The recent proposal by Lithuania's Ministry of Energy to temporarily suspend the second offshore wind auction has sparked debate about its impact on energy transition goals and investor confidence. Linas Sabaliauskas, Managing Director of the Lithuanian Wind Power Association (LVEA), assures Strategic Energy Europe that, in the short term, the suspension will not affect immediate energy objectives, as the country has 4,700 MW of onshore wind projects in development. "Offshore wind was expected to become operational around 2032," explains Sabaliauskas.
However, the long-term effects of this measure raise concerns about Lithuania's ability to meet its ambitious energy goals, including the operation of 1,400 MW of offshore wind capacity by 2028. Sabaliauskas described this target as a "bold statement" by the former Minister of Energy, given that sector timelines indicate a more conservative outlook.
Price Stabilisation vs.Market Competitiveness
One of the government's arguments for the suspension is to minimise the impact on electricity prices for consumers. However, according to Sabaliauskas, the current design of offshore wind auctions could harm the competitiveness of Lithuania's energy market. "With 6,000 MW of onshore wind capacity and another 6,000 MW of solar already secured, adding offshore energy with 15-year dispatch priority and contracts for differences (CfD) could dominate 60% of the national energy consumption, creating risks of market manipulation," he warns.Sabaliauskas also highlights that the limited capacity of commercial interconnection with Poland and the lack of incentives for green hydrogen projects exacerbate these risks.
"Even with a 4-5 TWh increase in domestic consumption by 2030, offshore energy could overwhelm the market and discourage further investments in more competitive onshore projects," he asserts.
Impact on Investor Confidence The auction's postponement adds to a history of regulatory changes that have eroded foreign investors' confidence in Lithuania's wind energy sector.Sabaliauskas recalls that in 2021, leading companies such as Orsted, RWE, and Total were ready to invest, but they exited the market in 2022-2023 after changes to support mechanisms and auction conditions.
STrust had already been damaged.
Now we must rebuild it from scratch, Sabaliauskas comments.
He also notes that the redesign of the current auction process allows for a winner to be declared even if there is only one participant an approach that could discourage competition and send negative signals to the market.
Lessons from Neighbouring Countries In this context, examples from Poland and Estonia provide valuable lessons for Lithuania.Sabaliauskas stresses the importance of avoiding underestimating investors' ability to assess risks and returns. "It"s not about competing against the market but collaborating with developers.
Changing auction rules at the last minute, as has been done in Lithuania, only deters participants," he explains.
In contrast, Estonia stands out for its calculated and stable approach.
"While Lithuania rushes back and forth without success, Estonians think and calculate twice, achieving correct results on the first attempt," Sabaliauskas notes.
A Way Forward? To ensure favourable conditions for consumers and developers, Sabaliauskas recommends a more strategic and thoughtful approach."If the government proceeds with auctions under the same conditions, private investors might halt their onshore projects and leave the country, a devastating blow to Lithuania's investor confidence," he warns.
Although the immediate impact of the auction"s suspension is limited, the future of Lithuania's offshore wind sector depends on the government"s ability to restore investor confidence and design policies that foster a competitive and sustainable market.
The suspended auction was aimed at allocating a 700 MW offshore wind park in the Baltic Sea. This capacity was part of a broader strategy to diversify the country"s energy mix and reduce dependence on energy imports.
However, policy uncertainties and frequent regulatory revisions have created unique challenges for Lithuania compared to its Baltic neighbours.
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