Breaking the monopoly power

  • 2011-06-29
  • By Matt Garrick

VILNIUS - Lithuanian Prime Minister Andrius Kubilius, 54, heads a government faced with many choices. In addition, he is a man under heavy pressure to make the right ones, especially in the field of improving energy industries.
Marred by a lack of energy sources from within the country’s borders, and relying on imports marked by ever-inflating price-tags from Russia, questions have become clear. How can Lithuania become more sustainable energy-wise? And at what cost to the future?

Kubilius and his Homeland Union-Lithuanian Christian Democrats (TS-LKD) government have been treading water to figure it out. Battling off low popularity polls (73.1 percent of the Lithuanian population rated Kubilius negatively, in a survey conducted by social research company Vilmorus and published in newspaper Lietuvos Rytas on June 18) from a jaded public seeking solutions for getting about their daily lives at a lower cost, solving this energy crisis has become a key focus for guiding his government into the next parliamentary election in 2012.

Heating, electricity and cooking using gas have become luxuries, rather than day-to-day essentials, due to their running costs: past studies have estimated more than 70 percent of Lithuanian households have had difficulty paying their energy bills.
Cold showers and warm refrigerators do not make for a contented voting constituent.
According to Lithuanian government sectors, spokespeople from the ministries of energy, economy, environment, right up to the president of Lithuania, Dalia Grybauskaite, have said the answer was clear: attaining resources to pave the way towards Lithuanian energy independence would lower household costs.

“We are striving to achieve energy independence by 2020,” advisor to the minister of energy, Kestutis Jauniskis, recently told The Baltic Times. “Energy independence means to us an opportunity to freely choose among energy resources and their suppliers. By 2020, Lithuania will have a balanced energy-mix, based mainly on nuclear energy and renewables, while supply of other energy resources will be well diversified. Lithuania’s energy sector will be integrated into European Union energy systems and Lithuanian consumers will benefit from a common EU energy market,” he affirmed.

Indeed, as Kubilius now navigates his party toward the second-half of 2011, a year already hallmarked by proposals of several major energy infrastructure projects to be constructed in Lithuania, including an LNG terminal, a new nuclear plant, and a gamut of previously unused green energy ideas, he has claimed his focus remains firmly on gaining headway.
“We see the complexity of goals we need to achieve in the reforms of our energy market,” he drawled recently, leaning against the polished pine table which centers his Vilnius office, as he spoke to TBT.
During the conversation, he touched on multiple energy industry forms possible for Lithuania’s future, along with the power duo of gas and nuclear, including wind, waste-to-energy, shale gas and biomass, for a shuffle towards green independence.
Steering Away from Gazprom – Gas Options

Creating a viable gas market appeared to be the government’s first port-of-call in energy expansion, to create a competitor against the giant Russian gas-corp, Gazprom, who currently hold an unsurpassable monopoly on the resource throughout the Baltic region. The Lithuanian government has announced its enthusiasm to begin construction of a liquefied gas (LNG) terminal in the country from this year, to be operative by 2014.

“When you have 100 percent dependency on gas deliveries from one pipeline, from one source, from Gazprom, a creation of alternatives means a creation of real independence,” Kubilius relayed. “But independence does not mean we shall not buy gas from Gazprom. Simply, we think the creation of this market, and of a competitive environment inside of it, will allow us to have the price for gas at a European level, not at the level we were getting from Gazprom.”
As of May this year, Gazprom exports to wider Europe had grown by over 20 percent, and, according to a recent remark from company CEO Alexei Miller, the European gas market was “skyrocketing.”

Gazprom’s boom, alongside their standing monopoly on supplying gas to Lithuania, has meant they hold the majority of bargaining aces in their hand, and could therefore, theoretically, charge exorbitant prices to those who rely on their product.
“Latvians and Estonians were paying a similar price, but Gazprom punished us starting from early winter, by increasing our gas prices by 15 percent,” stated Kubilius.

Gazprom remains embroiled in a bitter legal dispute with the Lithuanian government over the company’s allegedly uncompetitive price offers. “We decided to appeal to the European Competition Authorities, and they were looking into the case. Because, as we understand European competition law, the behaviour of Gazprom, punishing us for implementing European directives by increasing gas prices, was against fair competition practices inside the European Union,” he said.
Due to this stalemate forming between the two forces, the necessity for Lithuania to spur proactively in different directions has lead to the country drawing an ace of its own: the proposal of a LNG terminal to be built at Klaipeda Seaport.

“We shall have this terminal operating with a capacity of 1.5 billion cubic meters [of gas]. Each year in Lithuania we are using around 3 billion cubic meters. So we are targeting half of the national demands,” claimed Kubilius.
“We need to build this LNG terminal, to have an opportunity for alternative supplies. We need to build interlinks towards European systems, to Poland and on the other side to Finland from Estonia, and we need to create a real Baltic gas market,” he explained. “In the meantime we shall be buying gas only from Gazprom. There are no miracles we can expect. We hope Gazprom will start to understand, they need to work in a competitive environment. We want to see Gazprom behaving in a transparent way with a transparent price formula.”

A New Nuclear Future

On the other side of the coin, a similarly huge industry transforming project, penned for construction from 2014, is a new nuclear power station to be built in the rural township of Visaginas.
Since the June announcement by two global electric companies, Hitachi-GE Nuclear Energy Limited, and America-based Westinghouse Electric Company, that they will be working hand-in-hand with the government as strategic investors into the project, a rumble of public speculation has been aroused.

While some politicians stand vehemently behind the idea, pressing how Lithuania’s past experience with nuclear power (the closing of the Ignalina nuclear power station was part of an agreement for Lithuania joining the European Union in 2004) makes it a profitable choice, and how, as Kubilius has said, it is a cheap and clean option “if you compare with coal or gas usage for the production of electricity.”

“As we can see from comparisons in international markets, building nuclear is really able to give a very competitive price of electricity,” he stated, emphasising how ultra-modern security would be provided for running the new plant.
“We have, in the Baltics, a clear market for the electricity which will be produced in this new nuclear station. We have existing infrastructure, we have nuclear know-how and a culture of a nuclear labor force, so we are well advanced in implementing this project,” he beamed.

As can perhaps be imagined, the idea of focusing on a form of energy which has historically proved cataclysmic for its surrounding environment on a number of occasions, including Japan’s disaster at the Fukushima Daiichi nuclear facility this year, was far from universally applauded.

The “Lithuanian Green Party (LGP) are fundamentally against government plans to build a new nuclear power plant in Lithuania,” vice-chairman of the green party, Saulius Piksrys, told TBT. “There are hundreds of arguments to prove our position, from economic reasoning, to the existence of more reasonable, environmentally friendly and feasible alternatives, to safety and management issues of spent nuclear fuel and radioactive waste.”
The Green Party plan to call a referendum concerning the plant projected for Visaginas, if government actions towards it materialise further.

Renewable Energy, Green Ideas and Shale Gas

During this era of Lithuanian energy upheaval, the most promising signs point to new and, importantly for many, environmentally-clean energy forms. There have been steps in positive directions, such as a 140 million euro waste-to-energy plant which has been agreed upon to be built in Klaipeda by 2013. The plant will reportedly aid in cutting down the amount of trash dumped daily into Lithuanian landfills, and through its emissions help lower greenhouse gases.

But green movements wish to dig deeper than this, to implement long-term environmentally sustainable solutions. “LGP has a concrete proposal for energy sector development. We did a study which shows that by 2050, we can reach full energy independence, and cover the whole country’s energy needs, just from local sources: solid biomass, wind energy, forest energy, solar, geothermal, biogas, etc. But at the same time, energy efficiency measures should be implemented to energy generation, transmission and use,” billeted Piksrys.

Kubilius confirmed national governments were researching and considering utilizing green energies for the future. “Recently, we approved a special law on ‘green energy,’ to look into wind power and biomass. We are especially interested in biomass,” nodded Kubilius. “We have big resources of biomass from the forests, from wood. Especially in heating energy, we see a big need of switching from the usage of gas to biomass.”
 Separate from biomass, Lithuania could be sitting on a hotbed of untapped energy resources. Recent research has detailed how a porous type of gas, known as shale gas, which can be extracted from solid material, was potentially plentiful in the Lithuanian wilderness.

“In the south-western part of Lithuania, it [the geological structure in which shale gas is found] looks like it is there. There is an opportunity to develop exploration of this, as it is still not very [much] investigated. Judging by theoretical calculations, there could be around 120 billion cubic meters of the structure, which would mean, for Lithuania, something like thirty or forty years of our domestic energy consumption. We were starting to look into this possibility also,” stated Kubilius, and doing so, affirmed Lithuania’s stance as stepping forward into an experimental energy landscape for the future.