Lithuanian-Polish power bridge grows into Baltic project

Zidrunas Damauskas, Lietuvos Rytas

Three years ago the prime ministers of the three Baltic states signed a document on establishing a Baltic energy market. In October 2002, in Vilnius, it was already countersigned by heads of energy sector regulators from these countries.

A common energy market for Estonia, Latvia and Lithuania is growing to be increasingly real. The document signed by regulators defines key market regulation principles that would guarantee electric power consumers the right to buy energy from any producer in the Baltics.

Waiting for the ref to whistle?

“The rules of the game are already set. Now we wait for the referee to whistle – these will be political decisions,” Lithuanian energy regulator head Vidmantas Jankauskas said after signing the document.

Linking Lithuanian power grids with Poland and Estonian power networks with that of Finland will be very important for functioning of the Baltic energy market. The advisor recently picked by the European Bank for Reconstruction and Development (EBRD), a consortium led by British IPA Energy Consulting, presented in Vilnius in October a study of the power bridge from Lithuania to Poland. The participation of the European bank in the project gives it more weight as Lithuania alone has been struggling with the subject for several years but to no avail.

Who's to help out with money?    

A new and unexpected thing about the project presented by the British consultants was the proposed involvement of not only Poland and Lithuania, but also Estonia and Latvia. The power bridge is intended to serve the needs of the latter two countries also. The EU has already made the project a priority and plans to give a non-repayable loan for its implementation. 

Authors of the study said the power bridge should be put into operation already in 2008. It would be worth building, if the EU pays 61 percent of the project costs or 275 million euros out of total expected costs of 434 million euros.  

Construction of power transmission lines (with capacity of 1,000 Megawatts) will cost 164.8 million euros, 108 million euros will be needed to renovate the Lithuanian and Polish power systems, 159 million euros will be spent on upgrading the power grids in all three Baltic states and 29 million euros on preliminary work. Renovations for Estonian and Latvian power grids will cost another 30 million euros each.

So far Lithuania tied construction of the power bridge to Poland with consequences of closing the Ignalina nucler power plant, expected to be completely shut down by 2010. If the project is linked with consequences of shutting down Ignalina, the EU must cover costs of the new construction. Nevertheless, the authors of the study recommended to finance the project from other EU sources such as Transportation Network and ISPA that provide funding to economic projects.

Opinions

IPA Energy Consulting representative Ian Pope said the would-be power transmission bridge can be state-owned – i.e., owned by energy concerns of the two countries while private companies may participate in management.

Lithuanian press reports suggested that Russia's unified energy systems RAO UES Rossii, had shown interest in financing the project. The company would also like to use this power line for exporting its electric power to the West.  

The Lithuanian Energy Agency's deputy head Jonas Kazlauskas doubts whether the EU will allocate the money required to build the power line. The amount of the allocation will influence the project's return estimated for a period of 20 years.

Meanwhile, Lithuanian Institute of Energy head Jurgis Vilemas believes that, if the project is brought up to the European level, the power line may elicit interest in context of EU enlargement, as one of the priorities is to have energy links between EU members. Thus, the idea of a power bridge today instills optimism in its supporters.

Rimantas Juozaitis, director general of Lietuvos Energija, the Lithuanian power company, also holds the same opinion. He said the EU simply cannot afford not to grant the required money. “How can we be part of the EU but not linked through power systems? It will happen sooner or later,” stated Juozaitis.

Lithuanian Economics Minister Petras Cesna is 50-percent sure that the EU will finance 61 percent of the project costs. He said a lot will also depend on the kind of the deal that Lithuania will be able to strike with the EU.

Vilemas said it would be very good if they could get at least 30 percent of the required funds. The remainder could be finance by energy companies. Juozaitis said that the would-be power bridge will transmit night-time power to the Baltic states and peak power will be supplied from the Kruoniskiai hydro power plant. Time will show whether the new power line will also serve for transits of Russian electricity.