Energy present and future in Latvia

Energy - March 15, 2023

ECR Member and Vice-president of the European Parliament Mr. Roberts Zīle has prologued a study on the future of European energy and transformation challenges for Latvia, commissioned by the ECR Party and the Latvian Economists Association, and written by Dr. oec. Olga Bogdanova, Mg. soc. Elmārs Kehris, Dr. oec. Māris Balodis and M.A. Uldis Spuriņš.

The study analyses both the current situation as well as a ten years forecast in Latvia against the background of global energy trends, together with EU strategy and legislation.

In 2020, electricity generation in the Union derived mainly from fossil fuels, including oil (32%), natural gas (25%) and coal (11%).  Russia has traditionally been the EU’s main supplier of all three.

Reacting to the invasion of Ukraine in the spring of last year, the European Commission decided to divert from Russian energy sources by 2027, revising its so-called “Green Deal”.  On top of energy efficiency and saving measures, alternatives include seeking other suppliers of natural gas, reactivating generation in coal plants and increasing Member States’ nuclear energy share.

With regards to natural gas, the US has now become Europe’s main supplier, with significant price jumps to be paid by companies and consumers.  However, US supply of natural gas is not enough to meet all of Europe’s demand.  In the best case scenario, Europe would be able to replace only about 55% of Russia’s pipeline natural gas deliveries.

This natural gas deficit requires to use fuel oil, diesel and coal.  Germany, the Netherlands, Austria and France have restarted their coal-fired power plants.  The ban on the import of Russian coal has triggered a replacement from the USA, South America and South Africa.

Nuclear energy is currently produced by thirteen member states (Belgium, Bulgaria, Czech Republic, Finland, France, Germany, Hungary, the Netherlands, Romania, Slovakia, Slovenia, Spain and Sweden), while Estonia and Poland have announced to develop their own reactors.  Nuclear energy accounts for 25% of total European electricity production.

The “Green Deal” aims at a 40% share of energy produced from renewable energy sources in the EU’s gross final energy consumption by 2030.  As of today, wind energy provides for the majority (37%) of electricity produced from renewable energy sources and biofuels in the EU.  Hydropower accounts for 34%, while 13% of gross electricity generation from renewable energy sources comes from the sun.  Onshore wind is currently the cheapest renewable energy source for electricity generation.

If we now turn from the overall Union picture to that of Latvia, it is first important to consider that the Baltic state only generates 76% of the electricity that it consumes, which means that 24% needs to be covered by external sources.

Following the sanctions imposed in connection with the Ukrainian conflict, it is no longer possible for the Riga authorities to import electricity from Russia.  In order to increase import of electricity from Poland, Sweden and Finland, the country needs to develop its electricity infrastructure connections with Lithuania and Estonia.

A similar consequence applies to natural gas.  Abandonment of the import of Russian natural gas from 1 January 2023 has produced an urgent need to reinforce LNG terminals and interconnections with Estonia and Lithuania up to 2025.

Replacing natural gas with nuclear in Latvia is not possible in the short term, as reactor construction will not start before 2030.  Interestingly, nuclear energy would produce a surplus enough to  convert Latvia into an exporter of energy to other countries.

In terms of renewable energy sources, Latvia has committed to increase the EU average Green Deal 40% target by an extra 10%.  This is possible thanks to its installed hydropower capacity, while development of wind projects faces public opposition, due to noise generation, impact on bird and bat population, and impact on habitats and surrounding landscapes.

In the long term, natural gas will not be completely replaced by 2050.  Indeed there is a need to reduce import dependence of natural gas in order to decrease energy prices.  But the most probable and reasonable scenario is  a combination of natural gas, nuclear energy and hydrogen starting in 2030, as its technology has not reached maturity yet.