“Lithuania’s goal is not an separate project; the goal is to create the market. Then we will have a choice and will be independent,” he said in an interview with BNS.
The current right-wing government has decided to split the monopoly in the gas sector by handing gas mains management to the state and building a liquefied natural gas (LNG) terminal by 2014. This is intended for undermining the current monopoly-status enjoyed by Russian gas supplier Gazprom. Other measures being considered include construction of an interconnection between gas grids of Lithuania and Poland, construction of an underground natural gas storage facility and exploitation of shale gas.
Lithuania, which imports more than half of its electricity, also hopes to build a new nuclear power plant by 2020 in cooperation with Japan’s Hitachi, as well as Latvia’s and Estonia’s energy companies, and to complete energy links with Sweden and Poland.
We have to choose among the projects and come up with the optimal solution so as to create the market.
Some of these projects have been slammed by other politicians, which raises questions whether the implementation of these initiatives will continue if after the October election the next government is dominated by another party. However, Švedas emphasizes that the authorities simply have to choose the optimal options out of all projects put forward.
“When I started working for the Energy Ministry three years ago, the most popular question was ‘why nothing has been done, where are all projects?’. The government then put a batch of document sets on the table. Now the politicians say that ‘it is bad again, there are too many projects, the state will not manage to implement them all’. Wait – we have to choose among the projects and come up with the optimal solution so as to create the market. This is the reason for confusion – we overemphasize the individual projects as a goal,” Švedas said.
He notes that politicians have always known what measures should be taken in order to reduce Lithuania’s dependence on Russian energy resources, but almost nothing has been done with any degree of consistent direction.
“How many energy projects have we implemented? Only Būtingė [a crude terminal] and LEO [energy holding company]. It’s not much. Why? Because we did not do anything. And why is that – is it because we did not know how or because we did not want to? I would dare saying that we did not want to. We understood perfectly well what we did not do. Reluctance to do something is deliberate inaction. It’s serious,” Švedas, who spent 20 years in public service, told BNS.
Gas law - achievement of the decade
Last year, Lithuanian Parliament (Seimas) introduced a legal framework for the future gas market by adopting a bill on implementation of the EU third energy package, which aims to ensure competition by unbundling gas supply, distribution, and transmission operations.
It means that gas supplier will no longer be able to operate gas mains as these will be taken over by the state. The reform is seen as a challenge to Russia’s gas giant Gazprom, which is currently Lithuania’s sole gas supplier and owns 37.1 percent share in Lietuvos Dujos (Lithuanian Gas), Lithuania’s gas imports and transportation company.
Signing the gas bill into law, President Dalia Grybauskaitė said that breaking up the monopoly in gas sector would clear the way for competition on the gas market, would ensure alternative supply sources, and Lithuania would be able to speed up the implementation of energy projects and ensure fairer gas prices for households.
International dialogue is a better way for us to clear things out than bilateral national dialogue.
The ruling Conservatives set the goal to implement the reform by the end of 2014. However, the Social Democrats, who hold the lead over other political parties in polls, claim that the unbundling is being implemented too fast, therefore the country has to pay high price for gas supplied by Gazprom. Social Democratic leader Algirdas Butkevičius even dismissed the law as “political step without any economic logic”.
In Švedas’ opinion, the debate reminds of a rhetoric question on what came first, a chicken or an egg.
“If we do not make any steps – if we do not manage to build an interconnection with the Poles, since there is no market, no liquefied gas terminal, since there is no market, [...] we will never have a market. And now we are taking a step, which has a cost, but it is a step towards creating a market,” former vice-minister said.
“The Law on Natural Gas passed by the parliament is one of key decisions in the past decade. It is not just economic, it is geopolitical,” Švedas said.
In his opinion, Gazprom’s intentions to challenge the reform in UN arbitration should not be a concern. According to Švedas, arbitration will provide more clarity on the situation than bilateral talks would.
“I regard such disputes positively, since they ensure greater transparency. Let’s talk in Geneva. It is the policy of the European Union, therefore I believe that the European Commission will speak for us and explain to what extent actions taken by the EU may breach interest of others,” Švedas said.
“International dialogue is a better way for us to clear things out than bilateral national dialogue. International level somewhat subdues emotions,” he said.
Latvia and Estonia, who applied an exemption and have not implemented unbundling in the gas sector yet, will follow Lithuania’s suit eventually, Švedas speculates. He notes that differences in legal regulation poses an obstacle to joint projects, such as regional LNG terminal.
“Lithuania has passed a law to spin the gas mains off, whereas Latvians and Estonians have not. We cannot even speak about a joint terminal as long as there is no common legal environment. How would that terminal operate? It is not possible to speak about a commercial model for three countries as long as there is no common legal basis,” he said.
Nuclear power plant - for the entire Balt-Nordic market
According to Švedas, the Baltic countries should keep in mind the example of electricity market when reforming their gas sectors. The three countries have already connected their electricity market systems and created a single market, which they intend to integrate with the Nordic market.
Germany is shutting down its nuclear power plants, so there is a niche – to export electricity to Poland and Germany.
Current discussions on the outlook for a nuclear power plant lacks such vision, Švedas says, adding that some politicians, in his opinion, still continue to think ‘at the national level”.
“When we speak about the system of the new nuclear power plant, we have to discuss where that project will be in 2020, 2040, 2060 and 2080. And in the market of the Baltic Sea and Poland, not just in Lithuania,” Švedas told BNS.
”Some say that the capacity of 1,300 MW is too high for Lithuania, the burden is too big. But let’s look and think on the scale of the entire market. Everyone is calculating those cents now. Lithuania’s share in the future nuclear power plant cannot be seen in absolute terms, that is, if we have a 34 percent share, then we must use that volume in Lithuania. Wake up. It’s the Baltic Sea market. Let’s sell through the exchange. Maybe we will profit on the exports of electricity. Germany is shutting down its nuclear power plants, so there is a niche – to export to Poland and Germany,” former vice-minister says.
In Švedas’ opinion, concerns that transporting large-scale structures for the nuclear power plant would pose a challenge for Lithuania's transport network are inapprehensible.
Last month, the Lietuvos Rytas daily published an article titled “Lithuania’s Roads to Face Nuclear Challenges”, saying that the biggest challenge for Lithuania would be “to transport the reactor’s body weighing some 1,000 tons” across Lithuania, from the seaport in Klaipėda to Visaginas on the eastern border. The daily then said that the cost of preparing the roads for the shipment might reach some 0.25 billion litas.
In Švedas’ opinion, Lithuania may gain particularly valuable experience in this case.
“Lithuania could in fact win the title of world’s champion in moaning. If this project forces us to strengthen the East-West route to our port by upgrading it for large-sized cargoes, it should be considered an advantage, not a headache. Having implemented such a project, we will automatically become the most competitive country in the region in shipping cargoes of such size,” Švedas said.
Nuclear power and renewable energy are not competitors
Švedas also comments on public concerns that the country - investing all hopes and efforts into the nuclear project - is not taking steps towards improving energy efficiency and developing renewable energy. He says such concerns are unfounced.
the nuclear power plant is a commercial project, it does not take away any money from the renewable sources.
“The contraposition between the nuclear power plant and renewable energy is absolutely unfounded. The balance of our primary energy sources shows that now we are almost 80-percent dependent on external suppliers. It provides enormous space for developing other sources of fuel. A more diverse balance of primary energy sources ensures greater stability of the system. Hence there is room for both renewable and nuclear power,” Švedas says.
He points out that “the nuclear power plant is a commercial project, it does not take away any money from the renewable sources.”
“Both areas – nuclear energy and renewable energy – can and shall move ahead together. Nobody is taking away either the market or the money,” Švedas said.
He also noted that Lithuania should be more focused on energy efficiency.
”The problem is that we do not reap the fruits that are already ripe. Renovating houses could be mentioned as an example. This is the easiest way to save energy, most efficient and effective, and it would contribute to Lithuania’s energy security. Unfortunately, we have not done that,” Švedas said.
Economists forget geopolitics
These are not just energy projects – these are energy security projects, too.
Commenting on public discussions about commercial benefits of Visaginas Nuclear Power Plant, Švedas points out that such considerations should always include the geopolitical context.
“Unfortunately, energy in Lithuania and the Baltic states is not only about economics. Energy is employed for both political and geopolitical ends. It is our misfortune and the reason why Lithuania’s politicians and economists often fail to understand each other,” Švedas said.
He agrees with economists saying that capital costs related with the new nuclear power plant pose greatest challenge. He adds, however, that these costs should also be considered in the context of energy security.
“These are not just energy projects – these are energy security projects, too. Lithuanian people and politicians still remember the economic blockade, suspended supply of crude via Druzhba and disregard to financial support offered for the repairs of the pipeline,” he said.
Geopolitical realities were illustrated by plans to build nuclear power plants in Russia’s Baltic exclave of Kaliningrad and Belarus, within 50-kilometer distance from Vilnius, Švedas reminds. In his opinion, these projects involve billions-worth of investment that is undertaken in pursuit of political goals. And Lithuania cannot ignore that.
