Commission staff working document

In the Baltic Sea Region, the energy markets (electricity, gas, oil,…) lack appropriate infrastructures and are too nationally oriented instead of being linked and coordinated (although cooperation is initiated on energy issues under the Baltic Sea Region Energy Cooperation initiative (BASREC)⁴⁵). Levels of market opening and competition in certain Member States are not sufficient to provide the right incentives for investments. This creates higher risks in terms of energy security and higher prices. In particular, the three Baltic States (Estonia, Latvia and Lithuania) are not properly integrated into the wider energy networks of the rest of the European Union (the only power connection is the Estlink between Finland and Estonia), and are hence practically isolated in the field of energy.

Fragmented electricity markets lead to the following problems: (a) low market liquidity; (b) few incentives or opportunities for infrastructure investment especially in renewable energies. There is also a lack of cooperation on natural gas issues, mainly due to lack of gas interconnections with the rest of the region. Such a situation means lack of cross border trade and of market liquidity, higher prices and lower levels of diversification of energy sources.

All European Union / European Economic Area countries in the region are part of the internal market for electricity and gas. However, the electricity markets are still in widely different stages of liberalisation. It is this, linked to infrastructure gaps, that has impeded the physical integration of the three Baltic States. Further physical integration of the grids in the region is needed to bring benefits in overall efficiency, and to improve security of energy supply through increased diversification, including renewable resources. Improved security of energy supply should also be promoted by other means, such as energy efficiency.

Baltic Sea Region Added Value:

The integration of the energy market would improve the security of energy supply particularly in the eastern Baltic Sea Region. It would reduce prices and facilitate the diversification of energy sources and enable the introduction of solidarity mechanisms.

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  “Establish an integrated and well functioning market for energy” by implementing the Baltic Energy Market Interconnection Plan (BEMIP) which, in addition to infrastructure projects, includes specific steps to achieve the desired integrated and functioning internal market for energy. This should include better coordination of national energy strategies, and measures to promote diversity of supplies and better functioning of the energy market.
  

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  “Increase use of renewable energies" by extending the use of biomass, solar energy and wind power (e.g. the Nordwind II, project supported by the Nordic Council, and Krieger’s Flak), especially by research in demonstration and deployment of on- and offshore wind and other marine renewable energy technologies. The region has high level expertise in maritime technologies. This must be better utilised. In addition, the database on bio-energies developed by the Nordic Council of Ministers (NCM) should be fully exploited. (NB: This has to be read in conjunction with the priority area number 5 ‘To adapt to climate change’).
  
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  “Ensure more cross-border cooperation” to share experiences and coordinate better in fields such as electricity grid and maritime spatial planning, regulatory practices regarding interconnector investments, and environmental impact assessments of wind farms.
  

In the frame of the TEN-E and / or the Baltic Energy Market Interconnection Plan (BEMIP) - and the relevant energy projects covered by the European Economic Recovery Plan - the following proposals are underlined:

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  10.1. “Monitor the implementation of the Baltic Energy Market Interconnection Plan (BEMIP) correspondingly with the actions of the High Level Group of the BEMIP”. In particular, priority should be given to “connect the Baltic States to the energy networks of the region”. The need to monitor the progress of the BEMIP emerges not only from Baltic Energy Market Interconnection Plan by its own, but also from the framework of European Union Strategy for the Baltic Sea Region. The function of monitoring relies on High Level Group of the BEMIP, therefore the aim of this project is better coordination between strategic goals of the European Union Strategy for the Baltic Sea Region and BEMIP. The Commission and the Member States concerned have developed the Baltic Energy Market Interconnection Plan (BEMIP) which identifies key missing infrastructures in electricity and gas, lists necessary actions (including financing), and provides coordination mechanisms to bring together Member States, market players and different financing sources. Innovative interconnector solutions involving ‘plugging in’ offshore renewable energy production installations are considered. Projects listed under the TEN-E guidelines could be co-financed by the TEN-E instruments, moreover the European Economic Recovery Plan provides for important additional financial support to infrastructure projects in the region. (Lead: Lithuania; Deadline for the implementation of priority projects: to be determined) FAST TRACK
  

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  10.2. “Demonstration of coordinated offshore wind farm connection solutions” (e.g. at Krieger's Flak (Denmark, Germany) and Södra Midsjöbanken (Sweden)) (Lead: Denmark; Deadline for progress review: to be determined) FAST TRACK
  
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  10.3. Implement the Baltic Sea Region Bioenergy Promotion’ project. The project aims at strengthening the development towards a sustainable, competitive and territorially integrated Baltic Sea Region in the field of sustainable use of bioenergy. (Lead: Sweden; Deadline for progress review: to be determined)
  

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  10.4. “Extend the Nordic electricity market model (NORDEL⁴⁶)” to the three Baltic States by following a step-by-step approach with a concrete timetable for implementation (market integration roadmap) within the framework of the Baltic Energy Market Interconnection Plan (BEMIP). (Lead: Latvia; Deadline for progress review: to be determined)