Energy ministry invites you to submit proposals on the long-term capacity mechanism concept

Date

2019 02 08

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On February 5, a public discussion was held at the Ministry of Energy, during which the capacity mechanism concept was presented. This was the first stage of public consultation with stakeholders - until February 19, the ministry is waiting for proposals and comments from stakeholders. The collected information will be evaluated, when forming the final model of the long-term capacity mechanism in Lithuania.

The long-term capacity mechanism is a measure, designed to ensure the reliable and stable operation of the electricity system and to encourage investment in the construction of new electricity production capacities, as well as the provision of operation, related to existing sources or their development. Such a mechanism allows to create a transparent, technologically neutral and competitive system, using which the state would encourage uninterrupted, affordable, flexible and fast-activated power generation, necessary to ensure electricity security of supply in the country.

The long-term capacity mechanism concept in Lithuania is being prepared in cooperation with the international consulting company FTI France SAS (Compass Lexecon), which participated in the successful implementation of capacity mechanisms in the United Kingdom, France, Belgium, Italy, Greece, Slovenia, Austria and Poland.

In several EU countries, where capacity mechanisms are already implemented, technologically neutral auctions are being organised, in which not only current or potential electricity producers, but also demand side response or energy storage services can participate. The participants of such auctions do not only compete and, in the case of a win, undertake, for the price, set during the auction, to provide the necessary capacity, based on the estimated electricity production and consumer demand in the system.

Last year, Kaunas University of Technology assessed the Lithuanian electricity system's adequacy for the next decade. The results showed that, to maintain reliable electricity system's operation and security of supply, it is necessary to make sure that, in addition to the existing capacities, by 2025, new reliable local electricity production sources will appear in Lithuania.

The capacity mechanism's implementation is especially important for the implementation of the goals, stipulated in the Lithuanian energy independence strategy, related to the expansion of electricity production from renewable energy sources, the increase in local electricity production in the country and the implementation of the project of a precise Lithuanian electricity system's synchronization with the continental Europe networks.

The most important criteria, when preparing the long-term capacity mechanism model - considering the current situation in the country's electricity sector, the possible cost of implementation and duration, it is necessary to ensure that the model being created meets the objectives of the Lithuanian energy independence strategy, as well as EU rules on state aid.

Having assessed all the relevant criteria, it was decided that the market-wide model best suits for the needs of Lithuania. The selected model will support the existing generation and attract investment in new power generation facilities. The market-wide model is also technologically neutral; it does not discriminate against various types of power — production, demand ide response and energy storage — and  creates competition between them.

It is planned that, by March 2020, the first auction will take place and the winners will be chosen, the contracts will be signed with. An important influence on the timely implementation of the force mechanism is the successful mechanism's coordination with the European Commission.

The long-term force mechanism concepts, prepared by consultants, can be found by clicking on this link.

Until February 19, 2019, the ministry will be waiting for comments and suggestions from stakeholders on specific issues that can be found by clicking on this link.

Proposals can be submitted by email, marius.pareigis@enmin.lt