Description

This study forms part of Frost & Sullivan's European Electricity Industry Profiles series and includes Estonia, Latvia, and Lithuania. Included in these profiles are:
•     an assessment of key drivers and restraints in the market
•     the demand and total generation profile
•     key aspects of energy policy
•     forecasts on the development of fuel mix, including installed capacity and Euro investment
•     renewable support incentives and mechanisms
•     key participants in power generation, retail, and distribution
•     shape of the transmission and distribution network and future investments
Although the Baltic States are 3 of Europe's smallest electricity markets, they offer attractive investment opportunities for European investors. All 3 are looking to increase their penetration of renewable energy as a way of ensuring security of supply against dependence on Russian gas, although there have not been any major supply crisis for some time now and Russia is keen on not scaring its European customers at a time when renewable energy investment across Europe is continuing to increase.
Another key strategy for security is investment in interconnections between states and, crucially, between the large Nordpool grid of the Nordic countries. All 3 countries have strong national champions that dominate electricity generation, but smaller companies are gaining share, mainly through investment in wind or bioenergy projects. The climatic conditions mean that solar potential in the region is limited. In the retail market, the rate of liberalisation is varied, but new entrants are starting to make inroads into the traditional state of dominance.
In terms of new investments, Estonia has plans to invest mainly in wind energy, but will also continue to invest in oil shale, a type of fuel found in few countries around the world. This fuel is not environment-friendly, but Estonia needs to leverage its natural resources and it cannot move entirely away from this fuel. New plants will have the latest environmental pollution control technologies and will operate at higher levels of efficiency than current plants, which is a significant improvement. The Baltic interconnector between Estonia and Finland will also help to ensure its energy security, a matter of key importance.
Latvia is making significant investments in wind technology, but the largest amount will go into natural gas, sourced from Russia and the Nordic region. Latvia has a fully liberalised electricity market and this should encourage new investments. In addition, Latvia is investing in bioenergy, given its extensive forestry resources that it can draw on for feedstock supply. Latvia also needs the baseload electricity generation that comes from fuels such as bioenergy to balance intermittent hydro power, on which it depends heavily.
Lithuania is investing significant amounts in wind energy and fossil fuels, mainly natural gas. Lithuania has an operational liquefied natural gas (LNG) terminal, which means it can source gas from the global market. This makes the country more comfortable with the idea of investing in gas. It is also investing in pipeline connections.