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27 Октября 2016


Lithuanians Will Pay For “Energy Independence”

Author: Alexander Nosovich

Lithuanians Will Pay For “Energy Independence”

19.10.2015  // Photo: tw-dom.ru

Lithuania is in the middle of discussing changes to the law on LNG terminals, which will make all consumers pay for its contents, including the population. The Energy Ministry warns that if the end consumers won’t pay for the LNG terminal’s upkeep, then even Vilnius’ energy tariffs will rise up to 20%. For common Lithuanians, this is the end result of the so-called “energy independence” struggle waged by the government.

Lithuania’s energy policy was a kafkian trap in all of its aspects – when they closed down the Ignalina Nuclear Power Plant, and when they tried to build the Visaginas Nuclear Power Plant, and when they looked for shale gas in Lithuania, and when they thought of switching the whole country to biofuel.

The LNG terminal episode was no exception in this long-running epic of Lithuania’s quest for energy independence. The construction of the LNG terminal in Klaipėda was envisioned as a means to free Lithuania from Gazprom’s energy market monopoly, which came to be when the Lithuanian government closed down the Ignalina nuclear power plant. It was assumed that the appearance of an alternative supplier would lower the final price of one cubic meter of gas for Lithuania.

Six months before the floating terminal Independence was officially activated, Gazprom did in fact lower the gas price for Lithuania by 20%, which Vilnius declared a triumph of their energy policy: saying that the Russian monopolist was scared by future competitors and is lowering the price.

After the Klaipėda terminal was activated, it turned out that the price of Norwegian liquefied gas is not only more than the new Russian prices, but even more than the old ones.

However, instead of the discounted Russian gas, Lithuania’s government forced the energy suppliers to buy the expensive Norwegian gas, obliging the companies to take no less than a third of the required gas from the LNG terminal.

Specific state and municipal companies in Lithuania were forced to buy 60% and more from the LNG terminal. For example, Vilniaus energijа who supply the capital with heat were obliged by the government to buy 65% of the gas they need from Klaipėda - as result, the heating bill for Vilnius residents, which got lower after the Russian gas discount, was now growing with the terminal entering service.

One wonders, what is the triumph of Lithuania’s energy policy if the Russian supplies lowered the price, but instead of the cheap Russian gas, the government is still making you buy the expensive Norwegian one?

And there is more.

Now they want to make all gas consumers in Lithuania to pay for the LNG terminal’s upkeep, this includes the common population, otherwise there will be a sudden increase in the tariffs.

Lithuania’s Energy Ministry has prepared the changes to the law on the liquefied natural gas terminal. They can be boiled down to the fact that all of the consumers, with no exceptions, have to pay for the Klaipėda terminal’s upkeep. Lithuania’s energy minister Rokas Masiulis states that the amendments to the LNG terminal law are necessary in order to split the cost of the terminal’s upkeep and tie them with the capacity of a specific consumer: the more the consumer uses, the more he has to pay.

That way, if all Lithuanians will pay for the terminal’s servicing costs, then the heating prices in Vilnius, for example for households, will drop by 4%. If the terminal’s servicing costs will be split between a smaller circle of consumers, then the main financial burden will be on the energy supplies, who will have to raise heating prices and then the prices in Vilnius will go up 20%.

So common Lithuanians will either way have to pay more than they do currently: either for “energy independence” or for the heating. But the price of “energy independence” is less than the heating bill – argue the government officials to the common Lithuanians, as if to tell them not to be displeased with this amusing situation. Because the results of these years of fighting for a lower gas price, now the population is forced to pay for the expensive and unprofitable LNG terminal.

This is the very energy blackmail which the Lithuanian government accused Russia of for many years: turns out it is not Russia who blackmails Lithuania, but the government blackmails its own citizens.

The nation-wide financing of the Klaipėda terminal would have made sense if there was an economic purpose in the terminal itself. But turns out, there is no purpose. In order for it to be worth the cost of the rent, buyouts, exploitation and regasification it has to have a yearly traffic ten times more than the amount of energy needed for Lithuania. However the Klaipėda terminal will never have that many: nor Lithuania, nor its neighbors even need that many.

The Klaipėda LNG terminal for the Lithuanian government is like a suitcase without a handle. It is quite hard to carry, but you can’t throw it out either. They spoke of this terminal for years and opened it so pompously this autumn, and had so much pathos when they told their Western allies about their newfound “energy independence”. They treated this terminal as the main achievement of Lithuania’s political leadership.

And now to just flat out admit that the LNG terminal is nothing but losses? Never in a thousand years! It is preferable to force the population to pay for its upkeep. And in the usual Lithuanian fashion, they paradoxically explain this solution as a way of looking out for the people: if you won’t pay to keep the energy independence afloat, then we’ll make your heating bills rise by 20%.

Translated by: Pavel Shamshiev

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