NIB: Baltics need unified energy plan to attract investors
26.11.2009, 10:30Three Baltic states need to merge energy policies to attract investment and integrate the region’s power grid with the rest of the bloc, writes Bloomberg.
Speaking at an energy conference in Vilnius yesterday, Johnny Akerholm, the chief executive of NIB, said that Lithuania where the Baltics’ sole nuclear power plant is due to close at the end of this year, and neighboring Latvia and Estonia can’t rely only on public funding.
“We know the Baltic region in general, and the countries in particular, are in a situation where they face an increasing energy deficit,” said Akerholm. “To deal with the increasing deficit, the Baltic Sea region needs a common, well-integrated energy market. A lot can be gained by cooperation.”
Two decades after breaking free from the Soviet Union, the Baltic states are still “energy islands,” isolated from the rest of the 27-nation EU and reliant on Russia for power and gas needs, said Heinz Hilbrecht, director of energy and transport at the European Commission. “We look forward to the day when the region will be fully integrated,” said Hilbrecht. “Energy integration is the priority of the EU.”
The Ignalina nuclear plant closure will deepen the recession, more than double power-generation costs and force Lithuania and the region to import electricity. At present, Ignalina supplies about 80 percent of Lithuania’s electricity consumption and in 2008 sent 23 percent of total power exports to neighboring Latvia and 45 percent to Estonia further north, according to the Energy Ministry.
Without that, electricity imports from such countries as Russia and the use of less efficient gas-fired domestic plants will push the average cost of power on the electricity exchange to 15 centai (7 U.S. cents) per kilowatt-hour from 6 centai. The final price to consumers will probably rise to 44.9 centai from 35.8 centai now, the Lithuania Energy Ministry said.
Soviet-built Ignalina's reactor is similar to the one that exploded at the Chernobyl Nuclear Power Plant in April 1986.
The commission has earmarked 425 million euros to add to the single EstLink cable that was laid two years ago between Estonia and Finland. A second Estlink cable is being planned, as is a NorBalt link between Lithuania and Sweden and a link between Poland, Denmark and Germany, Hilbrecht said.
NIB’s Akerholm said that private investment is also urgently needed to add to public financing to move the Baltic interconnection plan from the planning stage to implementation.
The largest component of the NIB’s 928 million euros in loan exposure in the Baltics is in the energy industry.
Larger investments are still being held back as “practical decisions” on energy infrastructure improvement are still taken too much on the national level, said Akerholm. There also lacks a “common view” on pricing levels, tax incentives and a coordination of how to utilize sources such as hydro and wind power, gas, oil and bio energy.
“It makes the investment climate more difficult for private bankers,” Akerholm said. “A few years ago, there was a lot of long-term financing in the market, but now the situation is different.”
Integrating the region would help utilities such as Germany’s E.ON AG, which owns Sweden’s Oskarshamn nuclear plant, Fortum Oyj of Finland and Vattenfall AB, the biggest Nordic utility.
Including the private sector in the planning and construction will help investment, Akerholm said. “We are talking about well-established strong energy companies,” he said. “They can raise financing at reasonable terms.”
The conference in the Lithuanian capital was organized by the European Commission and the Lithuanian Energy Ministry to begin work on a plan to lay electricity cables, gas pipes and build a liquefied natural gas terminal to strengthen energy security in the EU’s northeast corner.