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22.01 2018

The country’s energy market 2018: 4 major changes

The revival of the independent gas market, new energy efficiency initiatives and two months of forthcoming repair of the NordBalt connection are key factors that will have the greatest impact on the energy market in Lithuania this year, Enefit predicts. According to the Enefit development manager Edita Semėnienė, in 2018, the undertakings using electricity and gas can expect a greater choice, also a date from which household consumers will be able to purchase electricity in the independent market only may become clear.

Accelerating trade in the gas market

In the second half of last year, the compensation for Russian gas ended up in the Lithuanian gas market, which resulted in the activity of independent gas suppliers. This has brought more choice for gas-consuming companies - they can already choose from a number of independent gas suppliers, as well as choose gas products with different pricing.

However, according to E. Semėnienė, as the experience of the last few months has shown, the Lithuanian undertakings, unlike the Latvian ones, more often tend to choose a flexible gas pricing option. Such option is not always optimal. “The gas market is much more inert than the electricity market, it is dominated by higher price volatility and is more dependent on events in Europe and all over the world. In the event of unfavourable circumstances, the gas price in a short time may noticeably rise and significantly increase the undertaking’s costs over the relevant period”, notices E. Semėnienė.

In 2018, more and more undertakings will choose to buy gas from independent suppliers. When deciding on a particular option, first of all, they should take into account their needs and not repeat the mistakes made over the year 2017. According to the representative of Enefit, if the undertaking’s gas consumption is affected by such seasonal factors as the need to heat industrial premises in the cold season, it may be preferable to choose a fixed price. At the same time, if over the course of 12 months the average gas consumption is similar, undertakings can choose a flexible pricing option that can help reduce costs for this energy resource over a longer period.

More undertakings will hear the recommendations for energy consumption

Over the past year, only large domestic undertakings with more than 250 employees or with annual revenue exceeding EUR 50 million were obliged to implement energy audits. This year, even more independent players in the electricity market will hear about how to assess their energy costs and what efficiency measures to choose. Since early 2018, the energy suppliers with more than 1 thousand customers will be required to inform their customers about ways to increase their energy efficiency.

“Since the beginning of this year we, like some other independent energy suppliers with a large number of customers, become active participants in the energy efficiency incentives. First of all, we intend to inform our customers on energy efficiency issues and increase their awareness. We are going to give advice on the use of low-cost LEDs, solar panels or other energy efficiency measures to the companies determined to take real action”, says E. Semėnienė.

Lithuania is committed to reducing the country’s energy intensity, which in Lithuania is about 1.8 times higher than the EU average. Our country is committed to significantly reduce its energy intensity by 2020.

After NordBalt repairs - more stability in the market

Although a few years ago the electricity interconnection with Sweden, NordBalt, was launched, which significantly reduced electricity prices on the market, its performance so far has not been very reliable, as on average the interconnection works four days out of five per year. In order to increase NordBalt operational reliability, at the end of July, 2018, it is planned to be repaired, which will last until the beginning of October.

According to E. Semėnienė, a few months after the closure of NordBalt interconnection higher electricity prices in the market are expected in the short term. However, more stable functioning of the interconnection in the long run should bring benefits, which will lead to lower price volatility in the market, reduced risk of electricity supply and more opportunities for independent energy suppliers to offer more affordable electricity prices. Therefore, it is now possible to predict that at least one factor at the end of 2018, i. e. successful repair of NordBalt, is going to push electricity prices down in the market.

Household consumers are prepared for an independent market

Currently, the new Energy Strategy for Lithuania is submitted to the Seimas, which should be considered at the spring session. It provides for the phasing out the regulation of retail electricity prices, although the specific deadline, before which it is intended to be done, is not named. However, the Minister of Energy has mentioned that all household consumers will be able to buy electricity on the free market until 2020. If we stay committed to this goal, then some changes can be expected already this year.

“Lithuania will become the last of the Baltic states, in which household consumers will also have to choose independent suppliers of electricity. In Latvia, this change occurred in 2015, and in Estonia, household consumers are taking part in the independent electricity market since 2013”, commented E. Semėnienė.

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