Deal on Russia-Baltic power trade due by year-end – regulator

Tasmin Chowdhary

31-Oct-2019

TALLINN (ICIS)–Details on a revised methodology for Baltic commercial power trade with Russia and Belarus is likely to be available from the end of the year, Latvian transmission system operator (TSO) AST has told ICIS.

Negotiations over how electricity trade between Latvia, Lithuania and Estonia and third countries – Russia and Belarus – would be organised are still in progress between regional energy regulators and TSOs.

“The general target is for Baltic TSOs to find a solution…but the middle ground is not there yet,” Gatis Junghans, member of the management board of AST said.

Lithuania last year passed a law prohibiting trade with third countries following the commencement of the 2.2GW Astravets nuclear power plant in Belarus, which the authorities believe violated international safety standards.

Lithuanian authorities have already suggested two options, one for commercial trade to end next year and the second, would be some “limited capacity” on the Estonia-Russia border, Junghans told ICIS on the side-lines of the Baltic and Nordic Energy Summit in Tallinn.

Any revised methodology for trade would see capacity reduced from currently available levels due to physical border constraints, he said.

Latvian authorities published a draft methodology for Russian cross-border capacity in August, with support from the Estonian TSO and regulator but not from Lithuania.

Another source from the Latvian energy regulator Public Utilities Commission told ICIS that Baltic TSOs were also working to reduce the maximum net transfer capacity on the Latvian and Estonian borders for next year.

Surging imports of CO2 quota-free Russian electricity was “distorting the market” and dampening domestic production, he added.

Baltic de-synchronisation with the Russian-Belarusian grid by 2025 would mean “closing the dirty entrance for non-competitive markets,” said Liutauras Varanavicius from Lithuanian TSO Litgrid.

BUILDING PRESSURE

On a political level, the TSO is under pressure to find a solution, as unit 1 of the Belarusian nuclear plant is due to be commissioned early next year, when Lithuania’s regulation would come into force.

“The biggest problem is uncertainty as market players are struggling to understand [what the impact would be],” Junghans told attendees at the event.

With the mothballing of oil shale generation capacity in Estonia, the Baltics have become increasingly dependent on third country imports this year. Imports from January to September reached 3.5TWh, almost double the volumes imported of 1.6TWh over the same period last year.

Since 2013, TSOs agreed that Baltic trade would be conducted on the Lithuanian-Belarus border with 1.3GW maximum capacity. While physical power transmission with Russia is possible for Estonia and Latvia, all commercial flows are through the Lithuanian border, available on the Nord Pool exchange.

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