Infrastructure / Innovations 19 May, 2017 9:00 am   
Editorial staff

LitPol Link 2 – an opportunity for the Baltic States, a challenge for Poland

In 2025 the Baltic States will complete the synchronization of their power grid with the European system. This means they will also need to disconnect from the post-Soviet power network. Poland is the key to solving Baltic problems. However, Warsaw which is protecting its own interests, is not as interested in the synchronization as the Baltic States.

To connect the Baltic grids with the EU, an energy link with Poland needs to be built. Lithuania and Estonia are already connected with Sweden and Finland. This gave the Baltic states access to the Nordic energy market Nord Pool. Submarine power cables enable the import of cheap energy from Sweden that produces it in, among others, hydropower plants. However, this is not synchronization, which is possible via a land interconnection with Poland.

The European Commission wants to help the Baltic States in their negotiations with Russia and Belarus on disconnecting with the BRELL network, i.e. an IPS/UPS system with which they have been connected since the Soviet times. The Baltic States want to achieve this by 2025. That is when they would like to synchronize their grid with the EU market via Poland.

Poland: between declarations and fears

Warsaw supports the Baltic States’ synchronization with the rest of Europe and the simultaneous de-synchronization from the Russian and Belarusian power system. The three Baltic States want to fully integrate with the EU and, thus join the Union’s power system. They are planning to gradually disconnect from Belarus and Russia by 2025. However, there are two problems. The first one is Poland’s position on the issue. Warsaw declared support for Vilnius, Riga and Tallinn. Yet, at this point Poland does not want to expand the LitPol Link. Poles are apprehensive of importing energy from that direction. This is mostly because of cheap energy from Sweden and Russia. Poland is protecting itself from energy imports to ensure bigger sales for the country’s energy companies. It also wants to receive a guarantee that there will be no imports from Russia via the Polish-Lithuanian link once its capacity is increased.

Poland will not spend ca. EUR 300 m to modernize the network, which is necessary to construct the new link. It is concerned that the new connection with the Baltic States will allow into Poland more energy from Belarus and Russia, which will threaten the profitability of local power companies. Russian producers always offer prices lower than the EU market, which is why Poland wants to do everything in its power to avoid such a threat. Warsaw also does not want to import energy from the Belarusian nuclear power plant Ostrowiec, which is currently under construction. Polskie Sieci Elektroenergetyczne (PSE), the Polish transmission system operator, are to dismantle the Białystok-Roś power line.

The other issue is de-synchronization. Russia and Belarus are reluctant about this idea because currently they are able to sell all of the energy they are producing. Another piece of the puzzle is political influence. Electricity is a convenient, practical and tried tool of exerting pressure. Additionally, there are worries about Kaliningrad, which after the de-synchronizing of the Baltic States will become an energy island. Vilnius is avoiding direct talks on this issue with Minsk and Moscow. The CEO of Litgrid stressed that the European Commission should represent the position of the Baltic States and the talks should take place between Brussels and Moscow.

Lithuania is even more against the nuclear investment, which is located near Minsk, than Poland. The de-synchronization plans with Belarus have not been agreed on yet. A similar risk is posed by the plans to construct the Kaliningrad Nuclear Power Plant. The project was suspended in 2013, but during his April visit, Alexander Novak, the Russian Minister of Energy, declared that the project needed to be continued. Both Ostrowiec, as well as the Russian nuclear power plant could flood the Baltic States with cheap electricity if they, together with Poland, do not agree on the construction schedule and the link itself. This is all the more important that there aren’t any phase shifters, which could decrease the risk of uncontrolled electricity flows across the borders.

Lithuania – the region’s energy hub

After the nuclear power plant in Ignalina was shut down, Lithuania has become an importer of electricity. The country imports over 70% of its energy demand from Russia, Belarus, Latvia, Estonia, Poland and Scandinavia. NordBalt and the link between Estonia and Finland allow Lithuania closer cooperation with the Scandinavian energy market.

The country has energy links with every neighbor and the transmission capacity on its territory allows it to transfer capacity that is three times as high as its demand. Excluding the connections with Poland and Sweden, Lithuania has four 330 kV links and three 110 kV links with Latvia. On its border with Belarus, it has five 330 kV links and seven 110 kV connections. There are three 330 kV and 110 kV links on the border with Kaliningrad.

The prices on the Swedish market are attractive to Lithuania. According to Litgrid, the price for one Mwh in Sweden was EUR 21.81 last year. In Poland the same unit cost EUR 37.5. Still, in Lithuania it was EUR 42. Sweden produces electricity mainly in hydro stations.

The market and profits from transit and cheap energy are just one side of the coin. The other issue is security. To take care of that aspect, the Lithuanian Ministry of Energy assumed that by 2025 the LitPol Link 2, that will connect Lithuania with Poland, will have been completed. They are also planning to expand their NordBalt 2 connection with Sweden. The second connection with Sweden may decrease the energy price in Lithuania, and will make available cheap energy to other Baltic States.

LitPol Link 2 – hopes and fears

The NordBalt connection with Sweden only facilitates the countries’ electricity markets and does not constitute synchronization. The synchronization project with Poland started already at the beginning of the 90s. The construction of the first stage of the link took 24 years to complete. At the end of 2015, the first element of the interconnection was put to operation.

The construction of the LitPol Link was included on the EU strategic projects list. It connected the Baltic States’ grids with Western Europe. The projects were implemented by Lithuanian and Polish grid operators – Litgrid and Polskie Sieci Elektroenergetyczne (PSE). In early December 2015, the first stage of the project, a 500 MW connection, was inaugurated. The investment cost EUR 580 million. Lithuania paid EUR 150 million and Poland EUR 430 million. The project received EU funding at EUR 213 million in Poland and EUR 35 million in Lithuania. However, this was just the first stage. The second will increase the transmission capacity to 1000 MW by 2020. The next, will be to construct the LitPol Link 2, which will complete the synchronization by increasing the capacity to 2000 MW. However, today only Lithuania benefits from this project, because it is earning money on transferring cheap energy to north-eastern Poland.

As a transit country, Lithuania profits from transit fees. On the other hand, this means losses for the Polish conventional energy. Swedish electricity, which is cheaper than Polish, flows across Lithuania to Poland.

The interconnection transfers the electricity for a few hours a day, it flows mostly from Lithuania to Poland. Vilnius claims that the Polish grid operator, PSE, needs more time to prepare its grid to fully utilize the available transmission capacity. Since the moment the link has gone online, the energy has been flowing mostly from Lithuania to Poland. The flow is three time as high as in the reverse direction. However, we need to consider a few factors. Firstly, electricity in Poland is more expensive than in Lithuania. Secondly, there are differences in capacity availability. Currently the energy import from Poland is limited. According to Daivis Virbickas, Litgrid CEO, this is the main reason why Poland is not fully using the capabilities of the connection. If this is improved, the transfer of energy should revolve at around 50% on each side.

Lithuania wants to build another connection with Poland – LitPol Link 2. It would increase the capacity flow to 2000 MW and enable synchronization by 2025. However, currently the grid operators are considering expanding the existing connection. The power substation in Lithuania’s Alytus is prepared for such a decision. Yet, the company representatives are not ready. On the other hand, the decision makers claim that they will be able to start the construction at any moment, provided there will be political will, which is lacking on the Polish side. Seeing Poland’s reluctance, Lithuania expects that the expansion of LitPol Link 1 may be extended beyond 2020. The situation is similar when it comes to the LitPol Link 2, where it is becoming more probable that the 2025 deadline will not be met.

Lithuania needs to agree with Poland on this issue. While being a transit country has its benefits, it also creates risks and a lack of security that can be addressed through synchronization with Poland. From a technical point of view, a synchronization is about delivering system services and providing and securing energy supply. Poland is connected with Lithuania via an overhead AC 400 kV transmission line that runs from the HVDC station in Lithuania to the Polish town of Ełk. It is 163 km long. Vilnius claims that a construction of an AC line between Lithuania and Sweden is technologically impossible.

Searching for a solution

Despite declarations from both parties, there is no “political will” that would push the implementation of the project. There are no details about a feasibility study, contractor, or a route corridor. These are purely technical details, but they may face new obstacles, such as opposition from local residents, once the project is on the go.

Lithuania is all for the LitPol Link 2 and is supported by the European community. Last April, representatives of the European Commission and Baltic States arranged yet another meeting, where they discussed research results on the perspectives of synchronization of their grid with Europe. The research was conducted by the Joint Research Centre of the European Commission. The parties decided that in order to implement synchronization, further political decisions needed to be made by countries of the Baltic Energy Market Interconnection Plan (BEMIP). The initial research conducted by the Centre, indicated that synchronization through Poland, not Finland, would be most cost-effective. “During the meeting we agreed that synchronization via Poland would be most cost-effective and reliable. We will seek to sign a political agreement regarding this strategic project. We want to complete it by 2025,” said Egidijus Purlys, Lithuania’s vice-minister for energy after the meeting. In his opinion, the necessary political decisions will be made in the nearest future, in order to ensure that synchronization via Poland will be officially approved by all BEMIP states.

The meeting of the BEMIP states hosted representatives of the Directorate-General for Energy, vice-ministers and other high ranking representatives from the Baltic States, Denmark, Poland, Norway, Finland, Sweden and Germany. Dominique Ristori, head of DG Energy presided over the gathering.

The Baltic Course internet magazine unofficially reported that the best solution would be to build another interconnection via Poland, LitPol Link 2, but Warsaw was not eager to pursue this project. Lithuania was to agree on synchronization via the existing LitPol Link. However, such a solution was not in the interests of Estonia and Latvia.

Unexpectedly the Polish grid operator, PSE, decided to break the deadlock and suggested that instead of a land interconnection with Lithuania, i.e. LitPol Link 2, a submarine power cable under the Baltic Sea should be laid. It would connect the Polish Władysławowo with Lithuania’s Klaipeda. This alternative solution could secure electricity exchange between the Baltic States.

“Instead of an AC overhead line with Lithuania, Poland proposes a submarine DC power cable,” announced Eryk Kłossowski, PSE CEO, on a press conference on 13 March.

However, the Baltic States believe this would only serve as a market connection, not synchronization. According to the Lithuanians, the cable could be an alternative solution that would improve exchange of electricity. However, in their opinion that would not have any impact on synchronization.

A new idea was also presented. As of July the LitPol Link connection will be used to transfer energy between Lithuania and Sweden. Grid operators in Lithuania, Poland and Sweden have already agreed to create a virtual bidding area. This will make it possible to transfer energy to Sweden through Poland, thanks to an interconnector between the two countries and the LitPol Link. The bidding area will work even if there are limited energy transfers from Poland. According to Litgrid, the area will allow to better use both connections and will ensure a more efficient exchange of energy between the three countries. Currently, Lithuania buys energy from Sweden via the 700 MW NordBalt interconnection. As of July, during the hours when the connection is operating at full capacity, the countries will be able to sell energy between Lithuania’s and Sweden’s fourth trade zone via the SwePol and LitPol Link interconnections.