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Russia's Power Grip Over Baltics Ending With Billion-Euro Cables

Russia’s Power Grip Over Baltics Ending With Billion-Euro Cables

A quarter of a century after breaking free from the Soviet Union, the Baltic states are finally getting rid of their electricity dependence too.

One of two new cables costing 1.1 billion euros ($1.2 billion), connecting Lithuania to Poland, started on Wednesday, according to grid managers. Commercial flows on the second link from Lithuania to Sweden, big enough to eliminate the Baltic nation’s Russian imports, had been poised to start commercial operations on Wednesday too before tests were suspended Monday after a fire next to a Swedish converter station.

After last year opening eastern Europe’s first liquefied natural gas import terminal to end Russia’s monopoly on fuel supplies, the two cables are a second step toward energy independence, according to Lithuania’s Energy Minister Rokas Masiulis. Russian imports met almost half of the nation’s demand in the last quarter, grid data show.

“The fear of the Russian factor will be eliminated just as the fear of the Russian gas factor was eliminated with the start of the LNG terminal,” Masiulis said Dec. 3 in a phone interview. “We can now buy electricity from Poland, from Sweden, from Russia or Latvia or Estonia, all depends on the price.”

Expanding capacity to Lithuania is central to energy independence for the region because the nation has the main link to Belarus and on to Russia. Lithuania, Latvia and Estonia’s joint power deficit exceeded 25 percent of the region’s demand last year. Half of that was covered by imports via Lithuania.

The integration means Russia will have to invest billions of dollars to modify its grid to ensure supplies to its exclave of Kaliningrad between Poland and Lithuania, President Vladimir Putin said in a September interview for PBS. The Russian Energy Ministry’s press service declined to comment on the spending needed if the Baltic and European Union power grids were completely integrated.

Lithuania has been forced to import almost three-quarters of its electricity since closing the Ignalina nuclear plant in 2009. The nation was Russia’s biggest market for power exports after China last year, according to Inter Rao PJSC, a grid operator based in Moscow.

Lietuvos Energija UAB, Lithuania’s state-owned energy holding company, will Jan. 1 close two 300-megawatt gas-fired power units at the Lietuvos Elektrine plant, according to statements via Nord Pool Spot Wednesday. The decision about takes into consideration the impact of the two cables on the local market, the company said.

Russia is concerned the moves will break the loop of the former Soviet grid that allows power to flow across the borders of what used to be one transmission network and isolate Kaliningrad, to which it is currently linked through Lithuania, Putin told PBS. Electricity flows via the Soviet-era network aren’t controlled by the Baltic states, according to their grid managers.

Russia plans to build four power plants in Kaliningrad to improve the region’s electricity supply balance. In spring, Russian warships hindered the work of the vessel laying the power cable between Lithuania and Sweden.

Lithuania got 3.2 terawatt-hours of electricity from Russia last year, or almost a third of total consumption, according to data from the two nations’ grids. While Estonia is a net exporter, shipping 2.8 terawatt-hours mainly to its Baltic neighbors, the region as a whole had a deficit of 7.1 terawatt-hours last year, according to Estonia’s grid.

Power typically flows from the cheapest to the most expensive market if there are no restrictions on the grid. Nordic power prices averaged about half and Polish prices 9.1 percent below mean Lithuanian prices of 42 euros per megawatt-hour this year on the Nord Pool Spot AS exchange in Oslo.

The Litpol cable was mainly exporting to Lithuania on the first day of trading Wednesday, with flows of as much as 200 megawatts from Poland for 17 hours versus two hours of supplies in the opposite direction, data on the website of Polish grid PSE SA showed.

The Swedish and Lithuanian grid managers couldn’t say when Nordbalt flows would resume, when reached on Wednesday.

The link with Sweden is expected to carry about 4 terawatt-hours of electricity annually during the next three years, according to SKM Market Predictor AS, a Norwegian energy markets analysis company.

Plans for a new nuclear power plant in Ostrovets, Belarus from 2019 may mean electricity will also flow from Lithuania to Sweden, Viktor Balyberdin, SKM’s chief executive officer, said by phone.

Lithuania, Latvia and Estonia plan to build at least one more cable to the rest of the EU to become a full part of the European network rather than just connected to it, according to Masiulis.