Power generator closure receives strong criticism

VILNIUS - The last operating unit, Unit 2 of the 25-year old Ignalina nuclear power plant, closed on schedule on Dec. 31, bringing the Soviet-era relic to an historic finish. The shutdown ended the countdown that began back in 2004, when Lithuania joined the European Union with the condition that it close the plant, which is similar in design to the Chernobyl reactor that exploded in Ukraine in 1986, by the end of 2009, reports news agency LETA.

The Lithuanian electricity transmission grid operator Lietuvos Energija announced last week that it has the ability to provide the state with necessary amounts of electricity, and that there need be no alarm at the loss of the plant’s output. “Operation without [the nuclear plant] is no big news for the Lithuanian electricity system – it has happened each year, when the power plant was stopped for scheduled maintenance. There have also been cases when the plant had to be stopped off schedule due to faults, but this caused no outages in Lithuania. Now we are prepared for the situation in advance, it has all been planned,” said company CEO Aloyzas Koryzna.

All opinions haven’t been so positive, however.
Prime Minister Andrius Kubilius said that “Electricity prices will rise after the closure, but the increase will be significantly smaller than previously projected.” Electricity imports from countries such as Russia, Estonia and Ukraine, as well as the use of less efficient gas-fired domestic plants, with gas coming from Russia, will push the average cost consumers pay for power up by 30 percent, the prime minister said.

Closure of Ignalina may add as much as a 0.8 percentage point to consumer prices next year, reducing deflationary pressures, reported the Vilnius-based unit of Sweden’s SEB said on Dec. 22. Consumer prices will probably remain unchanged in 2010 from this year, SEB said.
Preparation work for the new energy environment had been going on with power system operators of neighboring countries. According to Koryzna, the essential change is that  the Lithuanian power system is now an importer, rather than an exporter of energy.

The expected electricity demand by Lithuania in 2010 is roughly 9.1 billion kilowatt-hours. More than half of the electricity will be generated by the power plants in Lithuania. “Lithuania has enough generation capacity to meet the demand of consumers,” said Koryzna. The rest of the domestic power demand will be covered by imported electricity.
Electricity supply contracts have been made with Estonia, Latvia, Russia, Belarus and the Ukraine and there are possibilities to import electricity from Scandinavia. Capacities have been confirmed for electricity imports as follows: from Scandinavian countries – between 0.2 - 0.6 TWh; from Estonia – 0.9 - 1.5 TWh; Latvia – 0.1 - 0.2 TWh; Belarus – 0.3 - 2 TWh; from the Ukraine – 0.8 - 1.5 TWh.

Kubilius, however, has been critical of preparations leading up to this point. “Lithuania could have been better prepared for the decommissioning of Ignalina. Our government has managed to start building the energy link with Sweden and build a new combined-cycle generation unit in Elektrenai, which had been much discussed by the previous cabinets [but] which failed to [act]. These are clear examples of delay and the failure to do one’s homework. If this homework had been done properly and on time, we would be ready for the closure of Ignalina better than it is now prepared,” said the prime minister, reports news agency ELTA. He added though that “The country will not lack electricity [this] year.”

In an interview with Lithuanian Radio Kubilius admitted that there might be problems with the energy imported from Ukraine. He cautioned that Russia might interfere in imports of electricity from Ukraine via Belarus, or other problems might occur. “Contracts are signed. Those matters are dealt with at a technical level. Russia may hinder [us] on that, or some problems might emerge when transporting electricity via Belarus, but we will certainly not remain without electricity. Both Ukraine and Belarus are interested in the supply of electricity.”

The power plant shut-off may test the theory that Russia may use energy as a political weapon, reports the EU Observer. Until Lithuania builds its planned new reactor, expected to go online between 2018 and 2020, and connects with new electricity bridges to Poland and Sweden, sometime around 2015 and 2016, power prices are expected to spike by up to 70 percent.
This period will see Lithuania almost entirely reliant on imports of energy from Russia amid the prevailing belief in former Iron Curtain countries that Moscow uses gas and oil cut-offs as a tool of political pressure on its former vassals.

Russia in 2006 shut off oil supplies to Lithuania via the Druzhba pipeline after Vilnius sold a petrol refinery to a Polish bidder instead of to a Russian state-owned firm. The dispute saw Lithuania threaten to veto a new EU-Russia treaty unless the EU commission intervened on its side. Relations on the Russia-Lithuania-EU axis were again tested in 2008 when Vilnius urged the EU to impose sanctions on Russia following its military attack on Georgia, another small, former Soviet country.
Lithuanian president and former EU commissioner Dalia Grybauskaite has sought to reassure people that the Ignalina closure will not alter relations with its bigger neighbor.

Despite the transition period and speculation, the lights are still on in Lithuania.
At the Lithuanian electricity exchange, which started operating on Jan. 1, approximately 76,400 MWh of electricity were bought and sold at the start of 2010. “The trading runs smoothly. Fourteen market participants were active during the first four days [of trade]. The lowest price for electricity on the last day of the session, Jan. 4, stood at 0.096 litas per kilowatt hour, and the highest price reached 0.148 litas per kilowatt hour,” said Lina Skrabutenaite, director of market operator BaltPool, which organized the Lithuanian electricity exchange.

Skrabutenaite noted that this reflects the price of electricity alone, excluding the infrastructure costs of transmission, distribution and supply. For comparison, the electricity price for consumers set by the National Control Commission for Prices and Energy stands at 0.155 litas per kilowatt hour.
The Latvian state-owned electricity supplier Latvenergo has started delivering electricity to Lithuania. Latvia is the only Baltic State which has an open electricity market, in operation since April 2008, when fixed electricity prices were revoked to all other business entities.

The subsidiary Latvenergo Prekyba, established in Lithuania, began to supply electricity to the Embassy of the Republic of Latvia in Vilnius last year and will sell electricity to several Lithuanian companies in 2010. Gatis Junghans, head of Latvenergo Prekyba said “We decided to start our activities during the first stage of the free market in Lithuania, before electricity suppliers split it among themselves. Lithuanian consumers will be able to choose from a larger number of competing suppliers for more favorable conditions and prices. The liberalization of the electricity market in the Lithuanian energy sector will form an entirely new business model with new principles of electricity supply and process management.”

Ignalina provided about 70 percent of Lithuania’s electricity consumption and in 2008 sent 23 percent of total power exports to neighboring Latvia and 45 percent north to Estonia, according to the Energy Ministry. Ignalina’s shutdown may shave as much as 1.3 percentage points from GDP as the country struggles with its deep recession, said Danske Bank in November.