Power policy

Lithuania has quite ambitious clean energy capacity goals. The country seeks to have clean sources account for 45% of final energy consumption by 2030. To achieve that, it held a reverse auction for clean power deliver contracts in September 2019. Under that tender, a 75MW wind farm was awarded a zero-subsidy contract and dispatch priority. The auction scheme will continue through 2022 with a total budget of 385 million euros ($20 million). Upcoming plans include auctions for offshore wind power delivery contracts in 2023.

Lithuania has ambitious plans for what it calls 'prosumers'. These small-scale solar installations will receive a boost from a 17-million euro solar rebate scheme and from net metering (up to 100kW for some businesses) or sliding feed-in-tariffs for small-scale (up to 10kW) renewable projects.

Power prices and costs

Due to higher wholesale power prices, prices paid by retail customers have also risen since 2017. Still, retail prices in the country remain relatively low compared to elsewhere in the EU due to the national government’s close regulation. Lithuania is now in the process of implementing a phase-out of price regulation, potentially opening the market to greater competition and choice for consumers.

This is just one of the three major transitions the country’s electricity sector is undertaking, however. Lithuania seeks also to reduce import dependency and increase interconnectivity and synchronization with the European network. New power interconnections with Poland and Sweden are planned for 2023 and could affect price dynamics. This should help Lithuania balance and integrate higher volumes of intermittent renewable generation.

Lithuania has implemented generous investment incentives to convince consumers to install renewable power systems.

Power market

In 2020, renewables accounted for a quarter of Lithuania’s power-generating capacity. Almost half of that was wind or biomass & waste.

Distributed solar is available to residents of apartment blocks through a remote purchasing scheme created under the ‘Solar Community’ online platform in March 2020. Plans for offshore wind are progressing with a site in the Baltic Sea that could support 700MW of capacity having been selected and scheduled for development in 2023.

Lithuania attracted around $1.2 billion of clean energy investment from 2010 through 2020. Wind accounted for almost half the total, although from 2016-2017, biomass dominated, attracting $621 million. Lithuania's top lead arranger for renewables has been the European Investment Bank, which has deployed $204 million, around a third of the country’s total. EIB’s involvement has helped to reduce interest rates for financing renewables, energy efficiency, clean transport, and pollution prevention and control. Lithuania’s first large subsidy-free wind farm of 69MW secured financing from GE Capital and E Energija in August 2020.

Lithuania’s electricity market remains highly concentrated, despite a large number of licensed suppliers. In 2018, more than 90% of all electricity sales on the power exchange came from one supplier: AB INTER RAO Lietuva.

Doing business and barriers

Lithuania seeks to establish a capacity market by 2025. Renewables, generating a total of 21TWh annually, can be awarded with feed-in-premiums through auctions planned through 2022.

Lithuania recently removed many barriers to renewables and the liberalization of electricity prices in 2021-2023 will further support this development. Renewable energy auctions should help capacity build through 2025. As retail electricity prices are low, customers have less motivation to install residential solar systems compared to in other countries, but a rebate scheme set to run through 2023 could spur activity. The goal of synchronization with the European grid by 2025 remains a challenge.

Lithuania’s renewable energy auction scheme got off to a strong start but has lost momentum recently. An auction held in 2020 received less than three bids compared to seven in the earlier auction. Separately, auctions for premiums up to 3.02 euros were undersubscribed and the quota was instead moved to later auctions. Government officials say results demonstrate that current electricity prices and power plant installation costs are enough to spur market activity without state incentives.

Auctions for balancing electricity are held by state grid authority LITGRID with suppliers of balancing energy and TSOs from other countries.

EV market

Demand for internal combustion engine (ICE) vehicles rose by a modest 1.9% from 2018-2019 in Lithuania. By comparison, demand for electric vehicles rose 30% year-on-year, albeit off of a very small base. The growth in EVs can be explained by stronger policies on the books since 2019. The government has been an active ally of the EV industry and has replaced government-owned internal combustion engine cars with electrics.

EV policy

Lithuania seeks to have 15% of its energy demand from the transport sector met by clean sources by 2030 through a mix of EVs, biofuels and hydrogen. The country has in place a 4,000-euro purchase incentive for new EVs. Buyers of used EVs can claim a subsidy of 2,000 euros. In addition, the country’s National Air Pollution Control policy introduced in 2019 incentivizes consumers with 1,000 euros per purchased light passenger vehicle.

EVs and vehicles with emissions below 130 g/km CO2 are exempt from paying Lithuania’s motor vehicle registration tax and the standard pollution tax typically imposed on mobile sources of emissions. In addition, the country is looking to reduce subsidies it offers to fossil fuels that distort the market.

To support the roll-out of charging, the government has held public tenders for the installation of public EV charge points.

Buildings market

Lithuania’s energy efficiency plan includes reducing by 1.5 times its energy intensity by 2030 compared to 2017 levels, with an eye toward meeting the EU average. To achieve the target, it plans to continue renovating inefficient residential and public buildings, increase consumer education and improve the energy performance of businesses to meet an efficiency standard set in 2016. Construction begun after 2017 had to be designated as “A+” by the country’s regulator. In 2020, that changed to “A++”.

Buildings policy

Lithuania plans aims to have two-thirds of its heating and cooling be zero carbon by 2030. Achieving this involves policies that go well beyond the residential sector. Operators of plants that burn biogas, solid and liquid biomass are exempt from the country’s environmental pollution tax. The “Replacement of Boilers in Households” regulation incentivizes households to replace old inefficient biomass boilers with efficient biomass (biofuel) boilers or with heat pumps (geothermal, aerothermal or hydrothermal). The subsidy covers 50% of expenses. The program budget is around 4.8 million euros. A call for applications to receive the benefit was open until November 2021. Meanwhile, the “Renovation of Modern Apartment Buildings” program allows participating flat owners to receive 30% rebates for renovations they make to improve efficiency.