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IEA: Lithuania needs to prioritise energy efficiency

Lithuania has made impressive headway in its clean energy transition in recent years but needs to take action in several key areas to accelerate progress towards its goal of climate neutrality in 2050, according to a new policy review by the International Energy Agency (IEA).

Lithuania is seeking membership of the IEA, which conducted an in-depth review of the country’s energy policies as part of the accession process. Overall, the review found that Lithuania has strengthened its energy policies over recent years. In particular, Lithuania’s track record on its clean energy transition is impressive. The carbon intensity of electricity and heat generation has decreased over the past decade and Lithuania is now comparable with leading IEA countries when it comes to the share of renewables in final energy consumption.

With the closure of its only nuclear power plant (Ignalina’s two reactors shut down in 2004 and 2009), Lithuania switched from the position of a net exporter to one of a net importer of electricity. Since then, the shares of electricity imports, natural gas and bioenergy have increased. Today, Lithuania imports over 70 per cent of its electricity needs, while bioenergy is taking the lead in domestic energy supply. Most of Lithuania’s co-generation (co-generation refers to the combined production of heat and power), district heating and residential heat have switched from natural gas to biomass.

However, despite the decoupling of emissions from economic growth, Lithuania’s total energy-related CO2 emissions have increased 9 per cent since 2000, notably from transport, which accounts for the lion’s share of the country’s emissions. To meet its targets, Lithuania needs to reverse that trend, but even stronger efforts will be needed for it to contribute to global efforts to reach climate neutrality.

The IEA encourages Lithuania to introduce an annual vehicle tax, create the Sustainable Mobility Fund and phase out tax exemptions and update excise duty rates in line with carbon content. The Lithuanian government has shown leadership in the transport sector with the adoption of the Alternative Fuels Law in March 2021. A holistic approach to mobility is needed to meet its ambitious 2050 vision. The government should prepare a comprehensive strategy for improving vehicle efficiency, rolling out zero-emission vehicles and biofuels blending. Besides subsidies for the roll-out of zero-emission vehicles, a package that combines fiscal instruments and local mobility measures, based on alternative fuels, biofuels and electrification targets, could be very effective. 

“Lithuania needs to boost investments in clean energy technologies to enhance both its energy security and the competitiveness of its industries,” said Fatih Birol, the IEA Executive Director. “Hydrogen, offshore wind and batteries can be real game-changers in the context of Lithuania’s clean energy transition.”

Energy efficiency progress has slowed down in Lithuania, as in many IEA countries. Energy consumption is rising in contrast with the government’s aim of reducing it by 60 per cent by 2050. The IEA review finds that energy efficiency must be made a top priority. Furthermore, Lithuania targets 100 per cent of electricity from renewables by 2050, which will require electricity systems and markets to accommodate very high shares of variable renewable energy, notably onshore and offshore wind. In the policy review, the IEA urges the government to adopt a forward-looking renewable energy strategy with a focus on flexibility and sustainability in order to help attract investment. It also needs to define the opportunities that Lithuania’s vast forest resources provide as a carbon sink and as a driver of the region’s bio-economy and biomass trade.

One of the current major challenges for Lithuania is to ensure that no electricity could enter the Baltic states’ market from Belarus, where the Astravets nuclear power plant was commissioned recently. Lithuania’s Special Law declares the plant as unsafe, as it poses serious threats to nuclear safety, the environment and national security across the Baltics and notably for Lithuania’s capital, Vilnius.

Also, Lithuania’s liquefied natural gas (LNG) terminal in Klaipėda has significantly reduced the country’s dependence on direct gas imports from Russia, a declared policy priority for the government. The terminal has also improved the gas market integration and lowered gas prices in the region. A Baltic gas market is emerging, which connects infrastructure and countries in the region: the Klaipėda LNG terminal in Lithuania, the Baltic gas storage in Latvia (Inčukalns) with Estonia’s and Finland’s gas network through the Balticconnector pipeline and with Poland through the Gas Interconnection Poland-Lithuania by the end of 2021.

As Lithuania and its neighbours have an opportunity to access global LNG and use natural gas as a transition fuel to end coal and oil use in the region, the IEA encourages the government to complete the regional gas market, based on regional gas pricing and infrastructure expansion and usage.

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