market and the changes that we can already start preparing for. The key objective of this study is exactly that: to determine the direction of Lithuanian energy, so that we know what to expect and get ready for the transformation of the system,” says Liutauras Varanavičius, head of Strategy Department at AB “Litgrid”.

Electricity is the fuel of the future

Electricity is the fuel of the futureDNV GL, an international leader in consultancy services, carried out the study in accordance with the ambitious National Energy Independence Strategy (NEIS). In the NEIS, it is anticipated that Lithuania will become a climate-neutral country by 2050, producing 100 per cent of its electricity from renewable energy sources. At the moment, RES account for about one-fifth of the overall quantity of electricity consumed in Lithuania.

Such a goal seems even more ambitious given the prognosis presented in “Raida 2050”, which states that over the next 30 years, the consumption of electricity in Lithuania will increase from the present 13 terawatt-hours (TWh) to an impressive 20 TWh. The biggest role here will be played by the growing electrification in the sectors of industry, customer service and especially transport.

“Solid fuel, biofuel, gas-fired boilers are already being replaced with electric heating and ventilation systems both in households and in the industry sector. In the transport sector, the demand of electricity will continue to grow not only due to electric cars but also because of electric railways and ports that are switching to using hydrogen. So other sources of energy – biomass, gas, firewood, petrol – are being replaced by electricity,” notes L. Varanavičius.

The majority of electricity will be produced from offshore wind

Offshore wind power plantsAccording to the NEIS, the total demand for electricity in Lithuania shall have to be satisfied by RES. Experts anticipate that if the portion of RES is gradually increased, offshore wind will become the primary source of production by 2050, amounting to about 40 per cent in the RES generation structure, while a further 30 per cent of the total demand will be satisfied by onshore wind and solar energy.
Nevertheless, the building of numerous wind farms and solar power plants shall not suffice, as the key weakness of RES and its main difference from the traditional methods of generating fossil fuels lies in the fact that electricity cannot be continuously produced and its capacity cannot be increased or decreased as soon as the need arises.

“This means that we must provide for additional measures of energy storage, so that the needs of the users are satisfied at all times, even when the wind is not blowing and the sun is not shining – for example, on cold winter evenings, when consumption tends to increase,” explains L. Varanavičius.

The goal is to control possible price shocks

The authors of the study “Raida 2050” note that if we fail to take action, the system shall encounter great challenges, which will take the form of huge wholesale electricity price shocks. As soon as in 2040, in the weeks when the winds are not blowing and the sun is not shining, wholesale electricity prices can increase up to 3500 EUR/MWh. Conversely, in the sunny and windy weeks, once the production of RES has reached its peak, considerable surplus can occur, resulting in the price dropping as low as 0 EUR/MWh. In comparison, the average electricity price in the Lithuanian market amounted to 46 EUR/MWh in 2019.

The period of low electricity prices could occupy about one-third of the overall time each year. However, this fact is far from good news, as the losses experienced by the producers of “free” energy would have to be compensated by the state. In such a case, subsidies for RES and the development of small means of storage could amount to 180 million euros per year.

The period of low electricity prices could occupy about one-third of the overall time each year. However, this fact is far from good news, as the losses experienced by the producers of “free” energy would have to be compensated by the state. In such a case, subsidies for RES and the development of small means of storage could amount to 180 million euros per year.

Hydrogen will be added to other flexibility measures

HydrogenLithuania is advised not only to encourage and introduce various flexibility measures relating to short-term storage devices and users but also to exploit the technologies allowing to produce hydrogen from RES. Such technologies would ensure the production of “green” hydrogen gas for the sectors of industry and transport, and would contribute to the decarbonisation of these sectors.

“Measures such as batteries, electric cars, reservation of production, flexible ventilation and heating solutions can only work in the short term. They enable us to “postpone” consumption for a few hours or, at best, days, but never weeks or months. The solution proposed in the study is transferring the surplus of electricity to the production of hydrogen. The latter is already used as fuel in various areas, although it must be noted that the production of hydrogen is cheaper when using gas,” states L. Varanavičius.

Experts predict that the technology of hydrogen electrolysis shall become particularly promising after 2030. Nevertheless, it is suggested that we should begin considering such solutions and getting ready for their implementation earlier than that in order for Lithuania to be ready to exploit this technology once it has been perfected.

It is predicted that, if the possibilities of hydrogen electrolysis are exploited, the need for subsidies will decrease by about three times in 2050 and will amount to about 60 million euros per year. The introduction of flexibility measures would also help to avoid huge wholesale electricity price shocks and to keep the average electricity price attractive to users.

Benefits for the energy sector, businesses, people

The insights of the study are particularly important and useful to the producers, suppliers of electricity, as well as industrial undertakings purchasing electricity on the wholesale market. On the other hand, they can be relied on by other businesses as well, for example, while preparing for the increase in the demand for “green” electricity and equipment related to it. The general public will also be enabled to access separate niches, such as the use of electric cars and household batteries, which will be connected to a single network by the suppliers.

You can access the study “Raida 2050”, which has been commissioned by “Litgrid” and carried out by the international consultancy services company DNV GL, here: Study PDF