EMPOWERING GROWTH OF LITHUANIA: ELECTRICITY MARKET IN SWEDEN, POLAND AND LITHUANIA Daivis Virbickas, Litgrid CEO

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1 EMPOWERING GROWTH OF LITHUANIA: ELECTRICITY MARKET IN SWEDEN, POLAND AND LITHUANIA Daivis Virbickas, Litgrid CEO

2 Contents Power generation Wholesale Retail Transmission Distribution Customer 1

3 Power generation Generation share, National balance, ,8 150,9 138,7 145,5 100% 80% 60% 40% 20% 0% TWh Data provided by ENTSO-E 10,1 5,4 4,4 10,6 Sweden Poland Lithuania-6,2 Net generation Net consumption Saldo Nuclear Hydro Biomass Fossil fuels Wind Solar Lithuanian will connect to Poland, dominated by fossil fuel power, and Sweden, dominated by hydro and nuclear energy - each at least 15 times bigger and exporting The major electricity producers in Poland and Sweden produce times more electricity than the biggest Lithuanian electricity producer 2

4 Generation: Capacity mix in Sweden, 2013 Installed capacity Sweden SE1 6 GW 87% hydro Total ,4 GW SE2 10,2 GW 78% hydro 18,3 GW 54% nuclear SE3 Hydro Nuclear Waste Wind Bio Other ,2 10 0,5 7,8 4,3 1,5 4,2 GW 55% thermal SE ,2 16,2 10,3 9,9 0,5 0,4 5,5 7 3,2 3,7 3,5 2,7 Data provided by Svenska Kraftnat Capacity, GW Electricity is traded in 4 bidding areas in Sweden Lithuania will connect to SE4 bidding area, dominated by thermal power generation The installed capacity of biggest electricity producer in Sweden is 3 times the total installed capacity of Lithuania, yet comprises less than 40% of the market 3

5 Generation: What future brings for nuclear? Forsmark NPP Vattenfall ownership share: 66% BWR MW BWR MW BWR MW Total: 3157 MW SE2 SE1 The Green Party: "Our demand is that at least two reactors are decommissioned during the next legislature. That we would sit in a government which builds new reactors is completely impossible September, SE3 Ringhals NPP Vattenfall ownership share: 70% PWR MW PWR MW PWR MW PWR MW Total: 3717 MW SE4 Oskarshamn E.ON ownership share: 54.5% BWR MW BWR MW * BWR MW Total: 2511 MW * The reactor under reconstruction, planned to be back in system in 2015 At least three reactors with the total capacity over 2,8 GW (7% of installed capacity in Sweden) may be closed down by This would result in lack of capacity during peak or outage hours, and might turn Sweden into importing system at times; in cases like this, imports come from Norway 4

6 Generation: Capacity mix in Poland, 2013 Installed capacity Poland Total GW Data provided by PSE ( Industrial Hydro Gas Hard coal Wind Lignite ,5 2,5 1,6 23 6,1 8, ,7 2,6 2,4 2,2 1,2 0,9 19,8 20, Capacity, GW 3,5 5 9,4 7,7 Polish power generation highly depends on fossil-based fuel Carbon price key driver of Polish energy sector development PGE, the biggest producer in Poland, holds 38% of market share and has 6 times more capacity than the biggest producer in Lithuanian market 5

7 Key driver of Polish energy sector development EU UR/tCO 2 (nominal price) Feb/2008 Feb/2009 Feb/2010 Feb/2011 Feb/2012 Feb/2013 Feb/2014 Poland s economy will continue to be based on coal, but in a more modern way D.Tusk, Polish Prime Minister September 2013 Main reasons for the EU s low carbon price in economic recession and high number of generous exemptions. Source: Poland is the world s 10th-largest consumer of coal In October 2014 the European leaders struck a broad climate change pact obliging the EU to cut greenhouse gases by at least 40% by 2030, compared to 1990 Concessions granted to Poland will allow it to continue reaping hundreds of millions of euros in free allowances to modernise coal-fired power plants 6

8 Wholesale: 7 major exchanges Nord Pool Spot EPEX SPOT APX PXE MIBEL GME PolPX Other countries Nord Pool Spot is one of the biggest power exchanges in electricity trading volume in Europe The Nord Pool Spot geographical area is well connected to three out of six of other exchanges 7

9 Wholesale market Day-Ahead Market prices in 2014, comparison to SE4 price Average price EUR/MWh 2014 Jan-Oct 31.9 EUR/MWh (SE4) Wholesale market Sweden (1996) Poland(1999) Lithuania(2012) Physical Market Day-ahead Intraday EUR/MWh Financial market with physical delivery Financial market Bilateral trading Balancing Market EUR/MWh Trade of electricity and financial products function on each market; however, the liquidity of the market in which Lithuania operates will increase immensely from 2016 In 2014 Swedish wholesale electricity prices are usually lower than in Poland or Lithuania 8

10 Retail market Electricity prices 2012 (all taxes included) Number of consumers 5.3 mln. Active consumers 1.7 mln (32.1%) The biggest share in the supply Vattenfall 27 % Number of suppliers 121 in 2012 Number of suppliers 82 in 2012 Number of consumers 16.7 mln. Active consumers (0.4%) The biggest share in the supply TAURON Group 32 % Number of suppliers 27 in 2012 Number of consumers 1.7 mln. The biggest share in the supply Lesto 35 % SE PL LT Source: Eurostat Most developed retail market is currently in Sweden; Poland and Lithuania still in the initial stage of development The number of suppliers currently registered in Lithuania seems disproportionate compared to consumption and trade volumes on the exchanges 9

11 Transmission system operators Number of interconnectors since 2016 Svenska Kraftnät PSE Litgrid Source: ENTSO-E The functions and responsibilities of Lithuanian, Polish and Swedish TSOs are of the same importance in each country and in the region; what is different the size of the infrastructure, number of employees, and revenue With 15 interconnections from 2016, Lithuania will become a hub of electricity flows of the Northern Europe 10

12 Distribution 11

13 Regions comparison, 2013 Regions comparison, 2013 Sweden Poland Baltics Lithuania 14,45 3,78 3,90 3,58 3,02 2,67 3,11 3,26 3,98 4,24 2,34 1,05 Electricity consumption per capita, MWh/cap Productivity per Electricity consumption, EUR/kWh Energy production per installed capacity, TWh/GW Lowest consumption of electricity per capita in Lithuania shows there s space for growth With highest earnings per 1 kwh, Lithuania is a good place for investment in electricity intensive industries Low energy production for installed capacity due to low efficiency, however sufficient power reserves in place 12

14 Summary and outlook Electricity production The markets to which Transmission and sources are diverse, Lithuania will be distribution of electricity competition among the connected open huge is well developed: with producers both in opportunities for 15 interconnectors from Sweden and Poland empowering growth of Lithuania starting 2016, ensures conditions for business and society the transmission of competitive and liquid electricity to and from electricity market Lithuania will open new possibilities for businesses 13

15 Thank you. Questions? Demand and transmission capacity of the region in ,5 GW vs. 3,6 GW Demand and transmission capacity of the region in ,9 GW vs. 4,8 GW Baltic electricity system 2014 vs