Latvia is making significant strides in renewable energy and infrastructure development, with ongoing reforms and projects aimed at increasing energy capacity and efficiency. Here is the Energy sector news for Q4 of 2024.
WIND: Additional Areas for Wind Farms are expected from 2028 according to Ministry of Defense
Since the last report, updates have been made to the map to clarify areas where wind farm construction could impact national defence operations, highlight zones with potential restrictions, and mark regions where wind parks do not impact national security or defence readiness. The Ministry has emphasised that permission decisions rely on National Armed Forces evaluations rather than map colour codes, especially near sector borders. The map only simplifies approvals by highlighting areas with minimal defence impact, guiding developers toward locations with easier and faster approval processes.
According to the recent information report of the Ministry of Defence it is planned that by transferring several existing radars and creating additional airspace surveillance sensors, the territory of Latvia will be significantly more accessible for the development of wind farms as from 2028. Placement of new radars, however, also implies the placement of new protection zones around them. The Ministry of Defence promises to submit a detailed plan for the implementation of the planned measures to the Cabinet for consideration by the end of the year. In September of this year, the government already accepted to divert almost EUR 50 million for the purchase of additional radars over a 3-year period. This informative report and the wind farm map attached thereto affect also those bidders who in 2023 and 2024 have participated in the auctions of Latvian State Forests for granting of building rights for development of wind farms – the proposed solution provides for the refund of the security deposit or recalculation of the auctioned one-time payment, if the planned park is fully or partially located in the white or yellow zone indicated on the map.
WIND: Amendments To EIA Procedure
The planned amendments to the Environmental Impact Assessment (EIA) procedure propose transferring the authority of making the final decision regarding results of EIA from local municipality to a state authority – the Environment State Bureau of Latvia. Still, the local government will have to be consulted prior to EIA procedure to assess the compliance of the intended activity with the spatial plan. The amendments to the law are set to be adopted by January 2025. However, as the necessary adjustments to the regulatory acts arising from the Law on Environmental Impact Assessment will be finalised by January 2026, the amendments are expected to enter into force in January 2026.
WIND: Offshore wind project ELWIND is progressing slowly
Taking into account that Latvia has by the National Energy and Climate Plan committed to reach 100% renewable energy sources in final electricity consumption by 2030, development of the Latvian Estonian offshore wind farm ELWIND project with a capacity of up to 1 GW has been identified as a political objective. The Ministry of Economics has recently published a report on the progress of the development indicating that while the project location in Latvia is still expected in the research zone E4 the targeted area is changed due to partially overlapping, recently established biological diversity territory. Also, the planned offshore wind park area falls within the operational range of the Ministry of Defence’s radar, critical for airspace monitoring and NATO missions. To address potential radar interference, compensatory measures, such as additional radars or radar modernisation, will be necessary. However, it is not yet determined who will bear the costs of these measures. The specifics will be clarified following the wind park auction. The report also highlights ongoing work to evaluate potential connection points for the Fourth Interconnection, which will link the ELWIND wind park to Latvia’s electricity grid, as well as increase trading capacity between two price zones. Currently the EIA process is performed for the project with the final statement expected in 2027; the auction is now expected in 2028 and the start of commercial operation of the wind farm – by 2035.
GRID: Desynchronisation in February 2025 and New Requirement for Balancing Service Recipients to Cover Balancing Capacity Costs
In February 2025 desynchronisation of the transmission systems of the Baltic States from the circle of BRELL is expected to synchronise with the continental Europe, which means an increase in the operating costs of the system. Accordingly respective amendments to the Network Code for the Electricity Sector have been elaborated introducing an obligation for balancing service recipients to cover the costs of maintaining balancing capacity. It is estimated that total balancing capacity maintenance costs in Latvia could reach indicatively EUR 40.74 million in 2025. The draft amendments propose that the TSO will start applying balancing capacity maintenance charges from July 2025.
GRID: Electricity Transmission System Service Tariff Discount for End-users
In the light of the earlier amendments to the Electricity Market Law, which tasks the Regulator with establishing criteria for determining eligible users and specifying the methodology for the TSO to calculate and apply the discount, the Regulator has adopted the procedure applicable to the users who, starting from May 2024., has applied for receiving technical requirements for the installation of a new connection to the transmission system and who installs the new connection to the transmission system, from the moment of concluding the system service contract. If the installed capacity of the connection is less than 25 MW, the discount will be 80% of the transmission capacity maintenance fee, but if the installed capacity is equal to or greater than 25 MW, the discount will be 90%. The discount is terminated if the total value of the discount during the entire application period reaches the amount of the connection fee paid by the specific user, or if five years have passed from the date of conclusion of the system service contract.
GRID: Flexible Connection Procedure Still in Adoption Process in Parliament Amendments to the Electricity Market Law
Since the last report, updates have been made to the planned procedure set in the Electricity Market Law applicable to producers connecting to the grid by applying for the flexible/switchable capacity product is still in the Parliament – the respective. By applying the flexible capacity product TSO will be entitled to limit the transmission service to 876 hours within one calendar year. The draft amendments to the law provide the possibility for producers who have already reserved transmission network capacities to abandon the reserved capacities in whole or in the 1st reading, and the deadline for submitting proposals for the 2nd reading is set for January 16, 2025. It is planned that the proposed transitional period during which the developer will be able to request the release of the grid network capacity reservation fee is set to end on 31 January 2025, but as the amendments are unlikely to come into force by then, the transition period is likely to be extended.
THERMAL ENERGY: New Procedures on Residual Heat
The amendments to the Energy Law have come into force applicable as of October 1, 2024, stipulating that if multiple producers of thermal energy operate in the licensing zone of a heating system operator and residual heat (thermal energy, which as a by-product is inevitably generated in industrial facilities, power plants or facilities used in the tertiary sector, or if a cogeneration process is or will be used, and which, without access to a centralised heat supply system, would be lost in air or water if not used) is available, the operator must organise a procurement process, selecting the most economically advantageous offer. Producers are required to adjust their production volumes if residual heat is more cost-effective, with the operator determining the procedures for such adjustments. Additionally, the operator has the right to impose a fee for reducing production volumes, based on a publicly available methodology.
POWER: New Regulations on the Registration and Operation of Energy Communities
On December 13, 2024, the Regulations on the Registration and Operation of Energy Communities have come into force, establishing the procedures for registering and managing energy communities in Latvia. These regulations outline the process for energy community registration, the conditions for electricity sharing, and the required information to be included in electricity-sharing agreements. The registration, control, and removal of energy communities from the register are managed by the State Construction Control Bureau.
GAS: Reforms in Natural Gas Market Procedures
Since the last report, amendments in Energy Law regarding the natural gas market procedures have come into force on October 1, 2024. The Inčukalns Underground Gas Storage (UGS) is now divided into two parts – the solidarity part, the part of the storage with a capacity of 4 TWh, and the market part (the remaining part of the storage). The regulated procedure now can be replaced with a negotiated procedure which will be applied to Finnish, Estonian and Lithuanian operators who will store natural gas in the solidarity part of the Inčukalns UGS to ensure the supply standard set in Regulation 2017/1938.
