As Latvia continues its transition toward sustainable energy, several pivotal initiatives and regulatory changes are shaping the country's energy sector in Q1 2025.
From the launch of the Energy and Environment Agency to advancements in renewable energy infrastructure and legislative reforms, Latvia is setting the stage for a greener and more efficient future. These developments highlight the country's commitment to reducing reliance on fossil fuels, enhancing energy storage capabilities, and promoting innovation in renewable energy projects.
LATVIA
GENERAL: Energy and Environment Agency begins work
On 1 February 2025 as a result of reorganisation of the Environmental Monitoring State Bureau and the State Construction Control Bureau, the Energy and Environment Agency started its work. The agency operates under the Ministry of Climate and Energy and is aiming to streamline the implementation of renewable energy projects in Latvia and create a more attractive environment for investors. The main functions of the Energy and Environment Agency in relation to renewable energy projects are environmental impact assessment (EIA) issues (such as decisions on the application of EIA, issuance of the EIA program, and provision of opinions on the EIA), as well as capacity permit issues (such as issuing capacity permits, re-registration of the addressee, and extension of the permit term).
GENERAL: The Ministry of Climate and Energy has published the first draft of Energy Strategy for 2050
The goal of the Energy Strategy project is to develop the energy sector by promoting the transition to sustainable energy resources, thereby reducing dependence on fossil fuels. The strategy includes various development scenarios that Latvia may face by 2050, both optimistic and pessimistic. However, the goal for all scenarios is the same – to provide the cheapest available energy mix for Latvian citizens and businesses.
The baseline scenario for 2050 foresees an energy resource portfolio dominated by renewable energy sources, particularly biogas, wind, and solar energy, which will reduce the use of fossil fuels.
GRID: New requirement for balancing service recipients to cover the costs of maintaining balancing capacity
Considering the desynchronisation of the transmission systems of the Baltic States from the circle of BRELL amendments to the Electricity Network Code have come into force, introducing a new requirement for balancing service recipients to cover the costs of maintaining balancing capacity. According to the amendments these costs will be covered by the TSO from its own funds until 1 July 2025. However, from 1 July balancing service recipients will be responsible for covering these maintenance costs.
From 1 July to 31 December 2025, the following fixed balancing reserve maintenance costs will apply:
- 3.00 EUR/MWh for the electricity consumed in the balancing service recipient's imbalance zone;
- 42.07 EUR/MWh for the total imbalance volume of the balancing service recipient.
For the future period starting from next year the TSO shall publish the calculated balancing capacity maintenance prices for the settlement period on its website no later than 2 months prior thereto.
It is expected that the costs of maintaining balancing capacity could decrease after November of this year, as the electricity storage battery systems of TSO will begin operating.
GRID: Finally, the law providing flexible connection procedure has been adopted
Amendments to the Electricity Market Law have been passed and will come into force as of 1 April this year stipulating technical terms for flexible grid connections. No payment of grid bond will be required, but multiple technical requirements for one connection point to several applicants can be issued. The connection agreement will be executed with the first applicant who will fulfill all the requirements.
Additionally, the amendments provide that producers who have already reserved transmission network capacity will have an opportunity to fully or partially cancel their reserved capacity without losing the paid capacity reservation fee. This opportunity can be utilised until 30 April 2025.
GAS: Planned amendments to Common Regulations for the Use of Natural Gas Transmission System
The regulations govern the rights, obligations, and information exchange between the natural gas transmission system operators (TSOs) of Estonia and Latvia and network users concerning gas transmission, capacity booking, nominations, and allocation within the shared balancing zone comprising both countries. A new capacity booking platform is planned, enabling online auctions for capacity.
Regarding capacity allocation at the Kiemenai Entry/Exit Point, participation in capacity allocation auctions will be limited to network users with contracts with the operator of the capacity booking platform. Key details, such as available capacity, auction dates, and pricing, will be published on the platform prior to auctions.
These provisions are expected to take full effect on 1 October 2025, with transitional measures in place until that date.
GAS: Excise Duty on Natural Gas Increased from 2025
According to amendments to the law "On Excise Duties", the excise duty on natural gas in Latvia was increased from 1 January 2025. These changes are part of the state's initiative to promote more sustainable use of energy resources and transition to environmentally friendly alternatives.
Changes in rates:
- For companies using natural gas as fuel, the rate increased from 1.65 EUR/MWh to 3.8 EUR/MWh.
- For participants in the EU Emissions Trading Scheme, the excise duty increased from 1.65 EUR/MWh to 2.08 EUR/MWh.
- The rate for using natural gas in industrial production and for technological climate control increased from 0.55 EUR/MWh to 2.57 EUR/MWh.
- Natural gas used in agriculture, including greenhouses and poultry farms, increased from 0.55 EUR/MWh to 0.85 EUR/MWh.
To support the achievement of the EU's climate neutrality goals, the excise duty rates on fuel, natural gas, and petroleum gases used as fuel will gradually increase based on CO2 emissions, setting the rate at 10 EUR/t of CO2 in 2025 and 20 EUR/t of CO2 in 2026.
WIND: Offshore Project ELWIND wind farm site moved 7 km further offshore
Initially, selected research area for the offshore wind park project "Elwind" in Latvia will be moved 7 km further out to sea (the new area will be located 22 km from Pāvilosta and 31 km from Jūrkalne). The decision was made following the initiative of residents and the results of the marine protected habitats research project implemented by the Nature Conservation Agency of the Republic of Latvia. The research area has been changed to reduce the risk of biodiversity loss and to avoid overlapping with areas that may be designated as marine protected areas in the future. The research area of project ELWIND will be 200 km2.
According to the information report, after the completion of the EIA procedure and receipt of the results of the technical studies, the ELWIND project is scheduled to be auctioned in 2028. The wind farm is planned to be put into operation in 2035.
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