RIGA - Latvia's new government has vowed to make headway on building additional power output capacity as the country, and the Baltic region, faces an acute energy deficit after the closure of the Ignalina nuclear power plant in Lithuania at the end of the 2009.
Prime Minister Ivars Godmanis told journalists on Jan. 3 that Latvenergo, the country's state-owned utility, would build two power plants 's one coal-fired and the other gas-fired 's simultaneously, and that Latvia would continue to participate in the construction of a new nuclear power plant in Lithuania.
Godmanis stressed that both a coal-fired and a gas-fired plant were needed and that the government would not consider building just one and scrapping the other.
"We will not separate them, just like our further participation in the new nuclear power plant," he said.
Godmanis, who was elected prime minister Dec. 20, said that Latvia would face an energy shortage in the near future and that the country needs to build two power plants with 400 megawatts capacity each.
Economy Minister Kaspars Gerhards told the Baltic News Service that the government would propose the new plants at a Cabinet meeting in the near future. "According to our proposal, the construction of these two plants should be started simultaneously. It has to be done as soon as possible, as outages are expected already in 2011," he said.
Gerhards, one of the Cabinet's three new ministers, said that the power shortages would begin in 2011 - 2012 and be felt throughout the region.
"If we look around at our neighbor countries, it is clear that they too have problems. If Ignalina shuts down 's and it is already clear that this is going to happen 's then right now there is only a plan to build an oil shale power plant in Estonia. But this can bring about serious environmental problems as this would mean lots of pollution, which means increased costs," he said.
Furthermore, Finland, Sweden and Central European countries do not have surplus energy, Gerhards explained. "They also have their problems. For instance, the Finns are building an NPP and are considering another one," he said.
The conclusion, Gerhards stressed, is obvious. Latvia has to build more capacity. "Since there is no spare energy around us, and it may not appear anytime soon, we have to think how to build basic capacities here to counter the expected energy shortages after the closure of Ignalina," the minister said.
The cost of the two plants could run up to half a billion U.S. dollars, if not more.
"I would not like to name any figures now, because I have not studied them in detail. It might be roughly 1 million lats (1.4 million euros) per megawatt-hour," the minister said.
Latvenergo alone would handle funding, he said. "These would be Latvenergo projects, and the company would accordingly borrow money to implement them," Gerhards said, adding that even though the company has debts, Latvenergo could handle the additional loans.
Latvenergo currently generates power at two thermal power plants in Riga and three hydropower plants on the Daugava River. The company's total power generation capacity is slightly over 2,000 megawatts, which is insufficient to meet demand. The remainder is imported from Estonia, Russia and Lithuania.
Gerhards said that a foreign investor might be invited for the coal-fired plant but not the gas-fired one.
"I am not ruling out any scenarios, but I believe that there is no need to attract a strategic partner in the case of the gas plant. This project would be easy to implement as we already have the first unit of TEC-2 thermal power plant. I do not think that Latvenergo would need a strategic partner to add an additional unit," the minister said.
Speaking of nuclear power, Gerhards said that it remains a priority project for Latvia. The project, however, has been beset by numerous obstacles in the negotiation phase.
"The most essential question is where this energy is going to go. This will be a constant flow of energyâ€¦and there has to be a constant consumer of this energy. We are interested in a stable reserve that might meet part of our constant demand. Latvia's main interest is not to participate in this project for business sake but to have a stable source of energy," Gerhards said.