13 Dec 2013

Latvenergo: Latvia becomes self-sufficient in power generation

NIB’s long-standing customer, the Latvian state-owned power company A/S Latvenergo, has launched the second power generating unit of the gas-fired power plant TEC-2 near Riga.

Built in the 1970s, TEC-2 is a combined heat and power (CHP) plant with the largest power generation capacity in Latvia. The plant has now been fully reconstructed after the first unit was launched in 2009. Three years earlier Latvenergo refurbished its oldest gas-fired CHP plant, TEC-1, located in Riga.

“From now on, when the upgrade of all three basis-capacity plants is completed, we have all necessary capacity in place to cover the country’s need for electricity,” says Zane Kotane, Latvenergo’s CFO.

TEC-2 alone can cover about 80% of Latvia’s needs. Becoming self-sufficient in production capacity doesn’t mean, however, that Latvia wouldn’t import electricity. Everything depends on the market, or the spot price on the regional electricity exchange Nord Pool, which Latvia has been part of since June 2013.

“The difference is that we now possess a powerful leverage to keep the price of the import at least at the level of our own production costs,” Ms Kotane continues.

“CHP plants enable an economically sound choice whether we generate our own electricity or purchase it on an exchange,” she explains.

With the basis-capacity plants being renovated one by one in recent years, Latvenergo has already become a major regional electricity trader.

She believes the new capacity of the three modernised generating units in combination with the cascade of the hydro power plants on the river Daugava would let Latvenergo export electricity to the Nordic market.

“Our export capacity is limited by the insufficient interconnections between the Baltic region and the rest of the EU,” she says.

These are major bottlenecks that we expect to be solved very soon, once the Estlink-2 interconnection between Estonia and Finland and the cable between Lithuania and Sweden are in operation.

The reconstructed TEC-2 power plant’s total electricity co-generation capacity amounts to 832 MW, which is more than double the amount before the reconstruction project. The capacity of the heating production is 1,124 MW, up three times compared to the replaced units. The investments in upgrading both generating units totalled EUR 626 million.

According to the company, the cost of each MW of the electricity output capacity, EUR 0.75 million, produced on TEC-2 is substantially lower compared to most other gas-fired power plants in Europe.

It has become possible thanks to the state-of-the-art combined cycle gas turbine technology that is twice as efficient as the so-called steam turbine generation technology used at the power plant before the reconstruction.

The modern technology also allows the reduction of CO2 emissions from TEC-2 by 35% per unit of energy. Although, due to the capacity increase, the total carbon emissions from the Latvenergo plants are expected to pick up from just below 1 million tonnes of CO2 in 2012 to 1.2 million tonnes in 2014, the company projects that the emissions per unit of energy for its total generation capacity will decrease by 7% to 0.234 tonnes per MWh in 2014.

Latvia imports all of the gas as well as other fossil fuels it needs. All of Latvenergo’s basis capacity is fired with gas. How would this fact affect the security of the country’s energy generation?

“This is true that gas is being supplied by a single provider. We haven’t experienced any disruptions or difficulties with gas supplies so far, but we are welcoming more competition in this market,” says Ms Kotane.

“Being a non-renewable energy source, gas emits far less harmful emissions into the air compared to coal or oil.”

Latvenergo also operates the Baltic region’s three largest hydropower plants, but their output very much depends on the water level in the River Daugava with flood periods for some two months every year.

“We are constantly on the lookout for new technologies available for power generation and keen to introduce efficient and environmentally friendly solutions. The diversification of generation capacity is a very important part of Latvenergo’s business strategy,” concludes Ms Kotane.

The reconstruction project has been co-financed with a 15-year NIB loan totalling EUR 50 million signed in 2008. Altogether, since 2002, NIB and Latvenergo have signed five loan agreements with a total amount of EUR 215 million to finance the company’s large-scale investment in the upgrade of the power generation capacities and distribution infrastructure.

 

Related resources

20 Oct 2008

Latvenergo A/S

EUR 50 million

Press Release

24.10.2008

New energy investments in Latvia