Eesti Energia: the Visaginas project nears its end

Photo: SCANPIX

Building a nuclear plant in Lithuania makes no business sense, says Eesti Energia, predicting demise of project pursued for seven years

After six months of still-life, Lithuania last week hosted a conference with Baltic energy companies and Hitachi – selected the technology supplier – in Vilnius.

Following the meeting, Eesti Energia’s nuclear project head Andres Tropp was more pessimistic than before. «Eesti Energia got confirmation to the fact that, currently, the Lithuanian nuclear station project is not economically sustainable,» he commented.

Mr Tropp added that Lithuania proposed that its partners search together for ways of making the project more competitive.

«Alas, this task is very complicated, as the main problems with the project’s economic sustainability are not linked to the project as such, rather to the poor investment climate in the European energy sector on the whole,» said the project manager.

Solutions up to governments

Mr Tropp specified: the uncertainty of the EU climate policy’s future; the subsidy schemes created to support renewable energy development, which have distorted competition on the electricity market; and continued lack of regulations on electricity imported from third countries. The «third countries» means Russia, the capacity of which allows huge exports.

«Talking of the project, specifically, the greatest weakness definitely is the insufficiency of Lithuanian legislation. But, as I said before, solving that would not alter the overall picture,» said Mr Tropp. «By now, the development of EU energy regulations has brought about a situation where investments into production capacity with no state subsidies is not sustainable, economically.»

Between the lines, both ministry of economy and Eesti Energia have indeed said so, even before. However, up to now it has not been directly acknowledged that continuing with nuclear energy development, in Lithuania, makes no sense. At home, however, the energy company has passed a corresponding judgement – having started plans for a wind farm on Pakri island, instead of a nuclear station.

Mr Tropp said that et Eesti Energia could not affect energy policy. Still, the company will, in near future, make several propositions to the Ministry of Economic Affairs related to developing the Baltic energy market. That’s right: not the Estonian, but the Baltic energy market.

«Finding solutions is up to national governments,» he affirmed.

Mr Tropp provided an example of the bottlenecks of internal market: electricity exports to Lithuania are cheaper from Russia than from Estonia. Because, under the aegis of transit, Russian electricity freely crosses the state borders; the Baltic borders having transmission lines auctions.

«Numerous useful things have been accomplished shaping the Baltic electricity market, but the work is not finished and the stated ought to move on,» he said.

Mr Tropp referred to the initial BEMIP plan of integrating the Baltic energy market ends this year, which should be used to set new goals to foreseeable future.

Market-distorting system

As the Lithuanian energy company, Eesti Energia is also troubled by the plan of merging Baltic and Central-European electricity grids. Even though big words have been put to paper, the first impact assessment takes until fall to be completed. For instance: when it comes to building a nuclear station, Eesti Energia is troubled by the issue of whether the transmission line from Poland will be capable to service a 1.3 GW nuclear station, once the Russian connection is cut.

Mr Tropp added that the Baltic states also need a renewable energy policy with less distortions caused to the market. Earlier, Eesti Energia has advised to make underbids to renewable energy capacity, with the most economical offers winning. Sadly, neither in Estonia nor in Latvia, this is not the case; all attempts to make the current subsidies system less expensive have failed.

«The indiscriminate and overly simplified distribution of subsidies to any producers of renewable energy, whoever raises their hand, is not prudent,» he said.

According to Mr Tropp, the current renewable energy subsidies system has led to a situation where it is impossible to invest in any station not supported by state.

Visaginas nuclear station

•    The construction of joint Baltic nuclear power station was, in the fall of 2005, initiated by Lithuanian prime minister Algirdas Brazauskas.

•    In 2006, the initiative of Mr Brazauskas led to a joint declaration by three Baltic prime ministers. Thereafter, Andrus Ansip was accused by opposition of overstepping his powers.

•    At glacial pace, the project proceeded till last fall, when a referendum voted «no» to it, by 62.7 per cent.

Source: PM