Energy Sector in the Baltics – Q2 2025

30.07.2025 | 18 min | Estonia, Latvia, Lithuania

The Baltic states are accelerating their energy transition with major developments in wind, electricity grid upgrades, and renewable support schemes. Estonia, Latvia, and Lithuania are each advancing legislation, auctions, and infrastructure to strengthen energy security and integrate more clean energy. This update outlines the latest regulatory and market changes shaping the region’s energy future.

ESTONIA

WIND

Saare 7 Offshore Wind Auction Ends Without a Winner, New Applications Invited. The Saare 7 area, located approximately 12 kilometres west of Saaremaa, is one of Estonia’s designated offshore wind development zones under the national maritime spatial plan. Covering 158.9 km², the area was opened for development through a public tender launched to determine which developer would gain the exclusive right to apply for a superficies licence for the site.
Two developers submitted competing applications ahead of the 18 March 2025 deadline. However, as neither of them participated in the auction scheduled for 10–12 June 2025, the auction could not be carried out. As a result, no winner was determined, and the superficies licence proceedings could not be initiated.
On 11 July, CPTRA announced that the Saare 7 area is once again open for new licence applications. While the government has ruled out direct subsidies for offshore wind projects, it is considering the use of financial instruments to support large-scale developments – a move that could help revive investor interest in future auctions.

GRID

New Tender Launched for 500 MW of Frequency Reserve Capacity in Estonia. Elering has extended the submission deadline for its long-term public procurement of up to 500 MW of generation and storage capacity for frequency reserve services. The new deadline is 08 August 2025, three months later than initially planned. The deadline extension was linked to a proposed amendment to the Electricity Market Act by the Ministry of Climate, which introduces a fixed, uniform grid connection fee, providing cost certainty for project developers.
Fixed Grid Connection Fee to Be Introduced from 2026. A new amendment to Estonia’s Electricity Market Act will introduce a fixed grid connection fee for producers wishing to connect to the existing electricity network. Under the revised system, half of the connection costs will be covered by electricity consumers and the other half by the connecting party. A fixed price list will be established to improve cost predictability for both producers and consumers.
In areas without an existing grid, the current cost-based connection model will remain in place. The law also sets out detailed criteria for calculating the connection fee, which includes a cost-based component, a fixed rate per megavolt-ampere (called the network strengthening fee), and other standardised charges related to substations and project management.
The changes are set to enter into force on 1 January 2026. Elering is currently working with the Competition Authority to finalise the exact pricing formula.
The tender, launched in July 2024, aims to secure capacity from new production and storage units to support the independent frequency control of Estonia’s electricity system in preparation for the planned synchronisation with the Continental European grid in 2026. An exemption granted by the European Commission allows the procurement of reserve capacity for up to eight years in advance, meaning contracts can run until 2033.
According to Elering, interest in the tender has been significant, with 29 companies already registered as potential bidders. Eligible bidders must propose new production or storage units and demonstrate the ability to transition to renewable fuels over time, in line with EU climate objectives. The submission window for proposals is nine months. Successful participants will receive capacity payments once their assets begin delivering reserve services. These payments will be funded through balancing service fees, ensuring cost neutrality for the system operator while providing stable, long-term revenue opportunities for capacity providers in the region.
Island Operation Reserve Law Passed to Strengthen Estonia’s Energy Security. The Estonian Parliament has adopted an amendment to the Electricity Market Act, establishing a framework for an island operation reserve service. From 2026 onwards, the new regulation will allow the country to retain sufficient electricity generation capacity to ensure the stability of the national grid in case Estonia becomes disconnected from the Baltic or Continental European power systems.
Elering, the national transmission system operator, will be responsible for assessing whether adequate dispatchable capacity is available at all times. According to supporting documents, Estonia’s minimum need for dispatchable capacity is estimated at approximately 1,000 MW.
To procure the required capacity, Elering will launch a technology-neutral public tender. A key condition is that participating generators must be capable of continuously supplying power for 10 days. The expected annual cost of the service is estimated at around €34 million.

GENERAL

Competition Authority Finds No Legal Barriers to Long-Term Power Purchase Agreements. A recent analysis by Estonia’s Competition Authority has confirmed that there are no legal or administrative obstacles preventing the use of long-term power purchase agreements (PPAs) in the electricity market.
The review assessed regulatory and procedural challenges related to renewable electricity contracts and proposed measures to reduce unnecessary barriers to their wider adoption.
While current legislation allows for such agreements, market participants cite general regulatory uncertainty and limited financial capacity as key constraints. The Competition Authority’s recommendations aim to address these issues by promoting a stable and predictable environment to support investment in renewable energy.
Suggested actions include developing a domestic PPA market, exploring regional cooperation – such as a joint Baltic PPA platform – and encouraging public sector demand aggregation. Additionally, mechanisms to mitigate financial risks for smaller market actors should be considered as part of future directive implementation.
Estonia Plans to Auction Kiisa Reserve Power Plant by mid-2028. The gas-fired plant, owned by transmission system operator Elering, was commissioned in 2014 to provide backup capacity and does not currently participate in the electricity market. With the EU exemption allowing its use in Estonia’s frequency reserve set to expire in 2028, the asset is expected to transition to full market-based operation.
The plant’s future role could include shaving peak prices and participating in frequency and capacity markets, particularly as Estonia strengthens its grid independence following desynchronisation from the Russian system.
The upcoming auction offers access to a fully built, grid-connected asset at a time when regional reserve and balancing needs are expected to increase.
Estonia’s New Energy Plan Shifts Focus to Clean Power, Price Competitiveness and Security. The revised draft of Estonia’s National Energy and Climate Plan (ENMAK 2035), published this week, marks a notable shift in the country’s energy policy. The former goal of 100% renewable electricity by 2030 has been replaced with a new target: 80% clean electricity by 2035. “Clean” electricity now includes renewables, nuclear energy, and hydrogen-based generation.
The updated plan places strong emphasis on energy security and economic competitiveness. Rather than framing energy policy primarily through the lens of climate objectives, the new version highlights the role of the energy sector in supporting national resilience and industrial competitiveness.
In terms of technology, energy storage is expected to develop on a market basis, with minimal state intervention. The use of oil shale is no longer bound by a fixed phase-out date; instead, its continued use will depend on market competitiveness. Direct burning of oil shale in electricity generation is expected to decline significantly by 2035, but may continue in combined heat and power plants until new capacity is built.
Overall, ENMAK 2035 signals a more pragmatic and flexible energy strategy, balancing environmental goals with price stability and security of supply.

LATVIA

NUCLEAR

Ministry of Climate and Energy Evaluates Potential Cooperation with Estonia on Nuclear Power Plant Construction. In May 2025, the Ministry of Climate and Energy initiated an evaluation of potential cooperation with Estonia on the construction of a nuclear power plant. By 1 September 2025, the Ministry is expected to prepare the initial phase of Latvia’s national nuclear energy program, which will include proposals for regulatory measures, safety standards, and the assessment of available human resource capabilities. Furthermore, by 1 November 2025, the Ministry must submit a comprehensive report outlining the results of bilateral negotiations with Estonia. The development of nuclear energy is seen as a viable solution to ensure long-term security of Latvia’s base-load electricity supply while maintaining stability in conjunction with the increasing share of renewable energy sources.

ELECTRICITY

Amendments to Cabinet Regulations to Promote Development of Energy Communities. On 5 June 2025, amendments to the Cabinet Regulations “Rules on the Registration and Operation of Energy Communities” were adopted to promote the development of energy communities in Latvia and encourage public participation in energy sharing. Under the new framework, energy communities with a capacity of up to 0.999 MW may sell electricity at the Nord Pool market price, with a maximum discount of EUR 20/MWh and a price floor of EUR 0/MWh. Contracts must be signed for at least 12 months but can be terminated early without penalty. Additionally, municipalities are required to ensure that at least 10% of the electricity produced by such communities is allocated to socially vulnerable individuals, ensuring fair access to renewable energy benefits.
Energy and Environment Agency to be further integrated into State Environmental Service. On 16 July 2025, the Ministry of Climate and Energy submitted a draft decree to merge the Energy and Environment Agency with the State Environmental Service. This integration, if approved, will take effect on 1 September 2025. The planned restructuring aims to consolidate environmental and energy oversight functions under one authority, thereby improving administrative efficiency and streamlining permitting processes for renewable energy projects. As a result, from 1 September 2025, the State Environmental Service will be responsible for both decision-making regarding environmental impact assessment matters and the control of compliance with environmental requirements, as well as issuing capacity permits for electricity generation and electricity storage systems. This is again another restructuring of competent authority – to remind that Energy and Environment Agency was established on 1 February 2025 and its competence includes issues of EIA procedures, as well as capacity permits for the implementation of electricity generation facilities.
Fixed Balancing Capacity Maintenance Fee Effective from 1 July 2025. According to Electricity Network Code, from 1 July 2025, the cost of maintaining balancing capacity is allocated to the recipient of the balancing service. During the first half of the year, these costs were covered by the TSO. However, from 1 July to 31 December 2025, balancing service recipients are responsible for these costs. The following fixed balancing reserve maintenance prices apply:
– €3.00/MWh for electricity consumed in the imbalance area of balancing service recipients;
– €42.07/MWh for the total absolute imbalance volume of balancing service recipients.
Traders can be Requested to Provide Financial Security to DSO. According to amendments on Cabinet Regulation No. 635, which came into force on 1 June 2025, if a trader’s projected debt to the DSO exceeds EUR 5,000, the DSO may require the trader to provide financial security in the form of a deposit or a guarantee from a financial institution. If the trader fails to provide such security or if it does not meet the required standards, the DSO can unilaterally terminate the system service agreement. Amendments aim to strengthen the financial security of the DSO.
TSO has joined the European balancing energy exchange platform PICASSO. TSO joined the PICASSO platform on 10 April 2025. PICASSO is used for the frequency restoration reserves with automatic activation (aFRR) balancing capacity market function. This platform provides market functionality and access to a unified regional market, and also enables optimization of the reserve volumes used, thereby reducing balancing costs.
TSO Submits Electricity Transmission System Service Tariff Draft to Regulator. The Latvian TSO has submitted a tariff draft for electricity transmission services to the Regulator for the next 3 years. The TSO’s total tariff costs will decrease by 0.7%, making Latvia’s transmission tariff the most competitive in the Baltics and, according to ENTSO-E data, maintaining one of the lowest transmission tariffs in Europe.
The tariff draft prepared by the Latvian TSO proposes a cost of EUR 7.25/MWh, while the Estonian TSO’s draft sets transmission service costs between EUR 7.37/MWh and EUR 16.14/MWh, and the Lithuanian TSO’s approved tariff reaches EUR 16.00/MWh.
The submitted tariff draft foresees that households will see no change in electricity transmission costs from 1 January 2026 to 31 December 2028. TSO customers with typical consumption profiles will see an average cost reduction of 9%. This demonstrates the sustainable development of Latvia’s energy system without additional burden on consumers.

GRID

Amendments to Energy Market Law – Information on Issued Capacity Permits will be Public & Decommissioning Obligation to be Introduced. According to the drafted amendments to the Energy Market Law pending Parliament approval, the competent authority will be required to publish information about issued capacity permits for electricity generation and storage systems on the Open Data Portal. The published information shall include the capacity permit addressee, type of electricity generation technology, planned location, capacity, and, in the case of the implementation of multiple types of electricity generation units, the proportion of unit capacity, as well as permit status. The competent authority will be required to publish information until 31 December 2025 on permits issued before the date of entry into force of the amendments, which have not been revoked or have expired. This will enhance transparency for market participants and the public.
At the same time, amendments to Energy Market Law expects to impose an obligation on operators to dismantle renewable energy generation units and storage systems once operations have ceased. For cross‑border installations linked to Latvia’s grid, dismantling must be performed in line with the host EU country’s legal requirements. The Cabinet of Ministers shall further determine the scope of dismantling activities and related technical and financial conditions. These provisions are expected to enter into force on 1 January 2026.
Amendments with regard to Proportion of Capacities of Different Types of Electricity Generation Units Specified by the Capacity Permit. According to current Regulation, if several types of electricity generation units are planned to be installed to one connection point to the grid, the producer must obtain a hybrid permit. This permit specifies the proportion of capacities for each type of electricity generation unit in relation to the total planned capacity.
If one of the types of electricity generation unit is installed with a lower capacity than indicated in the hybrid permit, the allowable capacity for the remaining unit types is reduced accordingly based on the proportion specified by the hybrid permit. This requirement however does not apply to electricity storage facilities.
According to the amendments currently under consideration by the Cabinet of Ministers, deviations from the capacity proportion specified by the hybrid permit will be permitted up to 5%.
Flexible Transmission System Service Introduced and New Grid Capacity Available for Connection. On 1 April 2025, amendments to the Electricity Market Law entered into force introducing the flexible transmission system service. Also a transitional period was established until 30 April 2025 allowing producers to request release of their grid capacity reservation and corresponding fee or guarantee. According to information announced by TSO 5’860 MW of capacity is currently available in the transmission grid for connecting new renewable energy projects under the flexible service framework.
Until the end of 2026, flexible grid connection can be requested without paying the reservation fee. However, capacity is reserved only from the moment when connection agreement is concluded with the TSO.
If free transmission capacity is allocated for another type of electricity generation unit within an existing connection, all such units of different types will be subject to flexible transmission system service. When applying the flexible transmission system service the TSO has the right to connect multiple producers to a single capacity unit and to limit grid feed-in by up to 10% annually without compensation in order to optimize system operation.

ENERGY STORAGE

New Provisions for Energy Storage Systems. On 1 April 2025, amendments to the Electricity Market Law came into effect, introducing a regulatory framework for standalone electricity storage systems. These amendments allow to connect storage systems to the grid even in areas with limited transmission capacity, enabling more efficient use of existing infrastructure. Storage systems exceeding 500 kW still require capacity permit. Storage systems with a capacity of 1 MW or more must register in the electricity storage operator registry. The Regulator has been tasked with developing new connection rules for electricity storage systems by 30 September 2025, which are set to enter into force no later than by 31 December 2025.

WIND

Minister of Agriculture Suspends Auctioning Build-up Rights for Development of Wind Farms on the State Forest Lands. On 5 May 2025, Minister of Agriculture has instructed AS «Latvijas Valsts meži» who manages the State forest land to suspend auctioning new contracts for wind farm development on the State forest land. The decision was prompted by public concerns regarding transparency, decision-making processes, and the potential impact on local communities. Existing contracts remain valid while a comprehensive review is carried out to assess the necessity of the auctions, their potential contribution to the economy, and their overall impact on quality of life.

BIOGAS

First Publicly Accessible Biomethane Injection Point in Latvia is Open. On 28 July 2025, the first publicly accessible biomethane injection point owned by the natural gas transmission and storage system operator Conexus Baltic Grid opened in Džūkste, Tukums Municipality.
Biomethane producers can deliver the produced gas to this location using transport containers and inject it into the gas transmission system even if they do not directly connect to the gas transmission network. To use the public biomethane injection point, producers must enter into a cooperation agreement. Producers must hold general civil liability insurance to sign such an agreement with a coverage limit of no less than EUR 800,000.
Until the end of 2025, the injection point will operate as a pilot project, and no usage fee will be charged. Starting from 2026, a fixed tariff fee will apply to be published at least 30 days before the tariff is implemented.
It is estimated that up to 10 million Nm³ or 100 GWh of biomethane could be injected into the public injection point annually.

LITHUANIA

WIND

Relaunch of the offshore wind tender. On 9 June 2025 the National Energy Regulatory Council has announced that the previously suspended offshore wind tender is renewed. The key points related to the relaunch of the tender:
– the registration of tender participants lasts until 8 September 2025;
– the lowest installed capacity is 700 MW and the maximum permitted generating capacity is 700 MW;
– the subsidy (if received) will last for 15 years;
– the highest transaction price is 125,74 EUR/MWh and the lowest transaction price is 75,45 EUR/MWh;
– the questions regarding the tender rules can be submitted from 10 June 2025 until 25 August 2025;
– the winner of the tender is expected to be known in mid December 2025.

ELECTRICITY

Postponed obligation to choose an independent electricity supplier. Initially, all consumers had to choose an independent electricity supplier by the end of 2025. However, the changes to the Law on Electricity that were adopted in April of 2025 extended this deadline for certain types of consumers. Small and socially vulnerable consumers can continue to use public electricity supplier until 1 January 2030.
Net-metering model will remain in place for prosumers. Recently the National Energy Regulatory Council has published calculations that due to the prosumers using the net-metering model, electricity suppliers suffer losses that are higher than the financial benefit created by the said prosumers. However, the Minister of Energy has issued a statement saying that the net-metering model will not be changed to the net-billing model for those prosumers who already have the net-metering model.

GRID

Preparation of design works for the harmony link interconnector. The transmission system operator has signed an agreement for the design services for the Harmony Link interconnector. It is scheduled that the design works will last for approximately 29 months until the construction permit is received and that the interconnector should be operational by 2030.
Flexibility services in the electricity distribution network. Currently, flexibility (balancing) services were only bought by the transmission system operator in the transmission network. The demand for flexibility services in the distribution network was mainly caused by the increasing number of prosumers. The transmission system operator has submitted a questionnaire to the potential providers of the flexibility services. Currently it is planned to launch a pilot project in the southeast of Lithuania to evaluate the mechanism for purchasing these services.
Rules on grid reservation upheld. The Supreme Administrative Court of Lithuania has issued a ruling that confirmed that the applicable grid reservation principle of 100%+100%+100% (when at the same connection point you can connect 100% of solar, wind power and energy storage capacity) is determined by objective circumstances (non-simultaneous generation) and is therefore legal.

CO2

Subsidy for the studies of co2 terminal. In June, the European Commission and KN Energies signed an agreement regarding more than EUR 3 million in support for the technical and commercial studies of CO2 terminal in Klaipėda. According to the agreement, the funding will cover 50% of the total planned expenses for the said studies, which will create conditions for making a final investment decision by the end of 2027. It is planned that the CO2 terminal in Klaipėda will start commercial operation in 2030.

GAS

GET Baltic is getting replaced by european energy exchange. On 27 June 2025 the National Energy Regulatory Council confirmed that the European Energy Exchange can act as a gas exchange operator in Lithuania. The European Energy Exchange is set to replace GET Baltic, a gas exchange operator serving the Baltic states and Finland, starting in September.

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