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42 I Eastern Europe bne November 2018
to burn will be significantly reduced, allowing it to earn a little extra from re-exporting more gas. While this will be a significant saving for the Belaru- sian budget, the overall volumes of gas transiting the country will not be greatly impacted and so will have little effect
on the regional or European markets. The really big effect will be one on the regional power markets.
Belarus becomes a regional powerhouse
Compared to its neighbours Belarus is
a major producer of power. When Astra- vets comes online Belarus’s installed capacity will rise to 10.8GW compared to Lithuania’s 3.6GW, Estonia’s 2.7GW and Latvia’s 2.6GW. Belarus will be generat- ing a surplus and will be in a position
to export enough cheap nuclear power
to meet most of the demand in all three Baltic states. For example, while Lithu- ania has 3.6GW of installed capacity and access to another 1.3GW via the LitPol and Nordbalt interconnection links with Poland and Northern Europe, its average consumption is 1.1GW, rising to a peak of 2.3GW in winter, according to Eurostat.
With so much excess generating capac- ity, there is no danger that Russia, using Belarus as a tool, can put itself in a position to turn off the lights in Vilnius so the Astravets power plant can’t be used as an overt foreign policy tool in the same way as Gazprom’s gas sup- plies to Kyiv have been used as a club on several occasions in the past. However, the cheap power Astravets produces will upset the economics of the power sector and have led Vilnius to fiercely resist the construction of Astravets.
Power in Lithuania is expensive, making it the most vulnerable of the countries
in the region. After it closed its only nuclear power plant at Ignalina in 2010, consumers experienced a 33.3% increase in electricity rates, and of its 3.6GW of generating capacity 2GW burn gas that has to be imported, which is expensive.
To break its dependence on Russia, the government invested some half a billion dollars into the Klaipeda floating liquefied natural gas (LNG) terminal launched in 2014. The trouble is that LNG costs some
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30% more than piped gas and is not com- petitive with the other sources of power available to Lithuania. Consequently the Klaipeda terminal is currently working at 20% of its capacity and the government has been toying with forced purchase orders of LNG to keep it functioning. If
a new supply of even cheaper Belaru- sian power comes onto the market then Klaipeda will be even more unprofitable.
Currently electricity prices in the region are so low burning gas to generate power costs more than importing power from Lithuania’s neighbours. In 2017 Lithuania imported 80% of its power, mostly from Sweden and Poland, largely ignoring its domestic utilities.
From this perspective an additional 2.4 GW of Belarusian power on the regional market would drive electricity prices down even further. Lithuania’s utilities would be priced out of the market and useless in pure economic terms.
All three Baltic states have been trying
to diversify away from traditional fossil fuels to renewables to improve their security and indeed Lithuania already produced 178MW from wind power in 2016. But the other two Baltic states have progressed much further and already reduced their exposure to risks from
a boost in Belarusian power generation or Russian games with gas supplies.
In Latvia hydropower production leapt by 73.2% in 2016 and wind power was up a healthy 17.1%. Over the last ten years the share of gas fuelled power has fallen by 5% to reach just 23.4% in 2017, with the share of renewables overtaking gas to make up 32.9%. Fuel wood makes up another third.
Estonia also managed to break its addic- tion to gas by exploiting local shale gas rocks. Already in 2007, more than 90% of its power was generated from oil shale. The Estonian energy company Eesti Energia owns the largest oil shale-fuelled power plants in the world, the Narva Power Plants.
BRELLixt
The difference in the energy profiles of the Baltic states has divided their inter-
ests and left Lithuania in the corner try- ing to protect its energy sector. Its bet on LNG has not paid off and its renewable sector has not grown far enough, leaving it currently dependent on imports.
So politicians in Vilnius have been work- ing hard to stymie the Astravets power plant. The first line of attack has been to question the safety of the plant, which is uncomfortably close to the capital.
Ironically, even the EU has signed off on the safety of the Russian-made reactor. The Astravets plant successfully passed EU- designed stress tests peer-reviewed by the European Union Safety Regulators Group (ENSREG), which examined
the facility on the basis of its prepared- ness for earthquakes, flooding, heat sink, and other severe accidents. IAEA experts have also certified the Astravets plant to be capable of withstanding "the worst credible external event." The VVER-1200 reactor model set for use in Belarus is also being deployed in Finland, Hungary, and Russia.
These reassurances have not placated Vil- nius, where politicians insist that they will not allow any Belarusian power onto their grid. The Lithuanian parliament passed a bill in mid-June declaring that the power plant is a threat to national security and demanded that the government come up with measures to prevent imports.
So far Lithuania has not got Estonia and Latvia on board with its boycott but Poland, which borders Lithuania and Belarus, said in March it would not import electricity from the controversial plant.
Lithuania’s preferred solution is to leave the old Soviet power sharing grid com- pletely, but as that comes with a $1bn price tag Vilnius has struggled to get Tallinn and Riga on board.
The Soviet IPS/UPS power sharing sys- tem works under rules that are governed by the so-called BRELL agreement, signed in 2001, before the Baltic coun- tries joined the EU in 2004.
Poland, Hungary, Czechia and Slova- kia have already made the jump to the EU’s Continental Synchronous Area in