Solar energy leads the Baltic states to energy security – pv magazine International

From the pv magazine 24.06

The outbreak of hostilities in Ukraine has become a warning signal for the Baltic states, indicating the urgent need for changes in energy policy.

“The energy crisis following the Russian Federation’s aggression against Ukraine in 2022 has certainly had an impact on all neighboring countries,” said Andres Meesak, manager of smart energy solutions at Estonian regional distribution system operator (DSO) Viru Elektrivõrgud. pv magazine.

The Baltic countries of Latvia, Lithuania and Estonia have learned a lot from Ukraine’s unfortunate experience, as they also have to live in the shadow of its belligerent eastern neighbor.

“The main positive impact was the understanding of the threat to energy infrastructure and the aggressor’s use of energy and energy infrastructure as a hybrid weapon against societies,” Meesak said. “The conflict forced countries to accelerate their separation from any energy cooperation (with the Russian Federation) – frequency stability, fuel supplies, electricity transit.”

Circuit breakers

Most European countries were to some extent dependent on Russia for energy, but for the Baltic countries the problem has a different dimension. These three countries remain part of the Soviet “BRELL” circuit, and Russia and Belarus rely on Russian operators to control frequencies and balance supply and demand.

In 2018, Latvia, Lithuania and Estonia worked out a plan to disconnect from BRELL and join the EU power grid by the end of 2025. Events in Ukraine have forced these countries to reconsider their timeframes and accelerate their transition. Other steps are also needed to improve the security of their power grid.

“The war against Ukraine has clearly exposed the weaknesses of centralized energy supplies compared to distributed generation in smaller units,” Meesak said, suggesting that it has had an impact on society at all levels, from households to top government officials.

In addition to political considerations, Baltic investors have strong economic incentives to invest in solar energy as energy costs in the region have skyrocketed. At the peak of the European energy crisis in 2022, electricity bills for consumers increased almost sevenfold compared to the previous year.

Against this background, the years 2022–2024 saw an increase in solar energy production in the Baltic region, which exceeded even the most optimistic forecasts.

PV deployment has really taken off in Estonia. Mihkel Annus, chairman of the Estonian Renewable Energy Chamber, said that installed capacity is doubling every year. In just five years, at the end of 2023, total installed solar capacity was 812 MW, up from 39.6 MW in 2018.

Lithuania has exceeded its 2025 solar power generation target of 1.2 GW in 2023, according to data from the Lithuanian Energy Agency (LEA). The country has welcomed almost 300 MW of new capacity in the past few years.

As of January 2024, Latvia had installed about 300 MW of photovoltaic capacity, said Anna Rozīte, business development director at AJ Power Group. Since May 2023 alone, that number has roughly tripled.

Solar energy experienced an investment boom in Latvia and other Baltic countries as market participants primarily opted for solutions that could be implemented as quickly as possible.

“Solar panel installations are probably the fastest projects from an implementation point of view, given the relatively short period of technical design and obtaining permits, as well as the availability of the necessary equipment,” Rozīte explained.

Upward trend

Market participants believe the growth so far could be just the prelude to a real Baltic solar boom in the coming years. The Baltic countries’ solar potential is estimated at 40 GW, said Rachel Andalaft, managing director of REA Consult. She added that the Baltic green energy sector is expected to attract investment opportunities worth 150 billion euros ($162 billion) over the next 20 to 25 years.

The development of the photovoltaic industry is expected to be accompanied by the deployment and integration of battery energy storage systems (BESS), improved interconnections with other European countries and the necessary emergence of a power purchase agreement (PPA) market to the benefit of the decentralized generational landscape, Andalaft said. There is already significant capacity in the pipeline.

According to official data from Elering AS, the country’s transmission system operator (TSO), almost 3.5 TWh of solar energy is to be added to the Estonian energy mix by 2026. Local market participants have indicated that this could potentially cover half of Estonia’s annual electricity consumption. Despite this, many large projects scheduled for 2022 have not yet been implemented. It may take up to two years for projects up to 15 MW in case of connection at the DSO level and more than three years for projects above 15 MW in case of connection at the TSO level, said Gatis. Macans, Executive Director of the Latvian Solar Energy Association.

“After the hype around renewables in 2022, when there was a lot of competition for grid capacity reservations, in 2023 we started to see new-build solar power plants connected mainly to the distribution network with a capacity of up to 15 MW. However, much larger PV projects are in the pipeline and we hope to see several projects commissioned in the next two years,” Macans said.

“(In 2024 and 2025) at least two to five times more solar farms should be built in Lithuania than in the entire period up to that time,” said Tomas Janususkia, partner at the Viden law firm Widen.

The solar craze is evident at every level of the economy. Consumers installed twice as many home solar panels in 2022 alone as in the entire preceding period, Janususkia said, adding that Lithuanian households are eligible for state aid for solar installations of up to 10 kW, while for industry the figure is set at 500 kW. Streamlining regulations for renewable energy installations has also had an impact.

“The current legal regulations have fundamentally simplified the construction of solar power plants,” Janususkia said. “It does not require spatial planning documents, nor an environmental impact assessment – ​​except in exceptional cases – nor a change in land use. The introduced hybrid power plant model, together with wind farms or batteries, has made the use of power grids and loads much easier and more efficient.”

Overcoming obstacles

Despite progress, challenges for the Baltic photovoltaic industry remain. Further capacity growth could be threatened by several factors, most notably concerns that having so much solar power in the energy mix may be difficult.

“The challenge (for Estonia) right now is to match production to demand,” Meesak said. BESS could play a key role, he said, adding that the industry has seen the growing importance of a variety of renewable energy parks that complement solar, wind and storage.

“Although we can expect a few hours in 2024 when solar energy production will exceed Estonia’s total electricity demand, it is still unrealistic to claim that at least 50% of demand will be covered by solar energy in 2026 due to the relatively low capacity factor (actual power compared to theoretical maximum) and increased electricity demand during the darker and colder winter months,” Annus said. As a result, daily spot prices during sunny hours are lower and more volatile, he added.

The maximum winter power consumption in Estonia is around 1.6 GW. Interested parties are considering adding batteries to their systems or optimizing the layout of the panels to increase the price of capture from the market. Meesak said decreasing battery storage costs have motivated households to install more hybrid photovoltaic systems with local storage, providing some autonomy in the event of power outages.

“The daily supply and demand curve shows the potential for inexpensive, four- to six-hour local storage – the market price of electricity is highest in the evening, just after the PV plants have turned off, until around midnight. To equalize supply and demand, and therefore the market price, four- to six-hour storage at a reasonable cost is needed,” Meesak said.

REA Consult’s Andalaft said it agreed that “storage facilities are absolutely essential to increase renewable penetration, while maintaining grid stability on the one hand and enabling new modes of operation on the other.” Andalaft also believes there are other issues that need to be addressed to ensure the solar industry thrives in the long term.

“Demand follows policy,” she said. “During the pandemic, we saw peak prices for both (capital expenditure) and electricity. Today’s market is still struggling with the effects of this event. “Where implementation has been delayed and limited during the pandemic, the current lack of a dynamic PPA market is limiting investment appetite and holding back the potential of a diversified, competitive private capital-led energy landscape.”

In Lithuania, the development of the photovoltaic industry also faced unexpected bureaucratic obstacles.

Janususkia explained that under the energy community model introduced in the country, consumers, energy communities and large producers of electricity must simultaneously connect to limited energy infrastructure networks. For this reason, network capacity quotas were allocated.

“This resulted in a series of legal disputes regarding grid capacity shortages for energy producers, which inhibited investments in solar energy,” explained Janususkia from Widen. “Currently, these problems have been partially solved, but the investment intensity has decreased significantly and the projects available on the market are in no hurry to be implemented.”

Despite these challenges, market participants are confident that in the foreseeable future nothing will be able to disrupt the development of the photovoltaic industry in the Baltic Sea region.

By Ian Skarytovsky