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Republic of Lithuania National Energy Strategy

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Republic of Lithuania National Energy Strategy INlS-mf —147 IC Consult ERM Energy Limited COWIconsult (with Technical Assistance of EC-PHARE) and Lithuanian Energy Institute Republic of Lithuania National Energy Strategy Volume I: The Strategy Final Report November 1993 VOL IC Consult ERM Energy Limited COWIconsult (with Technical Assistance of EC-PHARE) and Lithuanian Energy Institute Republic of Lithuania National Energy Strategy Volume I: The Strategy Final Report November 1993 Foreword For modern economies, fuels and electricity should be supplied economically, environmentally benign, technically safe, reliable in terms of supply security and at acceptable social costs. The existing institutional and technical structure of the energy sector in Lithuania however does not meet most of these attributes. To convert the system into a new structure needs three essential factors: policy will, time and financial resources. The policy for reforms in the energy sector has been stated by government and parliament since the first days of regained independence. Lithuania is now discussing a new Energy Law, the legal framework for a new energy sector structure. However, it can be learnt from other Central and Eastern European countries (CEEC) that despite the desire for a rapid transition there are considerable time lags involved in restructuring an economic system, especially since both, the infrastructure, and the management have to be changed or improved. It is also clear that large financial resources are required for the modernization of the energy sector and that Lithuania cannot afford this capital all on its own. It needs help from the international donors' and banking system. Lithuania has over the last two years received various grants from the international donor community, among others in the form of technical assistance for the energy sector. Various loan projects for the energy sector are in the examination or negotiation phase. These projects will have long-term impacts once they are implemented. All of this, therefore, calls for a comprehensive and long-term strategic plan of the energy sector, which is provided herewith. This National Energy Strategy determines the strategic goals for the future direction of Lithuanian energy policy in the period of transition to a market oriented economy. It is the result of a collaborative effort between a European Consulting Group drawn from Germany (IC Consult, also leader of the group), United Kingdom (ERM Energy Ltd.), and Denmark (COWIconsult) and the Lithuanian Energy Institute (LEI) under Technical Assistance from the EC-PHARE Programme. The strategy is based upon comprehensive scenario analyses of future options of the Lithuanian energy sector. The approach includes the development of demand and supply side scenarios, takes the various technical and economic constraints and benefits of the potential options into account, selects priorities and alternatives among the candidates, recommends investment projects and determines a future plan of action to create the necessary legal, regulatory and institutional framework for implementation of the strategy. The Strategy Development Project, at the same time, provided an excellent opportunity for supporting application of modern planning and management methods. This support is worthwhile to be maintained in the future through technical assistance, since the strategy must be reviewed from time to time. This Final Report of the National Energy Strategy has emerged from the discussion of a Draft Report (which became available in July 1993), and after a series of intense exchange of opinions with all relevant institutions at a Strategy Workshop in Vilnius during September 1993. The strategy is fully built on an evaluation of the energy sector programmes which have been launched in Lithuania in recent times, including the National Energy Conservation Programme (1992), the National Energy Efficiency Programme (1991) and the Dwelling Programme (Bustas). The Strategy is as far as possible co-ordinated with other energy sector plans which were underway during its development work, in particular: the Alternative Power Supply (G-7) Study (IEA, World Bank), the Energy Sector Review (World Bank), the Power and Heat System Masterplan (Vattenfall, IVO), the Natural Gas Masterplan (DONG), the District Heat Strategy and Pilot Project Study (Danish Energy Consultants) and the Energy Pricing and Tariff Study (Kennedy and Donkin). The Strategy Report is laid out in two volumes containing the Strategy itself (Volume I) and the Background Material for its development (Volume II). Only Volume I is intended for general readership while Volume II is made up for energy planners and other specialists. This Volume I contains nine Chapters and one Annex. In Chapters 1, 2, and 3, key issues of Lithuania's energy sector are introduced and macroeconomic scenarios as well as projected energy demand scenarios are explained. Chapter 4 suggests the energy demand and supply side options which are available to Lithuania. In Chapter 5 and 6 those options are examined in scenarios of possible future energy demand and supply developments. These scenarios differ according to various constraints relating to fuel import sources and prices, export potential, energy efficiency effects and fossil or nuclear/non-nuclear fuel choices. Chapter 7 presents the recommended strategy which is built on the evaluation of the scenarios. Chapter 8 details the institutional and legal reforms which are necessary to implement the Strategy, and Chapter 9 summarizes the conclusions. The Appendix contains Project Profiles for a selected number of projects. x. 0 Stefan Rath-Nagel / Jurgis Vilemas Team Leader, Counterpart Team Leader Consortium IC Consult - ERM - COWIconsult and Director of Lithuanian Energy Institute Acknowledgements This National Energy Strategy is the result of a Technical Assistance Project within the framework of the PHARE Programme of the Commission of the European Communities. The project, which commenced in January 1993 benefitted from the joint efforts of a German-British-Danish team of professionals and its Lithuanian counterparts, mainly drawn from the Lithuanian Energy Institute in Kaunas. The team and counterpart team included the following experts: Team Counterpart Team Team Leader Stefan Rath-Nagel Prof. Jurgis Vilemas Economists Rolf Seifried Vidmentas Jankauskas Heiner Meindl Vaclovas Miskinis Power Systems Engineer Peter Lewis Algimantas Burba Thermal Systems Engineer William Orchard Vykintas Suksteris Vytautas Mikaila Institutional/Legal Experts Michael Kvetny Mindaugas Krakauskas Eva Elbek-Jorgensen Else Bernsen Oil and Gas Expert David Aron Jonas Kugelevicius Environmental/Renewable/ Joanna Cochrane Vytautas Guzys (MoE) Conservation Expert Prof. Matas Tamonis Prof. Juozas Burneikis Systems Analyst and Energy Modeling Experts Dieter Wilde Arvydas Galinis Ray Tomkins Antanas Juska (MoE) Prof Nigel Lucas Bruce Jenkyn-Jones Sociologist Ulrich Elsenberger Training Expert Svend Erik Sorensen Vykintas Suksteris Mr. Saulius Kutas, deputy minister, and Mr. Kazys Zilys, department head of research and development in the Lithuanian Ministry of Energy (MoE), took active part in the development of the Project, provided overall support and made the necessary contacts for visiting various institutions and receiving valuable information. These institutions, which have been very supportive include the Lithuanian State Power System (LSPS), the District Heat Company (SILUMA), Lithuanian Fuels, Lithuanian Gas, the Mazeikiai Refinery, the Kaunas Technological University (Prof. Anzelmas Bacauskas). Valuable information was also obtained by the OPET Thermie Office of The European Community in Vilnius. Special thanks for overall support of the Project goes to Morten Sondergaard of the EC-PHARE Project Implementation Unit at MoE and to Mantis Franckevicius of MoE for the logistical arrangements. ABBREVIATIONS, DEFINITIONS AND UNITS AGC Automatic Generation Control ASAP As soon as possible CCGT Combined Cycle Gas Turbine CHP Combined Heat and Power cif Cost, insurance, freight DH District Heat DSM Demand Side Management EBRD European Bank for Reconstruction and De ED Economic Dispatch EIA Environmental Impact Assessment EMS Energy Management System Energy Intensity Ratio of GIC to GDP EPD Environmental Protection Directorate FBC Fluidized Bed Combustion FGD Flue Gas Desulphurisation FSU Former Soviet Union GDP Gross Domestic Product GIC Gross Inland Consumption GOL Government of Lithuania GW 109 Watts of electricity generating capacity HC Hydrocarbons HFO Heavy Fuel Oil HOB Heat Only Boiler HVDC High Voltage Direct Current Hz Hertz I&C Instrumentation and Control IMF International Monetary Fund IPS Interconnected Power System (of the FSU) IRP Integrated Resource Plan kWh Thousand Watthour of electricity kt Thousand metric tonne LCP Least Cost Planning LFO Light Fuel Oil or Diesel LRMC Long Range Marginal Cost LSPS Lithuania State Power System MECU Million ECU ME Ministry of Economics MoE Ministry of Energy Mt Million metric tonne Mtoe Million toe NMP Net Material Product PC-LAN Local Area Network (of Personal Computer) PE Primary Energy PS Pumped Storage Hydro Electric RoR Runoff River RTU (Remote Stations) SBM Single Buoy Mooring SCADA Supervisory Control and Data Acquisition SCR Selective Catalytic Reduction (of NOJ t Metric tonne, or 1000 kilograms TFC Total Final Domestic Energy Consumption toe Tonne of oil equivalent, or 107 kilocalories, or 41.86 GJ TSP Total Suspended Particles TWh 1OU Watt.hour of electricity USD US
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