Lithuania is currently leading the Baltic states in the expansion of renewable energy capacity, having increased its renewable energy production capacity the most rapidly over the past decade, according to economists Dzintars Jaunzems, Oļegs Matvejevs and Ieva Opmane of Latvijas Banka, as reported by Macroeconomics.lv.
The green transformation of energy supply systems in the Baltic countries, particularly since 2022, is moving in similar directions, but the pace of change differs due to varying starting positions, the economists write. This is especially apparent in the field of renewable energy.
Latvia has the highest proportion of renewable energy sources in its gross electricity generation in the Baltics – 55.5%. The economists explain that, thanks to its historically large hydropower capacity, more than half of the electricity generated in Latvia is currently provided by renewable sources – while this is still primarily hydropower.
In 2024, Lithuania’s share of renewable energy sources in gross electricity generation was 49%, while Estonia’s was 38%. However, the economists point out that Lithuania reached the 49% share, increasing from 21% in 2021 within a single year.
“Looking at development and investment, Lithuania’s recent sprint in developing new renewable electricity capacity is impressive, followed by Estonia. Latvia in this race is more of a leisurely Sunday runner, having historically accumulated a large amount of kilometers already completed,” the economists write. This rapid growth in Lithuania’s renewable energy sector is attracting attention as the country aims to bolster its energy independence.
Electricity storage systems are rapidly entering the grid as a complementary technology to smooth out the fluctuating generation profile of intermittent renewable energy sources, the economists note. If energy generated from renewable sources cannot be stored, it creates additional fluctuations, and the demand and supply of electricity may not coincide in time. Storage, however, ensures that the benefits of renewable energy are available when they are most needed.
Lithuania is as well ahead of the other Baltic countries in the field of electricity storage systems connected to transmission and distribution systems – excluding storage at the end-user level. Lithuania currently has 201 operational storage facilities, compared to 35.5 in Estonia and 10 in Latvia.
The Latvijas Banka economists emphasize that Latvia, Lithuania, and Estonia are small, open economies that import almost all fossil energy resources and a portion of their electricity, making them particularly sensitive to global energy price shocks.
Latvia’s energy price fluctuations are closely linked to global energy price fluctuations, but local factors also play a role, the economists indicate. For example, after Russia’s invasion of Ukraine in 2022, global oil and natural gas prices rose sharply. However, the increase in energy prices in Latvia was even more pronounced, as, in addition to the general increase in resource costs, Latvia had to reorganize its resource supply systems – previously, a portion of these products was imported from Russia, but then alternative supply routes were sought.
the increase in energy prices in Latvia in 2022 reached 48.8%, accounting for almost half of the total inflation of 17.2% in Latvia. High inflation was also observed in Lithuania and Estonia in 2022, where the situation in the energy sector was similar. During periods when global energy resource prices rise sharply, an increase in energy prices in Latvia is inevitable, the economists conclude.
Responding to the question of whether and by how much these price peaks could be mitigated if a larger share of energy needs could be met using locally produced renewable electricity, the Latvijas Banka economists, citing an analysis by the International Monetary Fund, emphasize that the Baltic countries, as small and open economies, are particularly sensitive to global price shocks, including sharp increases in energy resource prices. Dzintars Jaunzems, an advisor to Latvijas Banka, has been a key voice in advocating for this transition.
The economists explain that in 2022, high energy prices in the Baltics were mainly determined by external supply shocks, highlighting the need to accelerate the restructuring of the energy sector and the transition to local and renewable energy resources. Such a move would reduce the economy’s vulnerability to global price fluctuations and stabilize inflation, while simultaneously strengthening the competitiveness of the Baltic countries in the long term.
Stingri aizliegts iAuto.lv publicētos materiālus izmantot, kopēt vai reproducēt citos interneta portālos, masu informācijas līdzekļos vai kā citādi rīkoties ar iAuto.lv publicētajiem materiāliem bez rakstiskas EON SIA atļaujas saņemšanas.
