1. 1 LITHUANIAN POWER SECTOR Dalius Šulga Director of Energy Development Department Lietuvos Energija AB Vilnius, 2007

2. 2 LITHUANIA Population – 3.44 million; Area – 65.3 thousand square km; In the Middle Ages - the largest kingdom in Eastern Europe (area – 930000 square km); Lithuania lost the independence in the end of the eighteen century; Lithuania restored the independence in 1918; The USSR occupied Lithuania in 1940; Lithuania once again restored the Independence in 1990; Lithuania became the member of the EU in 2004.

3. 3 XIV c.

4. 4 SOME DATES OF REFORMS March, 1995. The Law on Energy adopted by the Parliament. December, 1995. Lietuvos Energija AB was established. 1997. The first step of reorganization of Lietuvos Energija AB. The district heating and CHP were separated from Lietuvos Energija AB and transferred to municipalities. 2000. The beginning of the second step of reorganization of Lietuvos energija AB December, 2001. Independent power companies were established. Restructuring of power sector was completed.

5. 5 THE STRUCTURE OF ELECTRIC POWER SECTOR IN LITHUANIA PRODUCTION 3 production companies 3 CHPs owned by district heating companies Few private mini HPP Few industrial power plants Wind park DISTRIBUTION Two distribution companies (one private)‏ TRANSMISSON One Transmission System Operator company – Lietuvos Energija AB

6. 6 3,4% 96,6% State-owned shares Other shareholders Assets 2 698 million LTL Authorized capital 690 million LTL Number of employees 1142 THE MAIN GOAL - TO ENSURE A RELIABLE OPERATION OF THE POWER SYSTEM AND TO INTEGRATE LITHUANIAN ELECTRICITY MARKET INTO THE MARKETS OF WEST EUROPE AND NORDIC COUNTRIES STRUCTURE OF SHARE CAPITAL LIETUVOS ENERGIJA AB

7. 7 THE MAIN FUNCTIONS OF LIETUVOS ENERGIJA AB MAINTENANCE AND DEVELOPMENT OF TRANSMISSION GRID Charge of high voltage (330-110 kV) transmission lines and substations Ensures a reliable and efficient electricity transmission from Lithuanian power plants to electric utilities and large customers. DISPATCH CONTROL Coordinates the operation of Lithuanian power plants and neighbouring energy systems. Creates non-discriminatory conditions for all users of transmission grid. Ensures balance of electricity generation and consumption and reliability of electricity system. ORGANIZES ELECTRICITY TRADE Coordinates electricity export and import Settles payments among Lithuanian and foreign electricity generators and suppliers.

8. 8 TRANSMISSION GRID  110/330 kV power lines  330 kV transformer substations and switchgears  110 kV voltage switchgear TECHNICAL CHARACTERISTICS OF TRANSMISSION GRID 110 kV 330 kV Length of overhead lines, km 4970 1670 Length of cable lines, km 21 Transformer 6 21 Switch - gears 213 12 Transformer substations 11 Capacity of transformer substations, MVA 93 3450 LITHUANIAN TRANSMISSION GRID

9. 9 BALANCES OF ELECTRICITY PRODUCTION IN LITHUANIA, TWh

10. 10 ELECTRICITY PRODUCTION IN LITHUANIA 334 949 2859 15101 2004 181 992 2804 15484 2003 13 744 2630 14142 2002 802823 Hydro 409 3202 10338 20052006 8651 Nuclear 2597 Thermal 402 Other

11. 11 BALTIC ENERGY STRATEGY Prepared Baltic energy strategy is published for public opinion; Main targets: – integration of power systems and gas systems into EU energy systems and markets; – diversification of primary energy sources and supplies; – increase the energy efficiency at the demand side and in the energy transformation sector; – develop the transit routes for energy products, including electricity; – strengthen education, research and development in the energy sector; – elaboration and implementation of common policy on energy imports from non-EU countries; – integration of the Baltic power systems into markets of Central Europe and Nordic countries; – to apply a request to UCTE President for conditions and terms of synchronous interconnection of the Baltic States power systems with UCTE; – renew the large power production capacities; – to use possibilities and benefits from development of distributed electricity generation; – increase the share of renewable energy sources in the electricity mix

12. 12 LITHUANIAN ENERGY STRATEGY Lithuanian national energy strategy approved by Parliament (Seimas) in 2007-01-27; Integration of power system and gas system into EU systems and markets; Diversity of primary resources, increase use of local resources, to limit use of gas for electricity production up to 30% of yearly fuel balance; Ensure the continuity and development of safe nuclear energy; to put into the operation of a new regional nuclear power plant not later than by 2015; Renovate power plants, power and natural gas transmission and distribution systems as well as we district heating systems increasing their efficiency and reliability; Not later than by 2012, to connect Lithuania’s high voltage electricity networks with the networks of Scandinavian countries and Poland; Further develop regional cooperation; Construct a natural gas storage facility in Lithuania, develop a common regional natural gas storage facility, construct, a common liquefied gas import terminal in the Baltic region; Increase the share of renewable energy resources in the national balance of primary energy at least up to 20% by 2025;

13. 13 INSTALLED GENERATING CAPACITIES AND FORECAST IN LITHUANIA 275023701880 Daily demand 1030 100 900 30 1030 100 900 30 1020 100 900 20 Hydro: Kaunas HPP Kruonis PSPP Small scale HPP totally 250024003640 Total without hydro and wind Gas, HFO, orimulsion Gas, HFO HFO nuclear Fuel 2100 4690 40 30 10 2330 1500 380 180 160 110 1300 2006 MW 20152010 -- Nuclear: Ignalina 2460 1500 370 170 160 260 2380 1500 370 170 160 180 Thermal: Elektrėnai (condensing) ‏ Vilnius CHP Kaunas CHP Mažeikiai CHP Others 340 300 40 220 200 20 Other renewables: Wind Others 38303630 Total generation 29002450 Peak demand

14. 14 THE CLOSURE OF THE IGNALINA NPP Unit I was shut down in December 2004 The closure of Unit II is scheduled in 2009 The Ignalina NPP can be substituted by the Lithuanian PP, but this power plant has to be upgraded to meet environment requirements

15. 15 On 26th January 2006, during an energy conference in Vilnius, government officials from three Baltic countries agreed to commission a feasibility study for a new nuclear power plant in the region. On 27th February 2006, the Prime Ministers of Lithuania, Latvia and Estonia issued a communiqué expressing their approval of construction of a new nuclear plant in the region and inviting the national energy companies to invest in the Project. The memorandum of understanding about conducting the feasibility study on the building of a new nuclear plant was signed by the heads of Lietuvos Energija, Latvenergo and Eesti Energia on 8th March 2006. NEW NUCLEAR PP

16. 16

17. 17 GENERATION ADEQUACY OF LITHUANIAN POWER SYSTEM 2007-2025 BALTIC REGIONAL ENERGY FORUM June 11 - 13, 2007

18. 18 BALTICS HIGHEST PRIORITY PROJECTS Lithuania – Poland interconnection (LITPOL LINK)‏ Estonia – Finland interconnection (ESTLINK 2)‏ Baltic's – Sweden (Sweden – Lithuania SWEDLIT or Latvia – Sweden)‏ Estonia – Latvia interconnection (Sindi – Riga)‏ MAIN OBJECTIVES AND BENEFITS Integration of the Baltic power systems into the EU IEM Ensuring security of supply in the Baltic region Market development Efficient use of power resources to Sweden

19. 19 The main conclusion of the Feasibility Study – It would be feasible to develop a new nuclear power plant to replace Ignalina NPP Lietuvos energija, Latvenergo and Eesti Energia undertaking jointly to build a new nuclear power plant appears feasible from a technical, electrical system, financial and legal perspective Likely cost advantage of nuclear reactor over alternative sources of new generation On the basis of geological investigations (GI), space at the Ignalina NPP site is available to accommodate at the new nuclear reactor units to 1600 MW Availability of suitable reactors designs The nuclear fuel market is effectively a global market The current electrical system is capable of accommodating up 3000 MW of nuclear capacity. FEASIBILITY STUDY

20. 20 PLANNED DEVELOPMENT OF BALTIC POWER SYSTEMS

21. 21 PLANNED 2007-2025 CAPACITY BLANCES IN MINIMUM LOAD INCREASE SCENARIO

22. 22 PLANNED 2007-2025 CAPACITY BLANCES IN MOST PROBABLE LOAD INCREASE SCENARIO

23. 23 PLANNED 2007-2025 CAPACITY BLANCES IN FAST LOAD INCREASE SCENARIO

24. 24 BALANCE OF CAPACITY IN BALTIC STATES 2500 MW 4170 MW 430 MW

25. 25 BALTIC POWER SYSTEM BALANCE IN SUMMER (ETSO)‏

26. 26 LITHUANIAN ENERGY STRATEGY (2)‏ Increase the share of the electricity generated by combined heat and power plants during the heating period in the national balance of electricity generation up to 35% in 2025; Improve the efficiency of consumption of all types of energy ; Ensure the practical independence of the National Control Commission for Prices and Energy and its responsibility for the decisions taken; Ensure that the management scheme and operators of new energy infrastructure facilities comply with EU competition criteria and that these operators act as neutral market participants; to seek their free and unhindered access to EU energy networks; Application of the Baltic States to the Western European Union for the Co-ordination of Transmission of Electricity (UCTE) for the issuance of technical specifications for synchronous interconnection of the Baltic power system with UCTE zone and creation of required technical, legal and organisational preconditions, while maintaining physical interconnections for energy exchanges with the Russian power system; Agreement of regulation of the Baltic States electricity market with regulation of the Scandinavian electricity market.

27. 27 DEVELOPMENT OF LITHUANIAN POWER SYSTEM

28. 28 NEW INTERCONNECTIONS EXPECTED FUTURE INTERCONNECTIONS Estonia – Finland Sweden – Lithuania Poland – Lithuania MAIN OBJECTIVES AND BENEFITS Integration of the Baltic power systems into the EU IEM Ensuring security of supply in the Baltic region

29. 29 EXPECTED INTERCONNECTIONS OF BALTIC TRANSMISSION GRID Krievija Ukraina Baltkrievija Polija Čehija Vācija Lietuva Latvija Igaunija Somija Norvēģija Dānija Zviedrija NORDEL UCTI/ CENTRAL Russia Ukraine Belorus Poland Czech Germany Lithuania Latvia Estonia Finland Norway Dānija Sweden Integrated Baltic and CIS energy system NORDEL UCTE/ CENTRAL Europe Švedija – Lietuva SWEDLIT 700 MW Lietuva – Lenkija LITPOL LINK 1000 MW ESTLINK 350 MW ESTLINK 2 – 600 MW

30. 30 LITHUANIA – POLAND INTERCONNECTION

31. 31 PRESENT STATUS OF LITHUANIA – POLAND INTERCONNECTION Capacity – 1000 MW; Investments – 257,4 mln. €; Completion of the interconnection is planned in 2012-2015; Interconnection is planned via Back-to-Back converter station (2x500 MW); Lithuanian side and Polish side plan to start the implementation of the Project by establishing a project implementation company; Shareholders agreement is being prepared.

32. 32 LITHUANIA – SWEDEN INTERCONNECTION

33. 33 INTERCONNECTION LITHUANIA – SWEDEN Completed Pre-feasibility Study; Capacity ~700 MW; Investments – about 400 million €; LE and Svenska Kraftnat perform Feasibility study; Consulting company – SWECO International Feasibility study will provide detailed technical and economic analysis of the Interconnection; Feasibility study is scheduled to be completed in November, 2007.

34. 34 PRODUCTION OF ELECTRICITY FROM RENEWABLES, MLN. KWH 8.19%4.36%From renewables 122109790Consumption 1000426.5Total: 1304.3Biomass PP 3801.2Wind PP 12562Small HE 365359Kauno HE 2010 m.2004 m.

35. 35 MAXIMUM INSTALLED CAPACITY OF WIND POWER PLANTS Maximum of installed capacity of wind power plants in Lithuania in 2010 (according to produced energy): P = 380 GWh/1900h = ~200 MW Maximum of installed capacity of wind power plants in Lithuania in 2010 (according to system demand): P = 622 x 1,3 x 0,2 = ~160 MW where: 622 – 2004 m. minimum load, MW 1,3 – demand increase up to 2010 m. 0.2 – part of capacity, not which not require additional costs for regulation

36. 36 DEVELOPMENT OF WIND PP BY ZONES Transmission network206 110 kV overhead line Klaipėda– Rietavas 355 110 kV overhead line Šventoji–Židikai304 110 kV overhead line Klaipėda– Palanga–Šventoji 453 110 kV overhead line Klaipėda– Pagėgiai, Juknaičių substation 402 Distribution network301 Location of zone Total capacity in zone (MW)‏ Zone

37. 37 LOCATION OF ZONES Zone 4 – 30 MW Zone 3 – 45 MW Zone 5 – 35 MW Zone 2 – 40 MW Wind connection zones: Zone 1 – 30 MW any place in 10-35 kV network Zone 2 – 40 MW Zone 3 – 45 MW Zone 4 – 30 MW Zone 5 – 35 MW Zone 6 – 20 MW, any place in 110 kV, except 110 kV lines in Zones 2-5

38. 38 PLANNED PRODUCTION FROM WIND POWER PLANTS 200920082007200620052004 304050 30MW Installed capacity of planned to construct new wind power plant 17313282310,85 MW Foreseen capacity of wind PP in the beginning of the year 320, 4 259,618296,227,41,4GWhProduction of electricity

39. 39 IMPACT OF WIND PP TO ELECTRICITY PRICE

40. 40 ETSO VIEW TO INTEGRATION OF WIND PP Necessary to speed-up construction of network infrastructure; Participation of wind PP in ensuring stability of power system, voltage control during short circuits and etc.; Ensuring balance and frequency control of the power system; Support of studies for integration of renewables into power system; Promote secure planning by limiting total capacity of renewables; Evaluate impact to international power flows.

41. 41 PROBLEMS Big impact to power system balance control; Additional costs for power system control, balancing; Limitation of total installed capacity of wind PP; Difficulties with land ownership, rent, preparation of detail plan, environment impact assessment, unfriendly view of neighbours (not in my backyard); Impact to electricity price; Renewables reduce part of market, limits competition; Big pressure from companies which wants to construct wind power plants.

42. 42 FUTURE DEVELOPMENT OF WIND PP Take into account policy of EU on development of renewables; In 2010 – 200 MW of installed capacity of wind PP; Most probable future development of wind power plants after 2010. How much? 50-100-200-400MW? Off-shore wind power plant 200-300 MW; Study for development of off-shore wind PP up to 1000 -1500 MW. Future development of wind PP limit not stable production from this type of production, network possibilities, necessity to have power transfer reserve in transmission grid, impact to power system balance; Development of other renewables (biomass PP, etc.).

43. 43 ACTUAL GENERATION FROM WIND PP

44. 44 Dr. Dalius Šulga Director of Energy Development Department Lietuvos Energija AB Zveju str. 14, LT -09310, Vilnius Lithuania web www.le.ltwww.le.lt dalius.sulga@lpc.lt