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------TRANSFORMATIONS IN ------Vasauskaite, J., Streimikiene, D. (2014), “Review of Energy Efficiency BUSINESS & ECONOMICS Policies in ”, Transformations in Business & Economics, Vol. 13, No 3C (33C), pp.628-642. © University, 2002-2014 © Brno University of Technology, 2002-2014 © University of Latvia, 2002-2014

REVIEW OF ENERGY EFFICIENCY POLICIES IN LITHUANIA

1Jovita Vasauskaite 2Dalia Streimikiene Department of economics Department of Business School of economics and Economics and Management business Faculty of Humanities KaunasUniversity of Vilnius University Technology Muitinės str. 8 K. Donelaicio str. 20 LT – 44280 Kaunas LT-44239 Kaunas Lithuania Lithuania Tel.: +370 37 401 958 Tel.:+370 37 300 550 E-mail:[email protected] E-mail: [email protected]

1Jovita Vasauskaite holds PhD in Economics. She is associated professor at Kaunas University of Technology. Currently J. Vasauskaite works as a postdoctoral fellow in Lithuanian Energy Institute. The researcher has experience in the projects related to corporate social and environmental responsibility, entrepreneurial competence. Her main research fields are: new technology implementation, energy efficiency development in industry. She has published around 15 articles in indexed international data basis.

2Dalia Streimikiene, PhD, is a senior research fellow at the Social cultural institute of Kaunas Faculty of Humanities, Vilnius University. The main areas of research are: environmental policy, energy policy and economic tools of environmental regulation in energy sector. Prof. Dr. Dalia Streimikiene holds PhD in Economics. She is professor and Leading Research Associate at Vilnius University Kaunas Faculty of Humanities. D. Streimikiene has experience in various projects related to sustainable development, environmental and climate change mitigation policies. The main area of her research is sustainability assessment of policies, technologies and products in energy field, development of indicator frameworks for sustainability assessment.

Received: August, 2014 ABSTRACT. Energy efficiency is the main target of sustainable st 1 Revision: September, 2014 development policy as energy efficiency improvement allows to save nd 2 Revision: October, 2014 means, to reduce energy consumption, energy import dependency Accepted: October, 2014 and GHG emissions.

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The EU is aiming for a 20% cut in Europe’s annual primary energy consumption by 2020. The aim of the paper is to review the newest EU energy efficiency policies and Lithuanian attempts to implement these policies. The paper analyses the newest EU policy documents on energy efficiency and reviews Lithuanian energy consumption and energy efficiency development trends. The Lithuanian energy savings targets and progress achieved in implementing these targets were assessed. Lithuanian energy efficiency policies and measures are analysed and policy recommendations are provided based on analysis performed.

KEYWORDS: energy efficiency, energy intensity, energy saving targets, policies and measures, Lithuania.

JEL classification: Q2, Q4, Q5.

Introduction

The 2012 EU Energy Efficiency Directive (EED) is the most important energy policy document as provides for tapping Europe’s large energy savings potential and reducing GHG emissions and Europe’s high dependency on energy imports. EU has mandatory end-use energy savings targets for Member States of 1.5% each year from 2014 to 2020. It also requires them to demonstrate how they will reach these savings via measures that are material and additional to what would have happened anyway. Energy efficiency is the main task of sustainable energy development and the main measure to reduce GHG emissions from energy production and consumption (Streimikiene, Volochovic, 2011; Streimikiene, 2012; Streimikiene et al., 2012a; 2012b). Very important issue in EED is energy savings obligations (EEO). The energy savings to be achieved by EEOs and/or alternative measures must be at least equivalent to achieving new savings each year from 1 January 2014 to 31 December 2020 of 1.5% of the annual energy sales to final consumers of all energy distributors or all retail energy sales companies by volume averaged over the previous three consecutive years where data is available (baseline). The implementation of EEO is foreseen in Lithuanian policy documents however the scheme is so far not developed. However Lithuania has implemented energy efficiency policies and reported according requirements of the Directive 2006/32/EC on energy end-use efficiency and energy services about progress in reaching the 9% indicative energy savings target by 2016. NEEAPs should describe the energy efficiency measures. Furthermore, the NEEAPs were supposed to describe how Member States intended to comply with the provisions on the exemplary role of the public sector and the provision of information and advice to final consumers. The aim of the paper is to review the newest EU energy efficiency policies and Lithuanian attempts to implement these policies. The main tasks to achieve this aim are:  To analyse the newest EU policy documents on energy efficiency;  To review Lithuanian energy consumption and energy efficiency development trends;  To review Lithuanian energy savings target and progress achieved in implementing these targets;  To analyse Lithuanian energy efficiency policies and measures and provide assessment of these policies; TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 13, No 3C (33C), 2014 J. Vasauskaite, D. Streimikiene 630 ISSN 1648 - 4460 Problems and Prospects of Different Industry Sectors

 Provided policy recommendations based on reviews performed.

1. New EU Energy Efficiency Policies

Energy efficiency is the main target of sustainable development policy. Energy efficiency improvement allows to save means, to reduce energy consumption, energy import dependency and GHG emissions. The EU is aiming for a 20% cut in Europe’s annual primary energy consumption by 2020. On 8 March 2011, the EC adopted the Communication "Energy Efficiency Plan 2011" for saving more energy through concrete measures. The set of measures proposed aims at creating substantial benefits for households, businesses and public authorities: it should transform our daily lives and generate financial savings of up to €1000 per household every year. It should improve the EU’s industrial competitiveness with a potential for the creation of up to 2 million jobs. The European Commission has proposed several measures to increase efficiency at all stages of the energy chain: generation, transformation, distribution and final consumption. The measures focus on the public transport and building sectors, where the potential for savings is greatest. Other measures include the introduction of smart meters (which encourage consumers to manage their energy use better), and clearer product labeling. The most important for all branches of economy are: EU directive 2012/27/EU (on energy efficiency), EU Directive 2010/31/EU (on the energy performance of buildings); EU Directive 2010/30/EU (on the indication by labeling and standard product information of the consumption of energy; EU Directive 2008/98/EU (on waste and repealing); Directive 94/62/EC (on packaging and packaging waste) and EU Directive 2008/1/EC (concerning integrated pollution prevention and control) and Directive 2006/32/EC on energy end-use efficiency and energy service (Katinas et al., 2014; Gaigalis, Skema, 2014a). Under the framework of the Directive 2006/32/EC, Member States were required to show in their National Energy Efficiency Action Plans (NEEAPs) how they intended to reach the 9% indicative energy savings target by 2016. NEEAPs should describe the energy efficiency measures. Furthermore, the NEEAPs were supposed to describe how Member States intended to comply with the provisions on the exemplary role of the public sector and the provision of information and advice to final consumers. EU MS including Lithuania prepared and submitted two NEEAPs and reported their progress in implementing targets set by Directive 2006/32/EC. 2012 EU Energy Efficiency Directive (EED) establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency. Commission Directive 2012/27/EU on energy efficiency requires all EU-28 countries to use energy more efficiently at all stages of the energy chain– from the transformation of energy and its distribution and final consumption. The new Directive will help remove barriers and overcome market failures that impede efficiency in the supply and use of energy and provides for the establishment of indicative national energy efficiency targets for 2020. EU target defined in the legal text and national indicative targets for 2020 to be set by MS. The MS should prepare Roadmaps for the renovation of building stock, increase the role of the public sector and to implement energy efficiency obligation schemes or alternative policies to be set by MS to address final consumption. The measures to promote energy services are also required. Accurate and frequent individual metering and billing, mandatory energy audits for large companies and promotion of audits for households and SMEs are foreseen in EED. The EED also and strong obligations for CHP and requires preparation and implementation of

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Heat and cooling demand plans. In addition according EED the energy efficiency to be taken into account in setting network tariffs and regulations. The main measures foreseen in EED (Ministry of Environment Republic Lithuania, 2013):  The obligation of Member States to achieve certain amount of final energy savings over the obligation period (1 January 2014 - 31 December 2020) by using energy efficiency obligations schemes or other targeted policy measures to drive energy efficiency improvement in households, industries and transport sectors. Lithuania has not yet set clear way for structuring the energy efficiency obligation scheme. However, this saved amount is a part of the above mentioned target; therefore the savings will not have additional impact on GHG.  Public sector to lead the example by renovating 3% of buildings owned and occupied by the central governments starting from 1 January 2014 and to include energy efficiency requirements in public procurement, if certain conditions are met (e.g. cost- effectiveness, economic feasibility). However, this saved amount is a part of the above mentioned national target; therefore the savings will not have additional impact on GHG.  Efficiency in energy generation: monitoring of efficiency levels of new energy generation capacities, national assessments for co-generation and district heating potential and measures for its uptake to be developed by 31 December 2015, including recovery of waste heat, demand side resources to be encouraged Therefore EED provides the legal definition and quantification of the EU energy efficiency target as the ”Union’s 2020 energy consumption of no more than 1474 Mtoe primary energy or no more than 1 078 Mtoe of final energy’’. With the accession of Croatia the target was revised to” 1483 Mtoe primary energy or no more than 1086 Mtoe of final energy”. EED poses an obligation on each Member State to set an indicative national energy efficiency target in their preferred form (primary/final savings, intensity, consumption) and, by 30 April 2013, to notify it together with its ‘translation’ in terms of an absolute level of primary energy consumption and final energy consumption in 2020. Also Energy Efficiency Directive requires Member States to achieve certain amount of final energy savings over the obligation period (01 January 2014 – 31 December 2020) by using energy efficiency obligations schemes or other targeted policy measures to drive energy efficiency improvements in households, industries and transport sectors (Ministry of Environment Republic Lithuania, 2013). The absolute savings volume per country is based on the average of annual energy sales over a three-year period. Countries are allowed to exclude all sales from transport from the baseline, and all but Sweden did so. Furthermore, countries are allowed to use exemptions up to reduce their target by a maximum of 25% (The Coalition of Energy Savings, 2014). Table 1 provides the cumulative amounts of savings between 2014 and 2020 and the total planned savings in 2020 as reported by the individual countries (exemptions applied). According EED public sector to lead by example by renovating 3% of buildings owned and occupied by the central governments starting from 01 January 2014 and by including energy efficiency considerations in public procurement. The requirements of EED for efficiency in energy generation include monitoring of efficiency levels of new energy generation capacities, national assessments for co-generation and district heating potential and measures for its uptake to be developed by 31 December 2015, including recovery of waste heat, demand side measures to be encouraged. Major energy savings should be achieved by energy consumers. The easy and free-of-charge access to data on real-time and historical energy consumption through more accurate individual metering will now empower consumers to better manage their energy consumption. The obligation for large enterprises are to carry out an energy audit at least every four years, with a first energy audit at the latest by 5 TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 13, No 3C (33C), 2014 J. Vasauskaite, D. Streimikiene 632 ISSN 1648 - 4460 Problems and Prospects of Different Industry Sectors

December 2015. Incentives for SMEs to undergo energy audits to help them identify the potential for reduced energy consumption (The Coalition of Energy Savings, 2014).

Table 1. The cumulative amounts of savings between 2014 and 2020 and the total planned savings by EU member States under EED

Cumulative final energy savings Total final energy savings planned in Country target over 2014-2020 (Mtoe) 2020 (Mtoe) Austria 5.006 1.341 Belgium 6.911 1.728 Bulgaria 1.943 0.486 Cyprus 0.213 0.053 Croatia 1.296 0.323 Czech Republic 4.571 1.143 Denmark 4.130 1.033 Estonia 0.614 0.154 Finland 4.209 1.052 France 30.570 7.643 Germany 48.880 12.220 Greece 3.302 0.894 Hungary 4.816 1.204 Ireland 2.652 0.663 Italy 25.580 6.395 Latvia 0.851 0.315 Lithuania 1.004 0.287 Luxembourg Report is not available Malta 0.058 0.015 Netherlands 11.512 2.857 Poland 14.725 3.681 Portugal 3.376 0.844 Romania Target in final energy not available Slovakia 3.121 0.780 Slovenia 0.997 0.270 Spain 15.979 3.995 Sweden 9.114 2.279 UK 27.859 6.965 Source: the Coalition of Energy Savings, 2014.

Article 7 requires EU Member States to set up Energy Efficiency Obligation schemes (EEOs) mandating energy retailers or distributors to reach energy savings targets. As an alternative to setting up an EEO, MS may opt to take other policy measures to achieve the same amount of savings among final customers. Also, a combination of EEOs and other policy measures is possible. 16 countries will have EEOs in place. Of this 16, eight countries already had an EEO in place (Belgium, Denmark, France, Ireland, Italy, Poland, Slovenia and UK). The following eight countries will introduce EEO as a result of the requirements of the EED: Austria, Bulgaria, Hungary, Latvia, Lithuania, Malta, Slovakia, and Spain (The Coalition of Energy Savings, 2014). EEOs are becoming more common in the EU. This is a doubling of the number of EEOs in the European Union. EEOs must be viewed by MS as successful instruments, also since none of the countries that already had an EEO in place will abolish the system. Lithuania reported the contribution to the energy saving target of both an EEO and alternative measures. The CEO and alternative measures still need to be developed in Lithuania. The Lithuanian government has identified two intermediate periods, 2014-2016, and 2017-2020.

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In the first period, 24% of the overall cumulative savings target will have to be achieved, so it seems that the fact that both the EEO and alternative measures still need to be developed has been taken into account in this report (The Coalition of Energy Savings, 2014). There is a large diversity in the setup of EEOs. Of the 16 EEOs to be in place, only four will deliver 100% of the binding energy savings target (of which the Bulgarian and Hungarian EEO schemes have not been implemented yet and need to be developed further). The remaining 12 will deliver between 20 and 90% of the target. Almost all countries put the obligation on either the energy distributors or the energy suppliers, this is evenly divided over the countries. In a few countries, both are obliged (The Coalition of Energy Savings, 2014).

2. Lithuanian Energy Consumption and Energy Efficiency Development Trends

Lithuania’s primary energy balance consists of natural gas, oil and oil products, local and renewable energy sources and coal. A share of natural gas in 2012 composed 35.9% of primary energy sources, in 2001 – 26.0%. All natural gas consumed in the country is extracted in Russia and is transported to Lithuania by means of pipelines. In 2012 the imported and consumed amount of natural gas made 3.3 billion m3. Petroleum products, including emulsified fuel in 2012 made 34.2% of primary energy while in 2011 – 33.7%. Domestic oil resources are not abundant, thus the indicators of oil and petroleum products sector are dependent on imports (Ministry of Environment Republic Lithuania, 2014). Following the closure of the last unit of Ignalina nuclear power plant in 2004 the bulk of the fuel and energy consumed in Lithuania is imported. Lithuania is not able to satisfy its electricity demand competitively. Grids are not connected with Europe’s electrical energy systems, so Lithuania can only import electricity from other countries. In the field of increasing energy efficiency, efforts are being made to renovate existing buildings, modernize their energy systems, increase the efficiency of energy production and consumption in the cogeneration and district heating sectors, in industrial processes, in the equipment used by undertakings, institutions and households for energy management and in transport, and to use renewable and waste energy resources in order to make the country less dependent on importing primary energy resources (Ministry of Environment Republic of Lithuania, 2014). Many factors had influence on changes in energy consumption of Lithuania. The deep economic slump in 1991-1994, fast economic growth over the period 2000-2008, dramatic reduction of economic activities in all branches of the national economy and the closure of Ignalina NPP in 2009, a significant increase of energy prices, an increase of energy efficiency and other reasons. Total final energy consumption (excluding non-energy use) in 1990 amounted to 9.68 Mtoe. In 1991-1994 final energy consumption decreased approximately by 2.1 times. The final energy consumption was increasing during the period 2000-2008 by 4.0% per annum, and in 2008 it was 4.9 Mtoe (Ministry of Environment Republic of Lithuania, 2014). During this period the final energy consumption was increasing in all sectors of the national economy. In 2009, total final energy consumption was by 6.4% less than in the previous year, and the most severe impact of the economic recession was in the construction sector where energy consumption decreased by 35%. Energy consumption decreased in the transport sector by 18.5%. As a result of recovering Lithuanian economy, final energy consumption increased by 3.7% in 2010. However, in 2011 the final energy consumption reduced by 0.86% and amounted to 4.72 Mtoe). This decrease was mainly caused by reduced energy consumption in transport, residential and commercial/institutional sectors. Final energy consumption in industry increased by 5.1% in 2011 due to growing activities of

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Lithuanian manufacturing sector. In 2012 the final energy consumption increased by 2.6% and amounted to 4.84 Mtoe (Ministry of Environment Republic of Lithuania, 2014). The most important indicator of energy efficiency of the country is energy intensity of economy. This indicator represents the ratio between the gross inland consumption of energy and the GDP for a given calendar year. The gross inland consumption of energy is calculated as the sum of the gross inland consumption of five energy types: coal, electricity, oil, natural gas and renewable energy sources. The GDP figures are taken at chain linked volumes. Since gross inland consumption is measured in toe (tones of oil equivalent) and GDP in EUR, this ratio is measured in toe per mill. EUR. The comparison of energy intensity of Lithuanian economy and all EU-27 countries are given in Figure 1.

1200

1000 Bulgaria

toe per per toe

800 Estonia 600

mill. EUR) mill. 400 Latvia 200

Energy intensity, Energy 0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2001 Source: created by the authors according to Eurostat, 2012.

Figure 1. Development of Energy Intensity of Economy in Lithuania and Other EU Member States, 2001- 2012

As one can see from information provided in Figure 1 energy intensity decreased in Lithuania about 1.5 times from 2004 to 2012 or from 479 to 292 toe/mill. EUR. On comparison, energy intensity of the economy in Bulgaria decreased 1.3 times from 870 to 670). Energy intensity average of EU-27 countries during such period decreased only 1.1 times, from 167 to 152 toe/mill. EUR. The best performing EU country in terms of energy intensity of economy is Luxemburg where energy intensity is 134 toe/mill. EUR and was almost stable during the same period. The worst performing EU member state in term of energy intensity of economy is Bulgaria having almost twice higher energy intensity than Lithuania.

Table 2. Final energy intensity in Lithuania by users groups for the period of 2000-2011 (toe/mill. LTL)

Final energy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 intensity Total 75.8 79.4 77.2 72.0 69.8 63.7 62.9 60.3 57.7 61.3 62.5 58.2 Industry 74.2 67.1 71.5 65.0 60.5 57.7 56.9 55.2 48.3 49.2 50.5 49.7 Agriculture 34.3 40.7 38.2 35.9 36.8 33.7 41.3 38.8 36.8 32.4 36.9 34.5 Household 27.5 28.1 26.4 24.0 22.3 20.9 20.2 17.6 17.7 20.9 20.9 18.9 Transport 21.2 23.7 22.9 21.2 21.7 19.9 19.9 21.5 21.0 20.1 20.4 19.0 Services 18.3 21.4 20.9 20.8 20.5 16.3 16.7 15.9 14.8 16.2 16.6 15.3 Construction 16.4 14.6 14.9 12.8 12.3 9.8 8.2 6.8 6.9 8.2 9.7 7.7 Source: Gaigalis, Skema, 2014b. The final energy intensity indicators in branches of economy in Lithuania for 2004-

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2010 years (ratio of final energy consumption in tonne of oil equivalent per LTL million of GDP) are shown in Table 2. As one can see from Table 2 the total energy intensity in Lithuania for the period 2004-2011 decreased about 1.2 times, from 70 to 58 toe/mill. LTL. Energy intensity in household and transport sectors decreased about 1.2 times, from 22 to 19 toe/mill. LTL. Energy intensity in industry during the period decreased by 1.2 times (from 60 to 50 toe/mill. LTL), in services sector- about 1.4 times (from 21 to 15 toe/mill. LTL).

3. Energy Savings Target and Implementation of EED in Lithuania

The national indicative target for energy consumption efficiency in the National energy independence strategy approved by Resolution No XI-2133 of the Lithuanian Parliament of 26 June 2012 (Ministry of Energy Republic Lithuania, 2012), expressed as a final energy saving from 2009 until 2020, is equivalent to 740 ktoe (17% of the final energy consumption for 2009). This assumption draws on the database of results of the study of energy saving potential in the EU Member States, candidate countries and EEA countries commissioned by the European Commission’s Directorate – General for Energy (http://www.eepotential.eu/esd.php) and factors in a large State energy saving incentive. Once this target has been achieved, the final energy consumption in 2020 should be not greater than 5445 ktoe. Lithuania has to report on progress achieved in implementing energy efficiency target (Ministry of Energy Republic of Lithuania, 2013). Lithuania’s report on the progress made in achieving national energy efficiency targets prepared in 2013 indicates that Lithuania is on line in implementing energy efficiency targets. In report was stated that Lithuania, like most other European countries, is facing major challenges in three energy sectors: security of supply, competitiveness and sustainable development. This report gives the basic indicators set in EED such as gross domestic and sectoral energy consumption, gross value added by sector, data on the number of inhabitants in the country, gross domestic product, households, electrical and heat energy generated, fuel consumption to generate this energy, energy losses during transport and distribution, district heat production and fuel consumption (Table 3). As one can from information provided in Table 3 the gross domestic primary energy consumption rose by 3.4% between 2010 and 2011 in Lithuania. Gross final energy consumption decreased by 1.5%, from 4 767.8 ktoe in 2010 to 4 696.0 ktoe in 2011. This downward trend is also reflected in the sectoral final energy consumption indicators (other than industry). In the industry sector, by contrast, the trend is upward. This growth has an impact on the gross final energy consumption indicator. The growth in final energy consumption in the industry sector was affected by the country’s economic situation. The country’s GDP grew in 2010, and changes in the country’s macroeconomic indicators between 2010 and 2011 showed Lithuania’s economy was recovering, with GDP growing by 1.5% and 5.9% respectively. In 2011 Lithuania’s GDP was LTL 80.7 billion (chain volume, Table 3) or LT 26 600 per capita (Ministry of Energy Republic of Lithuania, 2013).

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Table 3. Lithuanian aggregate data for basic indicators under EED, 2010-2011

Indicator 2010 2011 Gross primary energy consumption, ktoe 7 054.0 7 290.0 Gross final energy consumption, ktoe 4 767.8 4 696.0 Final energy consumption - industry, ktoe 857.9 901.0 Final energy consumption - transport, ktoe 1 557.9 1 534.5 Final energy consumption - households, ktoe 1 593.6 1 525.4 Final energy consumption - services, ktoe 605.3 584.2 Gross value added by sector – industry, LTL million 16 974.8 18 146.36 Gross value added by sector - services, LTL million 55 576.24 57 309.66 Disposable income of households, LTL 25 768.8 - Total number of households, thousands 1 389 1 392 Gross domestic product (GDP), LTL million 76 245.59 80 718.03 Electrical energy produced by cogeneration (electrical energy 316.3 231.4 produced in thermal power stations), ktoe Heating produced in thermal power stations, ktoe 376.2 347.1 Heat produced in cogeneration plants (including waste energy from 539.5 469 industrial enterprises), ktoe Fuel consumption in thermal power stations, ktoe 485.7 430.2 Fuel consumption in cogeneration plants, ktoe 1305.7 1022.9 Transport and distribution losses, ktoe 236.4 216.9 Gross passenger kilometres (pkm), million km 5 180 4 101 Gross tonne-kilometres (tkm), million tonnes 33 414 37 199 Number of inhabitants, thousands 3 137.0 3 052.6 District heating production, ktoe 842.9 756.3 Fuel consumption in the output of district heating, ktoe 934.5 813.05 Source: Ministry of Energy Republic of Lithuania, 2013.

The portion of GDP contributed by both the industry and service sectors increased between 2010 and 2011 (Table 3). The gross output of industry grew as the economy recovered, the portion of GDP generated by industry rising from LTL 16 974 800 000 in 2010 to LTL 18 146 360 000 in 2011. As Lithuania’s industry sector recovered between 2010 and 2011, industrial output posted an increase of 6.9% (Ministry of Energy Republic of Lithuania, 2013). The increase in the number of households in Lithuania, from 1 389 000 in 2010 to 1 392 000 in 2011, was not significant. The disposable income of households was around LTL 2 500. In descending order of importance, final energy consumers were as follows: in 2010 transport (33%), households (33%), industry (18%) and services (13%), and in 2011 transport (33%), households (32%), industry (19%) and services (12%). For the country as a whole, in 2011 42.7% of the electrical energy was produced in cogeneration plants, whilst 68.9% of the total electrical energy produced in Lithuania was generated by district heating. In 2011, 41.7% of the electrical energy used was produced domestically, 55.7% of this coming from cogeneration plants (Ministry of Energy Republic of Lithuania, 2013).

4. Assessment of Lithuanian Energy Efficiency Policies in Terms of Implementing Energy Efficiency Target

The main energy policy document in Lithuania is The National Energy Independence Strategy of the Republic of Lithuania, approved by Resolution No XI-2133 of the of the Republic of Lithuania (Ministry of Energy Republic of Lithuania, 2012). Development of

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Renewable energy sources (RES) and increase in energy efficiency are recognized as the most important priorities in the National energy policy. Energy efficiency measures are provided in the second Energy Efficiency Action Plan, prepared in 2011 (Ministry of Energy Republic Lithuania, 2011). It is prepared in pursuance of provisions set in Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC (hereinafter as Directive 2006/32/EC). It defines the results of achievement of national intermediate (2010) index on energy saving. National index on energy saving for period of 9 years (2008-2016) is estimated in accordance of provisions of Directive 2006/32/EC and is equal to 9 % of average (2001-2005) of the final energy consumption (Ministry of Energy Republic of Lithuania, 2013). One of the key measures to improve energy efficiency is the Program for Modernization of Multi-apartment Buildings, approved in 2004, with latest amendments in 2013. In 2009 fundamental changes to the funding arrangements were introduced. Until 2020 modernization of at least 70% of apartment buildings having received building permits before 1993 with saving 1 000 GWh of estimated heating energy in renovated buildings is intended. This program is funded from the State’s aid, municipalities, the EU structural funds, inhabitants and other financial sources In order to enhance energy production, distribution and consumption efficiency and promote use of RES, voluminous financing is allocated for district heating companies, municipal and public organizations. For the period of 2007-2013 an allocation of 399 million EUR (of which 359 million EUR form EU funds) was planned for the projects under the Environment and sustainable development program. As of October 2013 an allocation of 390 million EUR has been approved for the projects under the program and the rest 9 million EUR was allocated to projects in 2013 (Ministry of Environment Republic Lithuania, 2013). In order to establish harmonized method for calculation of impact of energy efficiency measures the Government of the Republic of Lithuania approved the Rules on the Monitoring of Efficient Use of Energy Resources and Energy in 2008. Rules on the Monitoring of Efficient Use of Energy Resources and Energy stipulate the requirements of monitoring of energy efficiency measures implemented in buildings, technological processes, plants or transport facilities via the financial support of energy efficient programs undertaken by the national authorities. Assessment of the object indices, generalization and forecasting of monitoring carried out in the process of the object monitoring are used for determination of the saved quantities of energy consumed by the object, safeguarding of efficient use of energy resources and energy at the national scope, development of energy efficient programs and creation of increased energy efficiency mechanisms/tools (Ministry of Energy Republic of Lithuania, 2013). The following main programmes and plans are prepared, setting the particular measures for the implementation of energy sector targets: District Heating Development Guidelines, the Energy Efficiency Action Plan, the National Renewable Energy Resources Development Strategy, and Cogeneration Development Plan, Programme of Modernization of Multi-apartment Buildings. This programme was approved in 2004, with later amendments in 2009. Due to this the modernization process was slowed down in 2009 while the owners of multi-apartment buildings were waiting for the formulation of the new explicit rules for financing. Modernization of multi-apartment and public buildings is the most voluminous measure aiming to increase the overall energy efficiency in Lithuania. Implementation of Lithuanian Energy Efficiency Action plan (Ministry of Energy Republic of Lithuania, 2011) provides for final energy savings to amount to 1092 GWh/year

TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 13, No 3C (33C), 2014 J. Vasauskaite, D. Streimikiene 638 ISSN 1648 - 4460 Problems and Prospects of Different Industry Sectors in 2010 (726 GWh/year if early actions are excluded) and 4725 GWh/year in 2016. This target corresponds to the National Energy Independence Strategy - starting from 1 January 2008 to achieve 9 % of the final energy savings during the period of 9 years, compared with the final energy consumption level of 2005. This target also involves modernization of buildings. The following measures are applied to increase energy efficiency in Lithuania so far:  Voluntary agreements with energy companies. Planned energy savings in 2010 - 110 GWh, 2016 - 740 GWh. Starts in 2009 and ends in 2016;  Lithuanian Environmental Investment Fund subsidies for measures reducing negative impact on the environment. This Directive 2012/27/EU establishes a common framework of measures for the promotion of energy efficiency within the Union in order to ensure the achievement of the Union’s 2020 20% headline target on energy efficiency and to pave the way for further energy efficiency improvements beyond that date. It lays down rules designed to remove barriers in the energy market and overcome market failures that impede efficiency in the supply and use of energy, and provides for the establishment of indicative national energy efficiency targets for 2020. In line with this Directive the Lithuanian legal acts related to energy efficiency shall be revised and attention to energy efficiency measures shall increase. The potential impact of energy-saving measures on energy consumption was evaluated by assessing the maximum possible savings resulting from individual energy-efficiency measures in different sectors with regard to different forms of energy. Impact of energy-saving measures up to 2020 was assessed in Lithuania (Table 4). When evaluating the impact of transport electrification on final energy consumption, it was estimated that replacing vehicles powered by internal combustion engines with vehicles powered by electric engines will increase electricity consumption by 0.3 toe for every 1 toe reduction in fuel consumption. The development of electric vehicles is therefore also considered to be an energy-efficiency measure. Full implementation of the above-mentioned energy-saving measures would permit final energy savings of 740 ktoe by 2020 (Ministry of Energy Republic of Lithuania, 2013). In 2011 and 2012, Energy-Efficiency-Watch conducted a quantitative and qualitative survey with national experts on implementation of energy efficiency policies in EU Member States (Energy Efficiency Watch, 2013). More than 80% of the respondents (13 questionnaires were completed for Lithuania) think that no or only few additional policies were set up in the last three years. A majority of around 60% of the respondents expect that the EED target would not be reached or, if reached, that it would not lead to significant energy savings. Consequently, most of the respondents rate the ambition of the national policy as rather low. Only around 30% of the respondents consider the policy ambitious in a range of sectors or generally ambitious. With respect to the greatest gaps in energy efficiency policy, almost half of the respondents believe that these are to be found in the residential sector. More than 50% of experts consider the greatest barrier to energy efficiency to be a lack of regulation or its implementation. More than 40% think that financing is the greatest barrier for energy efficiency improvements. The residential sector is considered as the field with the greatest need to act (Energy Efficiency Watch, 2013).

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Table 4. Impact of energy-saving measures up to 2020

Energy-saving measures Impact up to 2020 Electricity-saving measures -12.7% (of electricity) Introduction of more efficient vehicles, development of public transport, development of road -8.6% (of fuel in the road transport sector) infrastructure Renovation of 30% of the most inefficient buildings -15.0% (of the costs of heat and fuel consumed (building envelope insulation and heating automation) directly in households and the service sector) Replacement of fuel-burning equipment with more -7.6% (of fuel costs in households and the service efficient equipment in households and the service sector) sector Other measures to reduce heat and fuel consumption -12.7% (of the costs of heat and fuel consumed in the industrial, construction, agricultural and fishing directly in the industrial, construction, agricultural and sectors fishing sectors) Modal shift from road transport to rail (50% increase -1.7% (of fuel in the transport sector) in rail transport) -65 ktoe (of fuel used in road transport) +19 ktoe (of Road transport electrification (5% of road transport) electricity) -46 ktoe (of final energy) TOTAL: -14.7% or -740 ktoe (of final energy) Source: Ministry of Energy Republic of Lithuania, 2013.

According to Energy Efficiency Watch (2013) a main challenge to be overcome in Lithuania is the refurbishment of the wide-spread multi-family buildings. The current renovation rate is perceived as too low despite an existing programme. As in some of the neighboring countries, the majority of the population live in multi-family buildings and own the flat that they occupy. Renovation measures therefore require majorities among owners which are hard to achieve. Generally, experts think that there is an important lack of awareness of the importance of energy efficiency among households. For the renovation of public buildings structural funds are used. The experts noted that there were very few activities in relation to energy contracting and nearly no ESCOs active in industry and the Service sector. As to the transport sector, experts report that more bike lanes were constructed and also public transport infrastructure was improved. However, the action was still insufficient to promote energy efficiency in transport. Experts also stated that the national ministry - and in general public sector bodies - dealing with energy efficiency suffered from a lack of staff capacities and that the role of the national energy agency should be strengthened. Among specific policy instruments, energy audits (rated by 46% as partly or very effective), energy efficiency funds (38% partly or very effective) and smart metering (38% partly effective) are perceived as the most effective (Energy Efficiency Watch, 2013). Lithuania succeeded in establishing a good policy package for the public sector which can be taken as good practice example. Except of a public sector strategy or vision which is not outlined in the NEEAP it is clear that Lithuania put a lot of effort into this sector policy. The buildings sector shows some weaknesses which could be improved to further strengthen the policy package and framework. Here, other measures, economic incentives, and education & training show good results. Problematic is that demonstration projects are not mentioned in the NEEAP which must be done. In the case of minimum energy performance standards, financial instruments, advice and audits, and information further improvements are necessary. For orientation following good practice examples could be considered. Germany can be used as a good practice example concerning information, finance & incentives, and governance framework. Minimum energy performance standards are in place for new and existing buildings undergoing major renovations. There is also a regular strengthening of targets and TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 13, No 3C (33C), 2014 J. Vasauskaite, D. Streimikiene 640 ISSN 1648 - 4460 Problems and Prospects of Different Industry Sectors obligations. France is a good example for enforcement mechanisms. An official Energy Performance Certificate is issued in Ireland for each home which receives and energy upgrade detailing all energy efficiency measures carried out on the house. Energy performance certificates are also mandatory in Germany at time of sale or lease and contain improvement recommendations. Other measures as the Act on the Promotion of Renewable Thermal Energy have additional impact on energy efficiency (Energy Efficiency Watch, 2013). Concerning the governance framework the implementation of the Ecodesign Directive on national level can be seen as first step. In France there is additionally a co-operation with the lighting trade union to remove the least efficient products from the market. Financial incentives that target businesses are available in the Netherlands and Ireland. Incentives are for instance energy investment allowances and tax rebates for purchase of energy efficient equipment. The corresponding list of efficient equipment is also used as a best practice list by public bodies for public procurement. This instrument thus links public and private sector purchases and creates a greater market for the eligible energy efficient products. States (Energy Efficiency Watch, 2013).

Conclusions

The 2012 EU Energy Efficiency Directive (EED) is the most important and recent energy policy document and provides for tapping Europe’s large energy savings potential and reducing GHG emissions energy import dependency. EU has mandatory end-use energy savings targets for Member States of 1.5% each year from 2014 to 2020. It also requires them to demonstrate how they will reach these savings via measures that are material and additional to what would have happened anyway. The EED provides MS with a range of options to reach energy saving target and allows to ensure the convergence of energy efficiency policies and greater shared learning from one another’s best practices. The implementation of energy-saving measures would permit final energy savings of 740 ktoe by as established by EED. However Lithuania as almost all MS used the maximum exemptions allowed to bring down the target and included possible non- eligible measures. The implementation of EEO is foreseen in Lithuanian policy documents however the scheme is so far not developed. The main measures to achieve energy saving target in Lithuania are: electricity saving measures (reduction by 12.7% of electricity consumption); introduction of more efficient vehicles and development of public transport, development of road infrastructure providing by 8.6% of fuel in the road transport sector; renovation of 30% of the most inefficient buildings (building envelope insulation and heating automation and providing by 15.0% reduction of heat and fuel consumed directly in households and the service sector; replacement of fuel- burning equipment with more efficient equipment in households and the service sector (reduction by 12.7% of the costs of heat and fuel consumed directly in the industrial, construction, agricultural and fishing sectors); modal shift from road transport to rail (50% increase in rail transport) providing by 1.7% reduction of fuel consumption in the transport sector and road transport electrification (5% of road transport) providing for savings of 65 ktoe of fuel used in road transport and 46 ktoe of final energy. However the actions implemented in transport sector up to now are not sufficient to promote energy efficiency in this sector. According Energy Efficiency Watch the main challenge to be overcome in Lithuania is the refurbishment of the multi-family buildings. The current renovation rate is perceived as too low despite an Programme of Modernization of Multi-apartment Buildings approved in

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2004. Though the modernization of multi-apartment and public buildings is the most voluminous measure aiming to increase the overall energy efficiency in Lithuania results of the implementation of this programme are not encouraging. Until 2020 modernization of at least 70 % of apartment buildings having received building permits before 1993 with saving 1 000 GWh of estimated heating energy in renovated buildings is intended. This program is funded from the State’s aid, municipalities, the EU structural funds, inhabitants and other financial sources. For the renovation of public buildings the structural funds were effectively applied in Lithuania (for refurbishment of public buildings 906 709 358 LTL was allocated), and for increase of energy efficiency, (mainly modernisation of district heat supply networks) 200 978 902 LTL was allocated. However there are very few activities in relation to energy contracting and nearly no ESCOs active in industry and the Service sector. Lithuania succeeded in establishing a good policy package for the public sector which can be taken as good practice example however the buildings sector shows some weaknesses which could be improved to further strengthen the policy package and framework. Such measures as economic incentives, and education & training could be applied. Problematic is that demonstration projects are not mentioned in the Lithuania’s NEEAP which must be done. In the case of minimum energy performance standards, financial instruments, advice and audits, and information further improvements are necessary. For orientation following good practice examples of Germany, France, Ireland and other countries can be a good considered by designing the enforcement mechanisms. Concerning the governance framework the implementation of the Ecodesign Directive on national level in Lithuania can be seen as just the first step. Incentives are for energy investment allowances and tax rebates for purchase of energy efficient equipment. The corresponding list of efficient equipment is also used as a best practice list by public bodies for public procurement. This instrument thus links public and private sector purchases and creates a greater market for the eligible energy efficient products. The next steps in implementing energy efficiency targets will be 30 April 2014, when MS submit their National Energy Efficiency Actions Plans and the official transposition date of 5 June 2014. Among specific policy instruments, energy saving obligations, energy audits, energy efficiency funds and smart metering can be perceived as the most effective energy saving measures to be foreseen and implemented in Lithuania in order to achieve energy saving target.

References

The Coalition of Energy Savings (2014), Implementing the EU Energy Efficiency Directive: Analysis of Article 7 Member States Reports. Energy Efficiency Watch (2013), Energy Efficiency in Europe, Assessment of Energy Efficiency Action Plans and Policies in EU Member States 2013. Eurostat (2012), Energy intensity of economy. Europe 2020 indicators, available at, http://appsso.eurostat.ec.europa.eu/nui/print.do?print=true, referred on 03/012/2014. Gaigalis, V., Škėma, R. (2014 a), “Analysis of fuel and energy transition in Lithuanian households sector and its sustainable development in compliance with the EU policy”, Renewable and Sustainable Energy Reviews, Vol. 37, No 1, pp.273-287. Gaigalis, V., Škėma, R. (2014b), “Sustainable economy development and transition of fuel and energy in Lithuania after integration into the European Union”, Renewable and sustainable energy reviews, Vol. 29, No C, pp.719-733. Katinas, V., Markevičius, A., Perednis, E., Savickas, J. (2014), “Sustainable energy development- Lithuania’s way to energy supply security and energetics independence”, Renewable and Sustainable Energy Reviews, Vol. 30, February, pp.420-428. TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 13, No 3C (33C), 2014 J. Vasauskaite, D. Streimikiene 642 ISSN 1648 - 4460 Problems and Prospects of Different Industry Sectors

Ministry of Energy Republic of Lithuania (2011), Second National Energy Efficiency Action Plan. Ministry of Environment Republic Lithuania (2013), Lithuania’s 6th National Communication and 1st Biennial report under the United Nations Framework Convention on Climate Change. Ministry of Environment Republic Lithuania (2014), Lithuania’s National Inventory Report, Green House Gases 2009-2012. Ministry of Energy Republic of Lithuania (2013), Report from the Republic of Lithuania on the progress made in achieving national energy efficiency targets. Ministry of Energy Republic of Lithuania (2012), National Energy Independence Strategy of the Republic of Lithuania, Resolution No XI-2133 of the Seimas of the Republic of Lithuania of 26 June 2012. Streimikiene, D. (2012), “The impact of international GHG trading regimes on penetration of new energy technologies and feasibility to implement EU Energy and Climate Package targets”, Renewable and Sustainable Energy Reviews, Vol. 16, No 5, pp.2172-2179. Streimikiene, D., Baležentis, T., Kriščiukaitienė, I. (2012a), “Promoting interactions between local climate change mitigation, sustainable energy development and rural development policies in Lithuania”, Energy Policy, Vol. 50, No C, pp.699-710. Streimikiene, D., Volochovic, A., Simanaviciene, Z. (2012b), “Comparative assessment of policies targeting energy use efficiency in Lithuania”, Renewable and Sustainable Energy Reviews, Vol. 16, No 6, pp.3613- 3620. Streimikiene, D., Volochovic, A. (2011), “The impact of household behavioural changes on GHG emission reduction in Lithuania”, Renewable and Sustainable Energy Reviews, Vol. 15, No 8, pp.4118-4124.

ENERGIJOS EFEKTYVUMO DIDINIMO POLITIKOS APŽVALGA LIETUVOJE

Jovita Vasauskaitė, Dalia Štreimikienė

Santrauka

Energijos efektyvumo didinimas yra pagrindinis darnaus energetikos vystymosi tikslas, nes energijos gamybos ir vartojimo efektyvumo didinimas leidžia sutaupyti lėšų, sumažinti priklausomybę nuo energijos importo bei sumažinti šiltnamio efektą sukeliančių dujų emisijas. Europos Sąjunga turi užsibrėžusi tikslą sumažinti pirminės energijos suvartojimą 20 % lyginant su baziniu scenarijumi iki 2020 m. Straipsnio tikslas yra išnagrinėti naujausius ES energetikos politikos dokumentus, skirtus energijos efektyvumo didinimo skatinimą ir įvertinti Lietuvos pastangas, nukreiptas į pagrindinių energijos efektyvumo didinimo tikslų įgyvendinimą bei pasiektus rezultatus. Straipsnyje apžvelgti Lietuvos energijos taupymo įsipareigojimai ir pagrindinės priemonės jiems įgyvendinti. Remiantis atlikta apžvalga, pasiūlytos politikos priemonių rekomendacijos Lietuvai.

REIKŠMINIAI ŽODŽIAI: energijos efektyvumas, energijos intensyvumas, energijos taupymo tikslai, politikos priemonės, Lietuva.

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