What Can Solve the Baltic's Energy Island Problem? Kaliningrad NPP
October 07, 2015
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The Baltic States want nothing more than the synchronisation of their electricity grid and its integration into that of continental Europe as part of a common EU electricity market. In the same context, they are striving for independence from the Russian electricity supply and its grid system IPS/UPS. Some progress has been made in order to end their so called energy island position, but much more has to be done. In this crucial phase of development, a new unexpected player has turned up: AtomEnergoSbyt, sales and trading arm of Rosenergoatom JSC, part of Rosatom Group.
The Russians offer to complete the Baltic nuclear power plant, right now under construction in the Russian enclave of Kaliningrad, and to put it under EU regulations. For the Baltic States this would mean a necessary stabilisation of its electricity supply and being able to establish a price competitive market to Northern Europe. Furthermore, Russia would certainly be more supportive than is currently the case of the transition of the Baltic Sea region from today’s Russia controlled IPS/UPS transmission system to the continental European CE grid. For Russia the advantage of such an agreement is obvious: without it there would be no reason to build a 2400 MW Nuclear Power Plant (NPP) in Kaliningrad, because the enclave doesn’t need it and there is no direct land connection with Russia.
At first sight, taking into account the Baltics’ deep-rooted aversion against – almost – everything Russian, the idea of bringing the Baltic NPP (Kaliningrad) into this equation sounds odd. However, as Rudolf Dolzer, Professor at the University of Bonn until 2009 and an expert on international economic law and energy issues, told EER, ”The economic-financial fundamentals speak in favour of the project; the logic behind it remains persuasive; ultimately, it will see the light of the day.”
Today, the Baltic Sea region is still almost an electricity island, at least if you look at its connections to the EU. The region is only connected to the EU between Estonia and Finland via two submarine 330 and 400 kV cables, with a transmission capacity of 1000 MW. Another 400 kV cable, LitPolLink, connecting Lithuania and Poland, will become operational towards the end of this year and – finally – at the same time NordBalt, a 450 km long subsea power line between Sweden and Lithuania, will be connected to the grid.
Once upon a time, Lithuania was the power house of the Baltic region until it was forced by the EU to shut down its Ignalina NPP in 2004. Under the Sovjet regime the Baltic States were an integrated part of the synchronised IPS/UPS system. In 2001, Belarus, Russia, Estonia, Latvia and Lithuania (BRELL), signed an agreement for the control of the electricity system in these countries inside IPS/UPS. Now, the Baltic States are getting much of their electricity supply over twelve 330 kV high voltage power lines that connect Belarus and Lithuania.
For Estonia, Latvia and Lithuania to leave the BRELL ring and the IPS/UPS system could become quite an expansive affair. Last June, Russia's president Vladimir Putin mentioned in an interview with the Italian newspaper Correra della Sera € 2.5 billion as compensation for such a step which he called "economically unwise". In an interview with the Lithuanian TV-station LRT, Gediminas Kirkilas, chairman of the Committee on European Affairs of the Lithuanian parliament, said, Brussels was considering reimbursing Moscow for these costs and added "there are talks to this effect... We are talking about a billion Euro. I would not rule out the possibility that the EU might try to convince us to pay compensation for our withdrawal."
Over the past years quite a few studies have been conducted in order to find the best way to integrate the Baltic States into the EU’s electricity infrastructure. The conclusion has been: The transition is technically possible but will require investments of billions of euros. It comprises three priorities: An extensive enhancement of the Baltic transmission grid internally between the three Baltic States, as well as externally through the development of new transmission and interconnection links with their EU neighbours, and, thirdly, the synchronisation of the networks.
All these studies however left out one crucial point; they ignored Kaliningrad. Some would say, this was for obvious reasons. Others argue, that you should not close your eyes to economic and technical facts, despite political circumstances. However, one has to realise that the EU’s regulations and tendencies, supported by the political and emotional climate in the Baltic States, did not offer the right environment to prepare the way for a solution of the energy island issue with the inclusion of any Russian participation. On the other hand, Russia’s thinking was in the same direction: It would not make sense to get Kaliningrad on the agenda of the synchronisation issue. Until June 8th,that is.
Dmitriy Sukhanov, Deputy CEO and Head of International Energy Business at AtomEnergoSbyt, told EER, that “The EU’s Memorandum of Understanding on the reinforced Baltic Energy Market Interconnection Plan (BEMIP)” of June 8th, “opened up doors and offered new opportunities”. However, the Russians also changed tactics and attitudes. Dimitriy Sukhanov states that, “At the same time our company is going through a transition phase in its strategy to become an international and global player”, which was followed by some changes in the company’s organisation. Since then, the former E.On manager has been travelling Europe on high speed. The new EU attitude is proven by words as “the Sides approve the extension of the scope of the BEMIP initiative by including (…) other aspects of the Union’s energy policy, in particular: security of supply, energy efficiency, renewable energy; and various aspects of the integration of the Baltic States’ electricity network into the continental Europe network, including their synchronous operation.” That means, according to Mr Sukhanov, that the EU, primarily the Commission, now has the mandate to negotiate with third countries, in this case Russia and Belarus, to look for a migration solution to transfer the Baltic States from the Russian IPS/UPS system into the CE grid. This is supposed to be finalised in 2025 according die Baltic States planning. “And this is new”, stresses Mr Sukhanov.
From his point of view Russia has a lot to offer, especially the Baltic NPP, the Kaliningrad nuclear power plant, whose first reactor is under construction and projected to be commissioned in 2021, and the second reactor in 2023. The combined nominal capacity is 2,193 MW. However, today only 20% of the work on the first reactor has been completed (concrete basement, parts of the reactor, but in the future, 50% of equipment will come from European companies), and the future of the project is deeply in doubt if Russia does not come to an agreement with the EU. Dimitriy Sukhanov points out, that “Baltic NPP’s main purpose is to export electricity.” If not, there would be a huge overcapacity, because with just 500,000 inhabitants and a medium size industry, under no conditions would there be the demand which could justify a 2400 MW NPP. On the other hand, if the Baltic countries were to connect to the CE network, the Baltic NPP would not only stabilise the region’s electricity base, it would also provide the volume for a competitive price compared to the mostly hydro power electricity of the Northern neighbours, as well as delivering carbon free electricity. So, Russia has no objections to the Baltic countries leaving the Russian controlled IPS/UPS system in order to join the continental European network. Especially not if the enclave of Kaliningrad gets included. According to Rudolf Dolzer, “this could lead to a very ironic situation: the completion of a new nuclear power plant in Russia could actually facilitate and support the migration of the Baltic States’ power systems from the Russian-dominated IPS/UPS area to the CE system!”
Dimitriy Sukhanov makes three further points. “Our project is in line with the EU and meets all international obligations and requirements; we will use EU-based legislation for management of NPP electricity sales and all investments and financing will be governed by EU laws. We are going to act purely on market conditions with no long term price fixation”. After all, one of his gravest concerns: politics vs. rationale. Several times during the interview he mentioned that, “we do not make a political project”. This is his timetable: The Finnish consultancy Pöyry has been commissioned to submit a pre-feasibility study of interconnected grid infrastructure of Baltic NPP towards the end of this year. There will be close cooperation with the ENTSO-E (European Network of Transmission system Operators for Electricity) and TSOs (Transmission System Operators). In 2016: development of feasibility study of interconnected grid infrastructure of Baltic NPP. In 2017: Connection agreement.
The reactions from the Baltic and Polish TSOs make it abundantly clear which obstacles the Russians are facing in their attempt to establish an EU electricity grid including the Baltic States and Kaliningrad. Andris Sprogis from the Latvian TSO, speaking on behalf of the three, says that, “In our opinion, electricity demand in the Baltics will be sufficiently covered by existing power plants and newly constructed DC links with the Nordic countries and Poland.” Regarding Pöyry’s pre-feasibility study, he says, “the company has approached ENTSO-E organisations and has been promised to receive the basic network modelling data. We as the Baltic TSOs do not object.”
Mr Daivis Virbickas, CEO and Chairman of the board of Litgrid, the Lithuanian TSO, points out that in 2012 the Lithuanian parliament decided that the electricity system of Lithuania shall be fully integrated with the Continental European Network and put this decision into law. He adds, “the political decision of the Baltic countries is to implement the electricity system integration project, ensuring that all infrastructure necessary for the implementation will only be constructed on the territory of EU member states.” Finally Mr Virbickas notes, that “the discussions among the EU and Russia/Belarus to identify the details of the process of Lithuania, Latvia and Estonia’s disconnection from the Russian IPS/UPS system and starting synchronous operations on the continental European Network started already in 2013.”
A short and precise reaction came from Ms Beata Jarosz, spokesperson of PSE, the Polish TSO: “PSE is not involved in the project initiated by AtomEnergoSbyt, thus we are not able to comment or take any position towards questions on this matter.”
What the Russians are obviously aiming for is to be recognised as a partner who is in the position to offer one, or more, options in this complex and expansive issue. A crucial part is left to be played by the EU. According to Anna-Kaisa Itkonen, the Commission’s Spokesperson on Energy, the Commission is aware that “Rosatom is very much interested in the synchronisation project” and “a scenario with Kaliningrad and/or Visaginas NPP might be considered in the soon-to-be launched ENTSO-E study on possibilities of synchronising the Baltic States.” The Commission “will try to make sure that Rosatom will be involved in the discussion process of the BEMIP Working Group on the synchronisation project so that they can present their project”. Even though the EU may moderate discussions between Rosatom and the Members States, Anna-Kaisa Itkonen points out that “the Commission does not take a position on the project at this stage.”
Listening to some people in the Baltics who know about the project and can see a rational case for the Russians, the most delivered statement is “it could be a win-win-situation, but…”.
Image: The closed down Ignalina NPP. Source NN Norden.org, CC-BY licence.
The Russians offer to complete the Baltic nuclear power plant, right now under construction in the Russian enclave of Kaliningrad, and to put it under EU regulations. For the Baltic States this would mean a necessary stabilisation of its electricity supply and being able to establish a price competitive market to Northern Europe. Furthermore, Russia would certainly be more supportive than is currently the case of the transition of the Baltic Sea region from today’s Russia controlled IPS/UPS transmission system to the continental European CE grid. For Russia the advantage of such an agreement is obvious: without it there would be no reason to build a 2400 MW Nuclear Power Plant (NPP) in Kaliningrad, because the enclave doesn’t need it and there is no direct land connection with Russia.
At first sight, taking into account the Baltics’ deep-rooted aversion against – almost – everything Russian, the idea of bringing the Baltic NPP (Kaliningrad) into this equation sounds odd. However, as Rudolf Dolzer, Professor at the University of Bonn until 2009 and an expert on international economic law and energy issues, told EER, ”The economic-financial fundamentals speak in favour of the project; the logic behind it remains persuasive; ultimately, it will see the light of the day.”
Today, the Baltic Sea region is still almost an electricity island, at least if you look at its connections to the EU. The region is only connected to the EU between Estonia and Finland via two submarine 330 and 400 kV cables, with a transmission capacity of 1000 MW. Another 400 kV cable, LitPolLink, connecting Lithuania and Poland, will become operational towards the end of this year and – finally – at the same time NordBalt, a 450 km long subsea power line between Sweden and Lithuania, will be connected to the grid.
Once upon a time, Lithuania was the power house of the Baltic region until it was forced by the EU to shut down its Ignalina NPP in 2004. Under the Sovjet regime the Baltic States were an integrated part of the synchronised IPS/UPS system. In 2001, Belarus, Russia, Estonia, Latvia and Lithuania (BRELL), signed an agreement for the control of the electricity system in these countries inside IPS/UPS. Now, the Baltic States are getting much of their electricity supply over twelve 330 kV high voltage power lines that connect Belarus and Lithuania.
For Estonia, Latvia and Lithuania to leave the BRELL ring and the IPS/UPS system could become quite an expansive affair. Last June, Russia's president Vladimir Putin mentioned in an interview with the Italian newspaper Correra della Sera € 2.5 billion as compensation for such a step which he called "economically unwise". In an interview with the Lithuanian TV-station LRT, Gediminas Kirkilas, chairman of the Committee on European Affairs of the Lithuanian parliament, said, Brussels was considering reimbursing Moscow for these costs and added "there are talks to this effect... We are talking about a billion Euro. I would not rule out the possibility that the EU might try to convince us to pay compensation for our withdrawal."
Over the past years quite a few studies have been conducted in order to find the best way to integrate the Baltic States into the EU’s electricity infrastructure. The conclusion has been: The transition is technically possible but will require investments of billions of euros. It comprises three priorities: An extensive enhancement of the Baltic transmission grid internally between the three Baltic States, as well as externally through the development of new transmission and interconnection links with their EU neighbours, and, thirdly, the synchronisation of the networks.
All these studies however left out one crucial point; they ignored Kaliningrad. Some would say, this was for obvious reasons. Others argue, that you should not close your eyes to economic and technical facts, despite political circumstances. However, one has to realise that the EU’s regulations and tendencies, supported by the political and emotional climate in the Baltic States, did not offer the right environment to prepare the way for a solution of the energy island issue with the inclusion of any Russian participation. On the other hand, Russia’s thinking was in the same direction: It would not make sense to get Kaliningrad on the agenda of the synchronisation issue. Until June 8th,that is.
June 8th, a crucial date
Dmitriy Sukhanov, Deputy CEO and Head of International Energy Business at AtomEnergoSbyt, told EER, that “The EU’s Memorandum of Understanding on the reinforced Baltic Energy Market Interconnection Plan (BEMIP)” of June 8th, “opened up doors and offered new opportunities”. However, the Russians also changed tactics and attitudes. Dimitriy Sukhanov states that, “At the same time our company is going through a transition phase in its strategy to become an international and global player”, which was followed by some changes in the company’s organisation. Since then, the former E.On manager has been travelling Europe on high speed. The new EU attitude is proven by words as “the Sides approve the extension of the scope of the BEMIP initiative by including (…) other aspects of the Union’s energy policy, in particular: security of supply, energy efficiency, renewable energy; and various aspects of the integration of the Baltic States’ electricity network into the continental Europe network, including their synchronous operation.” That means, according to Mr Sukhanov, that the EU, primarily the Commission, now has the mandate to negotiate with third countries, in this case Russia and Belarus, to look for a migration solution to transfer the Baltic States from the Russian IPS/UPS system into the CE grid. This is supposed to be finalised in 2025 according die Baltic States planning. “And this is new”, stresses Mr Sukhanov.
From his point of view Russia has a lot to offer, especially the Baltic NPP, the Kaliningrad nuclear power plant, whose first reactor is under construction and projected to be commissioned in 2021, and the second reactor in 2023. The combined nominal capacity is 2,193 MW. However, today only 20% of the work on the first reactor has been completed (concrete basement, parts of the reactor, but in the future, 50% of equipment will come from European companies), and the future of the project is deeply in doubt if Russia does not come to an agreement with the EU. Dimitriy Sukhanov points out, that “Baltic NPP’s main purpose is to export electricity.” If not, there would be a huge overcapacity, because with just 500,000 inhabitants and a medium size industry, under no conditions would there be the demand which could justify a 2400 MW NPP. On the other hand, if the Baltic countries were to connect to the CE network, the Baltic NPP would not only stabilise the region’s electricity base, it would also provide the volume for a competitive price compared to the mostly hydro power electricity of the Northern neighbours, as well as delivering carbon free electricity. So, Russia has no objections to the Baltic countries leaving the Russian controlled IPS/UPS system in order to join the continental European network. Especially not if the enclave of Kaliningrad gets included. According to Rudolf Dolzer, “this could lead to a very ironic situation: the completion of a new nuclear power plant in Russia could actually facilitate and support the migration of the Baltic States’ power systems from the Russian-dominated IPS/UPS area to the CE system!”
Dimitriy Sukhanov makes three further points. “Our project is in line with the EU and meets all international obligations and requirements; we will use EU-based legislation for management of NPP electricity sales and all investments and financing will be governed by EU laws. We are going to act purely on market conditions with no long term price fixation”. After all, one of his gravest concerns: politics vs. rationale. Several times during the interview he mentioned that, “we do not make a political project”. This is his timetable: The Finnish consultancy Pöyry has been commissioned to submit a pre-feasibility study of interconnected grid infrastructure of Baltic NPP towards the end of this year. There will be close cooperation with the ENTSO-E (European Network of Transmission system Operators for Electricity) and TSOs (Transmission System Operators). In 2016: development of feasibility study of interconnected grid infrastructure of Baltic NPP. In 2017: Connection agreement.
Baltic TSOs: Demand sufficiently covered
The reactions from the Baltic and Polish TSOs make it abundantly clear which obstacles the Russians are facing in their attempt to establish an EU electricity grid including the Baltic States and Kaliningrad. Andris Sprogis from the Latvian TSO, speaking on behalf of the three, says that, “In our opinion, electricity demand in the Baltics will be sufficiently covered by existing power plants and newly constructed DC links with the Nordic countries and Poland.” Regarding Pöyry’s pre-feasibility study, he says, “the company has approached ENTSO-E organisations and has been promised to receive the basic network modelling data. We as the Baltic TSOs do not object.”
Mr Daivis Virbickas, CEO and Chairman of the board of Litgrid, the Lithuanian TSO, points out that in 2012 the Lithuanian parliament decided that the electricity system of Lithuania shall be fully integrated with the Continental European Network and put this decision into law. He adds, “the political decision of the Baltic countries is to implement the electricity system integration project, ensuring that all infrastructure necessary for the implementation will only be constructed on the territory of EU member states.” Finally Mr Virbickas notes, that “the discussions among the EU and Russia/Belarus to identify the details of the process of Lithuania, Latvia and Estonia’s disconnection from the Russian IPS/UPS system and starting synchronous operations on the continental European Network started already in 2013.”
A short and precise reaction came from Ms Beata Jarosz, spokesperson of PSE, the Polish TSO: “PSE is not involved in the project initiated by AtomEnergoSbyt, thus we are not able to comment or take any position towards questions on this matter.”
What the Russians are obviously aiming for is to be recognised as a partner who is in the position to offer one, or more, options in this complex and expansive issue. A crucial part is left to be played by the EU. According to Anna-Kaisa Itkonen, the Commission’s Spokesperson on Energy, the Commission is aware that “Rosatom is very much interested in the synchronisation project” and “a scenario with Kaliningrad and/or Visaginas NPP might be considered in the soon-to-be launched ENTSO-E study on possibilities of synchronising the Baltic States.” The Commission “will try to make sure that Rosatom will be involved in the discussion process of the BEMIP Working Group on the synchronisation project so that they can present their project”. Even though the EU may moderate discussions between Rosatom and the Members States, Anna-Kaisa Itkonen points out that “the Commission does not take a position on the project at this stage.”
Listening to some people in the Baltics who know about the project and can see a rational case for the Russians, the most delivered statement is “it could be a win-win-situation, but…”.
Image: The closed down Ignalina NPP. Source NN Norden.org, CC-BY licence.
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