Scenarios for the development of the Lithuanian electricity system for 2020-2050
Electricity consumption is growing at an impressive rate, renewable energy sources (RES) are expanding and subsidies are targeted. This is the future of Lithuanian energy for the next 30 years, according to the study “Raida 2050” commissioned by “Litgrid”. The data from the €120,000 study are publicly available as a gift from the transmission system operator to market participants and the public.
“All the data, insights and conclusions of “Raidos 2050” are open to the market and to anyone who wants to know what the future of Lithuania's energy market will look like and what changes we can start preparing for now. This is the main goal of this study: to set the energy direction for Lithuania, so that we know what to expect and are ready for the transformation of the system,” says Liutauras Varanavičius, the Director of “Litgrid” Strategy Department.
Electricity - fuel of the future
The study was carried out by DNV GL, an international leader in consultancy services, in line with the ambitious National Energy Independence Strategy (NEIS). It envisages that by 2050 Lithuania will become a climate-neutral country, generating 100% of its electricity from renewable energy sources. At present, RES meet about one-fifth of Lithuania’s total electricity consumption.
This goal is even more ambitious in the light of the “Raidos 2050” prediction that Lithuania's electricity consumption will grow from the current 13 terawatt hours (TWh) to an impressive 20 TWh over the next 30 years. This will be mainly influenced by increasing electrification in industry, services and especially transport.
“Solid fuel, biofuel and gas boilers are already being replaced by electric heating and ventilation systems, both in homes and in industry. In the transport sector, electricity demand will grow not only because of electric cars, but also because of electric railways and ports switching to hydrogen. Thus, other energy sources - biomass, gas, firewood, petrol - are being replaced by electricity,” notes L. Varanavičius.
Most of our electricity comes from offshore wind
According to the NEIS, all of Lithuania’s electricity demand will have to be met by RES. Experts predict that if the share of RES is gradually increased, offshore wind will be the main source of generation in 2050, accounting for around 40% of the RES generation structure, with onshore wind and solar accounting for around 30% of the demand.
However, it is not enough to build a large number of wind and solar power plants, because a major drawback of RES, and a difference from traditional fossil fuel generation, is that electricity is not produced continuously and capacity cannot be scaled up or down as and when needed.
“This means that we have to provide additional measures to store energy so that consumers' needs are always met, even when the wind is not blowing and the sun is not shining, such as in the cold winter evenings, when consumption rises," explains L. Varanavičius.
The aim - to contain potential price spikes
“The authors of the “Raida 2050” study note that the system will face major challenges if nothing is done, with huge spikes in wholesale electricity prices. After 2040, wholesale electricity prices could soar as high as €3,500 per MWh in the weeks when the wind is not blowing and the sun is not shining. Conversely, in sunny and windy weeks, a maximum increase in RES production would lead to a surplus and the price would drop to €0/MWh. In comparison, the average electricity price on the Lithuanian market in 2019 was €46 per MWh.
A period of low electricity prices could be around one third of the time throughout the year. However, this is far from encouraging, as the losses of "free" electricity producers should be compensated by the state. Subsidies for the development of RES sources and small-scale storage would amount to up to €180 million per year.
“Doing nothing would be a real luxury. The study therefore identifies measures to ensure the stability and reliability of the system during the transition period, to ensure that prices remain attractive and that producers secure sufficient income. And the state subsidies would need to be three times less”, says the representative of “Litgrid”.
Hydrogen will complement flexibility measures
Lithuania is advised to promote and deploy not only a range of short-term storage facilities and consumer flexibility measures, but also to exploit hydrogen production technologies from RES. They would ensure the production of “green” hydrogen gas for industry and transport and contribute to decarbonising these sectors.
“Measures such as batteries, electric cars, production deferral, flexible ventilation or heating solutions are only short-term solutions. They allow you to “shift” your consumption for a few hours or, at best, days, but not for weeks or months. The study therefore proposes a solution by shifting surplus electricity to hydrogen production. The latter is still used as a fuel in various applications, although it is currently cheaper to produce hydrogen using gas," says L. Varanavičius.
Experts predict that hydrogen electrolysis technology will become very viable after 2030. However, it is suggested to start thinking about and preparing for these solutions before then, so that when the technology is perfected, Lithuania is ready.
Once the potential of hydrogen electrolysis has been exploited, the need for subsidies is projected to be reduced by a factor of three to around €60 million per year in 2050. The flexibility measures would also help to avoid huge spikes in the wholesale price of electricity and maintain a favourable average electricity price for consumers.
Benefits for energy companies, businesses and people
The insights from the study are of particular relevance and benefit to electricity generators and suppliers, as well as industrial companies that buy electricity on the wholesale market. On the other hand, they can also be used by other businesses, for example to prepare for the growth in demand for “green” electricity and related equipment. There will also be niches for residential customers, for example through the use of electric cars or home batteries, which will be connected into one network by suppliers.
The “Raida 2050” study, commissioned by “Litgrid” and carried out by international consultancy services company DNV GL, is available here: Studies PDF
