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Renewable energy and Latvia's growth

Renat Lokomet, Strategic partner of Venture Faculty

As the world is moving towards a more sustainable and greener future, the arrival of new renewable energy solutions in Latvia is becoming an even more important topic. Just about two years ago there were no significant innovations in the area and the country mainly relied on energy production using hydroelectric power plants (HPP) and cheap natural gas from Russia.

Due to different reasons also the private sector was reluctant to invest in the energy sector, but the Russian invasion of Ukraine, and the inflation catalyzed the actions of businesses to act in order to make Latvia independent from Russian gas and be able to provide an alternative to households, manufacturing businesses, and other businesses for buying electricity at affordable pricing. Ultimately, the growth of the energy sector, innovation, and stability are the cornerstones of Latvia's security and economic sustainability.

However, it should be acknowledged that the implementation of renewable energy projects at the European level has been on the agenda for a few years now. The European Union's (EU) policy is focused on the development of a sustainable global economy, so one of its objectives is to force all industries to reduce CO2 pollution while fighting against global warming. In order to encourage these changes, the European Commission proposes different support programs in the form of grants and co-financing for both economic operators and households. The states are also interested in supporting green energy projects by creating motivating legal frameworks because if there is no reduction in CO2 level at the state level by 2030, the fines are going to be significant.

Aside from improvements in the electricity laws, it is also apparent that the joint stock companies Sadales Tīkls (ST) and Augstsprieguma Tīkls (AT) are planning to modernize and extend the lines with a total investment of €80 million from the EU Recovery Fund by 2026. €41.9 million of the amount will be assigned to ST, which also plans to equip up to 700 transformer substations with solar panels.

When looking at Latvia's situation, electricity consumption is increasing each year as the consumer demand for new technologies also increases, diesel and petrol cars are replaced by electric cars, etc. The amount of generated energy is also increasing every year, however, according to AST data, for self-consumption Latvia produced a sufficient amount of electricity in only in three out of twelve months last year, while the total shortfall amounted to 1880,774MWh. Currently, the most popular types of renewable energy are HPPs, thermal power plants, biogas, wind plants, cogeneration, and solar power plants. The most electricity generated in February this year (88%; AST) was produced in Latvia by Daugava HPP (due to pals) and thermal power stations, but the energy produced by these stations is volatile and insufficient. Therefore, the availability and diversity of renewable energy is an asset for stability.

As an example of diversifying energy sources, wind power plants can be mentioned. They have demonstrated their effectiveness when formed at sea, for example, as it is in Denmark. They produce enough energy to provide electricity to several coastal cities. The largest project currently being developed in the Baltics is ELWIND – Estonia and Latvia interstate wind park. Its construction is scheduled to start in 2028. The aim of the project is to promote the energy independence of the Baltics from Russia and lower prices for electricity. The total annual electricity consumption of Estonia and Latvia is approximately 16 TWh and ELWIND will be able to produce about one-fifth (3 TWh) of that amount. In addition, such a wind park would reduce CO2 emissions by around three million tonnes per year, which is essentially the same as the transport industries in Estonia and Latvia together, counting annually.

On the other hand, solar energy still is an undervalued renewable energy resource in Latvia. We have about 12 times more wind parks than solar parks (AST data), which seems interesting given that it takes about 6 to 8 years to materialize an idea about a wind park, while a large solar park can be designed and constructed (along with funding attraction) over a half-year to two-year period. Perhaps the reason is that not everyone knows the fact that Latvia is reached with quite a lot of solar radiation, as the panels only need light, not heat, to produce electricity. Additionally, the new generation solar panels produce up to 20-25% more electricity than just a few years older models, therefore giving an excellent financial return to municipalities, businesses, and households.

Now the situation is changing, and it looks like the developers of solar parks will pass the developers of wind parks (although, in an ideal scenario, we would need a hybrid between the two). From the public information, it derives that it is planned to invest almost €1,3 billion in the development of solar parks. The largest developers planning to invest significant amounts are Ignitis Group (€700 million), Latvenergo (€200 million for both - solar and wind park development), Green Genius (€90 million), Sunwise (€56 million), and Merito (€50 million).

Also on the household level, there is some significant activity in the installation of solar panels. Last year, almost 10 thousand households installed their own solar panels, which is six times more than in 2021. ST predicts that at such a pace the total households with solar panels will amount to 20 thousand by the end of the year, while generating a total of 180 MW.

Another significant aspect of the quick development of solar stations is that they can be built on both land and building roofs, energy can be generated right after the installation, and they boost the value of the real estate. “Latvia's abundant solar radiation, favorable climate conditions, the availability of flat land, and supportive government policies make it a great place to build solar power plants. Investing in solar energy is a wise decision because the life cycle of the panels is 25-30 years and maintenance is not expensive,” stresses Sunwise co-founder Alexander Berkman; his company has already built around solar stations of 200 MW in Ukraine.

The third renewable energy resource, which cannot yet be produced in large quantities but has huge potential, is hydrogen. Hydrogen vehicles are another alternative to fossil fuel-powered cars and buses. Latvia by including ten hydrogen-powered trolleybuses in its public transport system, is the first country in the world with this innovation, as well as having the first hydrogen production, storage, and filling station in the Baltics. Hydrogen-powered vehicles can travel longer distances than diesel-powered vehicles, but they are still relatively expensive. However, in time, this direction can be successfully developed further simply because Latvian scientists are actively working on new hydrogen engine solutions. Germany, on the other hand, launched the first hydrogen-powered train last December.

It is also known that this summer the association Green and Smart Technology Cluster (Zaļo un viedo tehnoloģiju klasteris) together with 43 partners from 9 countries will launch a five-year project BalticSeaH2 by investing a total of €33 million in hydrogen technology innovation, research and development, prototyping and alike activities.

Still, the biggest challenge and the next step that I would like to see is not new technology, but rather a new, economically viable and more nature-friendly energy storage solution. Currently, for storage reasons, we are using lithium-ion batteries, which are expensive and their expenditure does not cover the costs, therefore the overproduced energy, which is not used for self-consumption and cannot be transferred to the public grid, is left to waste. If, over the course of the next 3-5 years, all the aforementioned energy developer's plans will be implemented, and a cheaper solution for energy storage will be invented, Latvia will become an energy-independent and rich country. And it is entirely possible that energy export will also become a strong side of our country.

Originally published on Forbes Baltics.