Legal Regulation of the Capacity Mechanism

On 24 September 2019, the Ministry of Energy submitted for public consultation amendments to the Law on Electricity, which envisage the implementation of a capacity mechanism in Lithuania. These amendments aim to create a system that will help ensure the reliable operation of the Lithuanian power system and a sufficient level of security of power supply after 2025, i.e. after de-synchronization of the Lithuanian power system from the IPS/UPS system.

The draft Law on Electricity proposes to establish a capacity mechanism that would ensure the adequacy of the system and maintain the Loss of Load Expectation (LOLE) of up to 8 h/year.

The capacity mechanism will be implemented by organising technology-neutral auctions, meaning that the auctions will be open to not only generation facilities, but also storage facilities (such as batteries), equipment operated by independent demand response aggregators. The auctions will be open not only to existing, but also to future generation sources, which should be installed by 2025.

The new facilities will replace technologically obsolete, inefficient and non-compliant facilities. It would also contribute to climate change mitigation goals.

The capacity mechanism will also be open to other EU Member States whose power system is connected to the Lithuanian power system, natural persons or legal entities, other organisations or their subdivisions operating existing capacity facilities in that Member State.

The 4 December 2019 meeting of the Government of the Republic of Lithuania involved a presentation of the capacity mechanism, which can be accessed here. On 30 December 2019, the Government of the Republic of Lithuania approved the amendments to the Law on Electricity prepared by the Ministry of Energy, which will allow Lithuania to create and implement a capacity mechanism. It will ensure the reliable operation of the power system and a sufficient level of security of power supply after 2025.

On 14 January 2020, the amendment to the Law on Electricity was submitted for considerations to the Parliament (Seimas) of the Republic of Lithuania.

On 4 June 2020, Parliament (Seimas) of the Republic of Lithuania adopted the Law No. XIII-3020 on the Amendments to Articles 2, 6, 7, 9, 18, 31 and 78, and the Addition of Section 10¹ to the Law on Electricity No. VIII-1881, which can be accessedhere (lithuanian language) and here (english language).

On 3 July 2020 implementing the adopted law, draft of subsidiary legislation – Capacity Auction Regulations was provided for public consultation. These Regulations establishes procedure for organising capacity auctions, technical requirements for existing and planned capacity, as well as the procedure for approving and publishing results of the capacity auction. The objective of the Regulations is to ensure transparent, based on competitiveness and the principle of technological neutrality, qualification of capacity auctions participants. Draft Regulations can be accessed here.

On 25 September 2020 National energy regulatory council (NERC) provided drafts of Methodology for the calculation of de-rated capacity of physical units, Methodology for the calculation of Maximum Entry Capacity, Methodology for the allocation of Auction Target Capacity and Methodology for the Allocation of Congestion Rent, prepared by electricity transmission system operator – AB "LitGrid", for public consultation. More information regarding development of these methodologies can be accessed on NERC website.

On 18 November 2020 Government of the Republic ofLithuania adopted subsidiary legislation – Capacity Mechanism Implementation Rules of Procedure. These Rules of Procedure establishes procedures for implementation of capacity mechanism in general, methods for capacity allocation during capacity auctions, terms and conditions of contracts on capacity delivery, payment arrangements for delivered capacity, etc. Rules of Procedure can be accessed here.

Press releases:

2019 09 24

Patikimam elektros energetikos sistemos darbui užtikrinti – ilgalaikis pajėgumų mechanizmas

2019 12 30

Vyriausybė pritarė mechanizmui, kuris prisidės prie patikimo elektros energijos gamybos užtikrinimo

2020 01 14

Elektros pajėgumų užtikrinimo mechanizmas jau svarstomas Seime

2020 06 04

Seimas pritarė modeliui, kuris užtikrins patikimą Lietuvos elektros energetikos sistemos veikimą