The countries of the Baltic Sea region have been cooperating closely in the energy sector for years, resulting in joint gas and electricity projects, and soon offshore wind will join the lot – writes Mariusz Marszałkowski, editor at BiznesAlert.pl.
Bornholm summit
The Danish Island of Bornholm will host the Baltic Sea Energy Security Summit, which was convened at the initiative of the Danish Prime Minister Mette Fredriksen. In addition to the heads of governments of Denmark, Poland, Lithuania, Latvia, Estonia and Finland, the head of the European Commission, Ursula von der Leyen, is also to take part in the event. Politicians are to discuss the independence of Europe from Russian gas, strengthening the energy integration between the countries of the region and expanding cooperation in the field of offshore wind energy. Prime minister Mateusz Morawiecki is expected to take an active part in the event.
The meeting will also be attended by energy ministers, the EU Commissioner for Energy, director of the EU Agency for the Cooperation of Energy Regulators, and representatives of leading energy companies and grid operators from Denmark, Estonia, Finland, Latvia, Lithuania, Poland, Sweden and Germany.
Regional cooperation is becoming more important in times of the energy crisis, but in practice it has been going on for many years in both the gas and electricity sectors. Cooperation is a challenge, because it concerns countries that are in radically different energy situations, have different energy mixes and are at different stages of development. Historical background also plays a role, as it impacts the energy situation in this part of Europe. However, apart from the differences, the states of the Baltic Sea region also share similarities, including the development of offshore wind, as well as LNG infrastructure. All this translates into the need to intensify cooperation in the field of energy – and this is what the meeting on the Island of Bornholm is intended to facilitate.
Energy ring
Cooperation in the electricity sector has been in place for years, for instance as part of the „Baltic energy ring”. The assumed goal is to connect the grids of all the states of the Baltic Sea region. This will ensure the security and stability of electricity supply to all countries in the event of an emergency situation in a given country, and will also enable full and open trade in the energy market.
Regional cooperation in this area has been going on for more than 20 years. One of the first electricity investments was the construction of the SwePol Link – an undersea direct current cable (HVDC), which connected the grids of Poland and Sweden in 2000. In 2005, a similar connection, called Estlink 1, was established between Estonia and Finland (in 2014, a second line, called Eastlink 2, was put into operation), and in 2015, the HVDC connection between Sweden and Lithuania, the so – called Nordbalt was launched. All these investments have directly connected the northern Baltic markets with the Central European region and the Baltic states. These connections play a special role for the Baltic states, which, due to their Soviet heritage, still rely on the post-Soviet BRELL energy system (energy interconnection between Russia, Estonia, Latvia, Lithuania and Belarus). At the moment, it is Russia that stabilizes the energy systems of the three countries that are members of NATO and the European Union. This poses a threat at a time when Moscow is pursuing an aggressive policy towards its neighbors. In order to complete the synchronization of Lithuania, Latvia and Estonia with the European ENTSO-E system, a permanent power link with continental Europe must be built. Poland is to be the link thanks to two connections. One that is already ready is LitPol Link, and the other, currently in the tender stage, is the HVDC Harmony Link. The LitPol Link is intended to provide a „technical” connection that maintains a constant current in the grid of the three Baltic states, in accordance with ENTSO-E standards, as well as to act as a support in case of an emergency. The Harmony Link, running from the Darbenai station to the Żarnowiec station, is intended to act as a commercial connection that will allow Poland, Lithuania and other states in the region to trade energy. According to the initial plans, Harmony Link was supposed to be put into operation in 2025, but due to the difficult situation on the installation market (broken supply chains, high prices of raw materials, as well as a limited number of companies working on the construction of submarine cable connections), now the plan is to commission the investment at the turn of 2027 and 2028 – this news was revealed in early July by the head of the Lithuanian grid operator – Litgrid. The company is responsible for the construction of the cable section of the investment, and PSE from the Polish side is responsible for the stations (two DC converter stations). Harmony Link is supposed to be the basis for safe desynchronization of the Baltic states with the BRELL system, however, according to the assurances of Lithuanians, its delay will not affect the plans for desynchronization, which is scheduled for 2025.
The electricity interconnection in the Baltic region has another important dimension. The aim is to develop low-and zero-emission energy in the EU and, in particular, to invest in renewable energy sources (RES), which are supposed to form the basis of the energy mixes of the member states. The most efficient renewable energy source (a ratio of power generated in relation to installed capacity – capacity factor) are offshore wind farms (40-45 percent), which thanks to offshore winds and the specificity of their location can generate a lot more energy than onshore wind farms (about 20 percent). According to a report by the European Commission, the Baltic Sea has a wind potential estimated at 93 GW of power. Most of the Baltic states have plans to develop offshore wind (Poland, Lithuania, Sweden), or are already using this method of energy production (Germany, Denmark). In Poland alone, 15 GW in offshore wind capacity will be added by 2040 in the country’s exclusive economic zone. If this potential is harnessed, it could completely change the energy mix of the states surrounding the Baltic Sea. Only in the case of our country, the share of offshore wind farms in energy production is expected to reach up to 30 percent. It is not without reason that the development of the offshore industry will be one of the main topics of conversation in Bornholm. Denmark is the country with the most advanced wind energy, and its companies, e.g. Orsted actively participate in the implementation of many offshore wind farm projects in the world, including in Poland.
Gas ring
Active gas connections in the Baltic Sea
The second, no less important ring, which has been consistently developed at the Baltic for several years, is the continuous cooperation of the countries of the region in the gas sector. Now, when Europe is dealing with an energy crisis (with main focus on gas), this cooperation has gained more importance, and Poland has a significant say in it. In recent years, a number of strategic investments have been made in the region. The first type of these investments is the construction of capacity to diversify directions and sources of natural gas supply. Poland and Lithuania are leading the way here, as the countries have implemented projects in the last decade to import gas in the form of LNG via tankers. Poland has built an onshore LNG terminal in Świnoujście, while Lithuania relies on a floating unit, the so-called FSRU. At the end of September, the Baltic Pipe will be put into operation, which will bring the gas extracted on the Norwegian shelf to Poland through Denmark. At the same time, the Baltic Pipe will allow gas to flow not only towards Poland, but also towards Denmark. This may be important in case of problems with the supply of gas to the Danes, combined with the impossibility of importing it from Norway.
Apart from the expansion of the gas supply infrastructure, an important element of regional cooperation was the construction of gas connections allowing the distribution of the fuel in the region. Important investments in this area include the Balticonnector undersea gas pipeline between Estonia and Finland, as well as the Poland-Lithuania gas pipeline (GIPL), which allows the Baltic states to open their markets to gas coming from Poland. Thanks to these two investments, as well as the expansion of the GIPL, which is expected to be completed in 2023, (the possibility of gas transmission between the two countries will increase from the current 2.3 billion to more than 4 billion cubic meters in both directions), the Baltic market will be fully able to enjoy independence from gas supplies from the Russian direction (which have already been partially stopped). These connections will also allow the emergence of further diversification projects including the Finnish-Estonian FSRU, on which work has recently begun.
Cooperation in the Baltic Sea area has many elements, which together constitute a complementary whole. Thanks to investments and cooperation, the region has a chance to become fully independent not only from Russian energy resources, but also in the future (through renewables), fully or largely abandon fossil fuels. Talks on closer cooperation and coordination are positive and, as history shows, will be fruitful for the whole region.