Power policy

Lithuania’s National Climate Change Management Agenda sets an aim for renewables to account for 45% of final energy consumption by 2030 and 90% by 2050. It also includes an objective for 100% of electricity to come from renewables by mid-century.

The country’s first solar photovoltaic auction was held in 2019 and the first offshore wind auction will be conducted in 2023. The 2021 round of bidding was canceled, but with current electricity prices and installation costs for power plants, renewables have been able to operate in the market without state incentives.

Electricity from renewable sources is exempt from excise duty, and small-scale energy storage projects could receive grants from the EU’s €100 million ($100 million) Innovation Fund.

Lithuania has ambitious plans for what it calls “prosumers”. These small-scale solar installations will receive a boost from a €40 million solar rebate scheme and from net metering (up to 100 kilowatts for some businesses) or sliding feed-in-tariffs for small-scale (up to 10 kilowatts) renewable projects in 2022.

Power prices and costs

Residential tariffs are still regulated in Lithuania, and Ignitis Group (formerly Lietuvos Energija) is the state-owned supplier. Despite being regulated, residential power prices, as well as commercial and industrial tariffs, have been increasing.

The country is seeking to reduce its dependency on power imports and increase interconnectivity and synchronization with the wider European network. Lithuania imported over 70% of its electricity in 2021. New power interconnections with Poland and Sweden are planned for 2023 and could affect price dynamics. This should help Lithuania balance and integrate higher volumes of intermittent renewable generation.

Power market

Renewables accounted for 30% of Lithuania’s power-generating capacity in 2021, with more than half of that coming from wind.

Distributed solar is available to residents of apartment blocks through a remote purchasing scheme created under the “Solar Community” online platform in March 2020. Plans for offshore wind are progressing with a site in the Baltic Sea that could support 700 megawatts of capacity having been selected and scheduled for auction in 2023.

Despite a large number of licensed suppliers – project developers and offtakers can choose to use a standardized power purchase agreement or negotiate individual contracts – Lithuania’s generation is somewhat concentrated, with Ignitis enjoying a dominant position. However, new renewables capacity has made the generation market less concentrated.

Doing business and barriers

Lithuania recently removed many barriers for renewables deployment and the liberalization of electricity prices across 2021-23 will further bolster this development. The country has made progress in gradually opening up its electricity and gas markets. However, due to security concerns, it has increased the level of state ownership in its energy sector in recent years, which may result in barriers to entry for private players.

Under the National Recovery and Resilience Plan, €823 million has been allocated for the development of offshore wind infrastructure and to support the construction of onshore renewable energy plants (including solar and wind), individual energy storage facilities, and renewable energy communities. Lithuania also seeks to establish a capacity market by 2025.

EV market

While demand for internal combustion engine (ICE) vehicles did not change considerably in Lithuania last year, sales of electric vehicles almost tripled to 1,134 units. This reflects stronger policies to support EV adoption since 2019. The government has been an active ally of the EV industry, working to replace publicly owned petrol and diesel cars with electric alternatives.

EV policy

Lithuania is seeking 15% of its energy demand from the transport sector to be met by clean sources by 2030 through a mix of EVs, biofuels and hydrogen. To encourage consumers to switch to low-carbon modes of transport, the country has a €4,000 purchase incentive for new EVs, while buyers of used EVs can claim a subsidy of €2,000. EVs and vehicles with emissions below 130 grams of CO2 per kilometer are also exempt from paying Lithuania’s motor vehicle registration tax and the standard pollution tax typically imposed on mobile sources of emissions.

To support the rollout of charging infrastructure, the government has held tenders for the installation of public EV charging points.

Buildings market

As Lithuania looks to improve the energy efficiency and carbon intensity of its heating sector, heat pump sales increased by more than 70% from 2019 to 2020, reaching 20,520 units. Growth continued in 2021, although more slowly, with sales rising by 22% to 25,130 units.

Buildings policy

Increasing energy efficiency is seen as a key focus for Lithuania through to 2050, and efforts in the buildings sector are focused on the modernization and renovation of both the residential and public buildings stock. Minimum energy performance standards are in place, and new buildings now need to secure an “A++” rating, meaning they are nearly zero-energy. The Renovation of Modern Apartment Buildings program allows participating owners to receive 30% rebates for renovations they make to improve efficiency.

The country’s Long-Term Renovation Strategy includes a goal to reduce the annual primary energy consumption of buildings by 60% from 2020-2050, and to cut annual consumption of primary energy from fossil fuels to zero across this period. The strategy also aims to lower CO2 emissions from the buildings stock to zero by mid-century. These targets rely on a concurrent transformation of the power sector to shift to renewable energy.

Lithuania is aiming for two-thirds of its final energy consumption for heating and cooling to be powered by renewables by 2030. To decarbonize and improve the energy efficiency of heating, the “Replacement of Boilers in Households” regulation was introduced to incentivize households to upgrade old, inefficient biomass boilers with more efficient models, or replace them with heat pumps. With a program budget of around €4.8 million, the subsidy covered 50% of expenses and the last call for applications was from January to February 2022.

Meanwhile, the city council of Lithuania’s capital Vilnius has decided to phase out the use of coal for heating, with the ban due to take effect in June 2023.