The Baltic Power Scene
By Oleg K. Temple, October 2010. Published in PRIME Match Magazine #40.
“NUCULAR” POWER
Nuclear power is generated through controlled (i.e., non-explosive) nuclear fission reactions that vaporize water and the steam drives the turbines to generate clean electricity.
Today, over 150 naval vessels rely on nuclear-powered propulsion and the World Nuclear Association reports that in 2009, 13–14% of the world’s electricity came from nuclear power. Indeed we’ve come a long way since the world’s first NPP went online in June, 1954 in the USSR generating just 5 megawatts.
The last section of the decrepit NPP was finally put to rest on December 31st 2009. To somewhat quell the fierce opposition from the locals – concerned about power vulnerability due to increased dependency on Russia, crippled economy and job loss – a number of government incentives and projects were launched to revive tourism and support SMEs in Lithuania.
In 2008, the power companies of Lithuania, Estonia, Latvia, and Poland founded the Visaginas Nuclear Plant Company, which will be responsible for construction, of the new NPP with a capacity of 3,000–3,400 megawatts, by the start of this millennium’s second decade. The project is predicted to have sponged up about 2.5 billion Euro. Lithuania will own 34% of the shares in the enterprise and the rest will be evenly split amongst the other participating nations.
THE LATVIAN GAMBIT
Rather than spew more CO2 and other pollutants into the environment, Latvia has chosen to position itself ahead of the curve and become part of the solution rather than stubbornly pursue dead-end, obsolete technologies and contribute to the ever-escalating problem. Latvia has sold a significant amount of carbon credits allocated by the EU, to various nations including Portugal, Austria, Netherlands and even a private investor in Japan, in order as to fuel the shift from fossil-generated to renewable energy sources.
| Latvenergo Joint Stock Company (JSC) is one of the largest corporate entities in Latvia, engaged in the generation of electricity and thermal energy, electricity trade, IT and telecommunication services. Predominantly due to successful export, the annual profit of Latvenergo AS in 2009 scaled 20 million Lats and was in its entirety transferred, for the second year running, as dividends to the state budget. |  |
INDUSTRY OVERVIEW:
In Soviet times, the primary load power plants were built in Estonia (oil shale power plants) and Lithuania (Ignalina Nuclear Power Plant, the Elektrenai Power Plant – presently the primary source of Lithuania’s power supply following the NPP’s shutdown). Sandwiched between its neighbours, Latvia drew the short straw on the power grid. Over two thirds of Latvia’s electrical power comes from 2 hydropower plants (HPPs). Hence, millions of lats are allocated every year to their maintenance, modernization and operation with a peak figure of 10.6 million in 2008, subsiding slightly to 9.7 million lats in 2009. Incidentally, B2B L!ST member, Energolukss plc. guaranteed uninterrupted power supply during the reconstruction of key HPPs in Keguma and Plavinu (the largest HPP in the Baltic in terms of production capacity) in 2005-2006. Founded in 1997, Energolukss plc. became the official Latvian AEG SVS distributor in 1998, when the company also received an official representative license from SDMO. By 2000 the company established the largest generator rental park in the Baltic States and as of 2007 became the official representative of Socomec in Latvia.
The power deficit in Latvia is mainly compensated for by imports from Estonia, Lithuania and Russia, as Latvia is not yet hooked to the European grid but is still connected only to the Russian/CIS electricity system.
Early on in the new millennium Denmark and Portugal took the lead in the race to effectively harness the power of air currents. Several programmes are underway to bolster the propagation and to refine exploitation of alternative energy sources in the Baltic region. In 1996 Latvia’s first serious wind power plant (WPP) was born in Ainaži. The Latvian Energy Law mandates cardinal energy distributors, to buy production output from renewable energy sources, for a competitive price established by the regulator (Cabinet of Ministers).
Another major way to increase energy efficiency is through maintenance and reconstruction of existing infrastructure. In December 2005, Latvenergo AS and the Spanish company Iberdrola signed an agreement on the large-scale reconstruction of Riga’s thermal power station no. 2 (TEC-2) and its maintenance. The deal stipulated construction for 178 million Euros and subsequent maintenance for 95 million Euros.
In May, 2009, the first reconstructed power unit of the TEC-2 was officially opened before dignitaries such as King of Spain Juan Carlos I, and Valdis Zatlers, the Latvian President. Kārlis Miķelsons, the CEO of Latvenergo AS, said that this investment strengthens the position of Latvenergo, as Latvia is the only Baltic State that has opened its electricity market and Latvenergo has to operate in a changing, competitive environment. K. Miķelsons stressed: “Previously, both heat-electric generating plants were running on the oils; now we use gas, an environmentally more friendly resource, to generate the electricity. Besides, if we take into consideration that around 60% of the total amount of the electricity is generated in hydropower stations, Latvenergo can be regarded as one of the greenest electricity generating companies in Europe.”
TEC-2 now churns out 600 MWel electric and 1,124 MWth heating capacity. Currently, the station is the most modern electricity and heating station in the Baltic region, increasing the power supply safety in Latvia and simultaneously slashing Latvia’s power supply dependency by 30%.
A MARKET FREE IN NAME ONLY
As of 1 July 2007, Latvian residents have been free to switch to alternative electricity suppliers. No household has yet exercised this right, primarily due to the absence of alternatives more economically attractive than what is offered by Latvenergo.
The Electricity Market Law also stipulates: as from 1 July 2007, the distribution system operator must be legally separated from entities engaged in generation, transmission and supply of electricity. So, all functions of electricity distribution system operator were taken over by AS Sadales Tikls, a fully-owned subsidiary of Latvenergo JSC. The transmission system is operated by Augstsprieguma Tikls JSC, which is also owned by Latvenergo.
Close to 80 licences have been issued by the Latvian Public Utilities Commission, however, the lion’s share of the market undisputedly belongs to the state-owned Latvenergo JSC, which has gone to considerable lengths and expense to consolidate its position in Latvia.
By Law, Latvenergo JSC as well as its shares must remain the property of the state and may not be privatised or otherwise alienated. Furthermore, the power plants and the electricity transmission and distribution infrastructure and equipment may not be used as collateral or transferred to any entities other than those fully owned by the state.
Thus, despite the existence of a general legal framework for liberalisation of the electricity market, the insurmountable logistical and technological practicalities make the environment not conducive for healthy, fair competition with the dominant giant. Under current conditions, it is simply impossible for any other company to effectively penetrate the market with competitive prices. Ergo, all bow before Latvenergo – until something significant changes in the Electricity Market Law, the power syndicate will retain its pseudo-monopolistic control and this “free market” charade will endure.
Just as in the realm of electricity, the Ministry of Economics is the sovereign entity over the gas industry. In contrast to the electricity arena, the Latvian natural gas market is purely monopolistic, Latvijas Gazeis JSC is the only entity licensed to transport, distribute, store and supply natural gas until 2017.
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AAS Gazprom of Russia and Itera-Latvija Ltd. are the chief importers and liberalisation of the natural gas market is extremely unlikely in the immediate future. |
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