Pillar 3: To make the Baltic Sea Region an accessible and attractive place

Pillar 3: To make the Baltic Sea Region an accessible and attractive place

The Priority Area Coordinators report that the Priority Area is progressing favourably and quite rapidly in the sense that all Actions and Flagship Projects are on a fast track. Priority Area 10 can demonstrate extensive progress in relation to improving the access to, and the efficiency and security of, energy in the Baltic Sea Region. On this basis, the PACs find it useful to consider how to best shape the future of the Priority Area to ensure that efforts remain targeted around the most urgent challenges.

Increased integration of the energy markets in the Baltic Sea Region will contribute to stability and economic growth, and improve the security of energy supply. It will reduce prices and facilitate the diversification of energy sources and enable the introduction of solidarity mechanisms. Therefore, the Strategic Action in Priority Area 10 focuses on establishing an integrated and well functioning market for energy by implementing the Baltic Energy Market Interconnection Plan (BEMIP). BEMIP is also covered by three Flagship Projects under Priority Area 10.

To secure progress in Priority Area 10, the BEMIP High Level Group has agreed to act as the steering group. Contact between the Danish Embassy in Latvia and the Danish Energy Agency has been established in order to facilitate contact with relevant actors if necessary.

In relation to the future work of the Priority Area, the Coordinators anticipate some financial as well as technical challenges. The experience of the Priority Area Coordinators is that they are becoming more directly involved in the practical implementation of the Strategy’s Action Plan and there is thus an obvious need for a certain amount of Technical Assistance (TA) for supporting their activities. A Trust Fund is highlighted as one attractive option for channelling TA for PAC.

In the forthcoming period, the Priority Area Coordinators will, if TA and additional financial resources are made available, focus their work efforts on the two Cooperative Actions in relation to identifying new projects which are in line with the scope of Priority Area 10. Furthermore they will try to explore possible synergies in relation to cooperation with Priority Area 5.

The coordinators point out that both the Strategic Action and the two Cooperative Actions are covered by the various Flagship Projects and proceeding well. Progress is described under the Flagship Projects. The coordinators note that if technical assistance funding and/or other financial resources become available, they will focus their future work more on the Cooperative Actions with respect to identifying new projects in line with the scope of the Priority Area.

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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 into demonstrations and deployments 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 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 the BEMIP on its own, but also from the framework of the European Union Strategy for the Baltic Sea Region. The function of monitoring relies on the 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 the BEMIP. The Commission and the Member States concerned have developed the 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 for infrastructure projects in the Region. (Lead: Lithuania; Deadline for the implementation of priority projects: to be determined) FAST TRACK
  

In terms of priorities, BEMIP’s focus was initially on the electricity sector, then gas, making reference to other topics of high importance (oil and clean energy). BEMIP brings together in a coordinated way the projects involving all Baltic Sea Region EU Member States, and as an observer Norway, for the development of: a) An internal market for electricity and gas; b) Electricity interconnections; c) New electricity generation capacity; d) Gas diversification of routes and sources; and e) Oil.

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  On electricity, work is progressing well and according to plan. A few actions are ahead of schedule, such as the work launched by NordPoolSpot to create the "BEMIP price area". In general, the start of the process can be regarded as a success: since the implementation of the first step of the roadmap, the process is now being driven forward by market actors. Support from the European Energy Programme for Recovery (EEPR) is still highlighted as a driver for project implementation: The Estlink2 investment decision has been made ahead of plan.
  
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  A major topic for discussion over the coming months is the definition of a common policy between the three Baltic States on electricity imports from non-EEA countries.
  
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  A new High Level taskforce on nuclear generation with members from the countries concerned has been established in order to promote and support the implementation of the Visaginas regional nuclear power plant project, to look at related interconnections, as well as to assess financing options for the project.
  
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  The gas sector now also enjoys the heavy focus of the BEMIP work. A major breakthrough in this area is the now ongoing dialogue between the companies concerned on the PL-LT gas link which received political support from both sides.
  
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  Several applications for TEN-E support were received by the Commission in 2010, including the PL-LT gas link and a storage project in Latvia.
  
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  The West Baltic taskforce [1] has been launched and successfully finished its mandate; it delivered an action plan in December 2010 which was approved by the BEMIP High Level Group. The Baltic States have also agreed to implement an entry/exit model on a regional level as opposed to country by country (when their markets are open); the details are currently being discussed.
  
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  Discussions on a regional LNG project are also ongoing and much progress has been achieved. Evaluation of the LNG options/locations based on agreed criteria is underway, but further discussions are still needed; a special High Level Group meeting was scheduled in addition to East-Baltic LNG taskforce meetings to make progress. A decision should be reached in the coming months.
  

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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
  

The result of this project may be the first offshore grid connection of offshore wind power which will also operate as an interconnector. When this large-scale project is completed, it will have addressed the technical challenges of designing, installing and operating a Combined Grid Solution based on the new multi-terminal HVDC voltage source converter (VSC) technology. The project will also have addressed a number of cross-border, regulatory challenges.

A Combined Grid Solution at Kriegers Flak will bring renewable energy to European consumers, strengthen the energy markets and increase the security of supply by providing transmission capacity.

Since the concept of the CGS project is based on the prerequisite that offshore wind farms will be built and operated in the Danish and German part of Kriegers Flak, the progress of these wind farm projects is essential for the progress of the CGS project. EnBW Baltic 1 has been designed, built and installed with a capacity of 48.3 MW in 2010. Concerning EnBW Baltic 2 (former Kriegers Flak I), the project owner (EnBW) has entered into a contract to build the platform for the offshore substation (OSS) with the option of an extension that will accommodate the additional cable connections for the Combined Grid Solution project. EnBW Baltic 2 will have an overall installed capacity of 288 MW.

The political decision concerning Kriegers Flak III on the Danish part has not yet been taken. As a consequence, the final technical design of the CGS project is therefore still pending. The project's main activities in the upcoming years are: Danish political decision on the offshore wind farm Kriegers Flak III, selection of the optimum technical solution and the permission processes.

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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)
  

1) Cross-sectoral and transnational networking to facilitate information and knowledge exchange; 2) Coordinating policy development; 3) Designing the application instruments to promote bioenergy; 4) Creating a regional platform.

The Flagship Project is divided into different thematic work packages (WP), which are the focus for evaluating progress:

Within WP2 on Information and Dissemination, the aim is to increase the knowledge of the opportunities for bioenergy and to enable technology transfer between the BSR countries and regions. Achievements thus far include a project website (www.bioenergypromotion.net), a finalised Communication Plan, a database of bioenergy actors, and cooperation established with other EU funded projects, such as 4Biomass, Set@Work, RUBIRES, BATMAN and EEN. The final meeting and WP 2 conference will be held in Rostock, Germany in late October 2011.

Within WP3 – Policy, objectives include the common development and operationalisation of sustainability criteria for bioenergy, the demonstration of ways and good practices on how to integrate those criteria into the policy framework through certification systems and other policy instruments and support for the formulation and implementation of coherent strategies and action plans promoting sustainable use of biomass for heating, electricity and transport. Results include: i) (Draft) policy guidelines on sustainability criteria; ii) A list of national certification schemes, a policy assessment report, a questionnaire to identify capacity needs regarding NREAP formulation, and a first draft of EU policy assessment; iii) The first outline on certification systems, as well as the setting up of the structure of BSR country reports; and iv) The preparation of criteria for Good Practice and guidance for policy showcases – these criteria have been disseminated for partner feedback. Regarding the further work of the WP, the “Biomass for bioenergy state-of-the-art meeting” has for instance been planned, and may include potential cross-fertilisation with the UNECE process.

The WP 4 on (Sub)regions focuses on establishing regions as testing grounds, developing means for promoting bioenergy on a regional level, and establishing regional network points. Achievements thus far include network points and regional websites set up in dedicated regions and a regional business/industry assessment report. A final workshop for exchange of experiences on Strategic Management Plans will take place in Potsdam, Germany, on June 14-17, 2011.

Finally, WP5 – Business, aims at providing information to ensure sustainable, transparent business possibilities between BSR countries in the field of bioenergy, through comprehensive mapping of stakeholders, technologies and best practices in business development. It also looks to establish a BSR wide virtual broker platform for bioenergy business developments and to support bioenergy market “match-making” through the facilitation of opportunities to create networks, clusters, public-private partnerships and potential project development. The 4th progress report will be ready in June 2011.

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  10.4. “Extend the Nordic electricity market model (NORDEL²⁵)” 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)
  

The Baltic electricity market roadmap consists of four steps.

Step 1 (2009) – preliminary political and business decision-making on market integration

Step 2 (2010) – fulfilment of market opening requirements

Step 3 (2011-13) – market functioning fine-tuning

Step 4 (2013-15) – fully functioning market integrated with the Nordic market

Besides parallel development of the market infrastructure and interconnections, it will also ensure greater effectiveness of the markets.

In accordance with the BEMIP Action Plan, the creation of a fully functioning electricity market in the Baltic States and its integration within the Nord Pool Spot Price Area should be completed by the end of 2011. The Estlink Price Area and Lithuanian power exchange successfully opened in 2010. At the beginning of 2011, the Ministry of Economics of the Republic of Latvia prepared amendments to the Electricity Market Law which will soon be adopted by the Parliament. The draft Law defines the most important elements concerning the legal form and operation of power exchange, interprets the bidding area, defines forms of deals that can be done only within the power exchange, assigns the obligation for the electricity market operator to supervise electricity trade in the power exchange and obliges the power exchange participant, similarly to regulations in other European Union Member States, to sign a balancing agreement for trading in the power exchange.

At the moment, authorities of the Baltic States are preparing amendments to national legislation in order to carry out Transmission System Operators (TSO) ownership unbundling according to requirements of the 3rd Energy Package. All TSOs in the Region are involved in the process of drafting management’s rules and subsequent information provision to market participants. Latvia has chosen the independent system operator’s option as the TSO ownership unbundling model, which enables the vertically integrated undertaking to retain transmission system ownership. The Nord Pool Spot does not have experience to work with TSO organised in such a way. Therefore, business environment conformity assessment to Nord Pool Spot requirements could be extended. Further activities related to creation of the Baltic electricity market include Latvia and Lithuania joining the Estonian Nord Pool Spot market area in 2011. A fully functioning Baltic market integrated with the Nordic market is expected in 2015.