Baltic Energy Market Interconnection Plan GRIP 2017

2.1 Energy Policy

The BEMIP region is often regarded as a heterogeneous one, not only in terms geographical coverage but also in the context of differences between the energy markets that are present in particular countries of the region. However, a closer look at their energy markets may give a more nuanced picture. Namely, a number of features can be identified that are either common across the region or are relevant in most cases. First of all, the political focus has been put on the reduction of greenhouse gas emissions and enhancement of the domestic sources of energy. The promotion of renewables and the introduction of important regulatory changes in Baltic countries had an impact on the competitive position of natural gas vis-à-vis other sources of energy. This was one of the major reasons behind the decreasing gas demand in recent years in some countries and uncertainty regarding the role of natural gas in the future. On the other hand, the shift towards renewable sources fostered the process of exploring the untapped potential of biogas and biomethane and, in the longer run, also renewable gases. TSOs in the Baltic region analyse the possibilities of opening the gas infrastructure to different sources of renewable gases, thus supporting the contribution of natural gas towards a low-carbon economy. Natural gas is well placed to play its role in this process in the mid- to long-term future. This can also be achieved since there is still potential for natural gas to replace more polluting fossil fuels such as coal, lignite and oil shale in the electrici- ty production and coal in the heating sector. In addition, there is room for LNG and CNG to contribute towards emission reductions in the transport sector. Since enhanced environmental standards defined by the International Maritime Organisa- tion and the European Union apply to the Baltic Sea, gas operators are cooperating with other parties in the region to establish the infrastructure necessary to facilitate the use of LNG, CNG and hydrogen in the maritime and inland transport. Policy makers in the Baltic region also attach importance to the development of gas infrastructure to guarantee secure supplies. Some of the first projects with the aim of providing diversified supplies have already been implemented, such as the LNG terminals in Klaipėda and Świnoujście. Other diversification projects are planned to follow suit. These include the extension of existing and construction of new LNG terminals (including small-scale ones) and the NO-DK-PL project (Baltic Pipe) that will provide direct access to Norwegian supplies. Cross-border interconnections between the countries in the region such as Baltic­ connector, Baltic Pipe and GIPL are also given priority. Enhancement of intercon- nections between the three Baltic States, including the introduction of reverse flow on Latvian-Estonian interconnection along with enhancement of flexibility of Inčukalns UGS in Latvia and Latvian—Lithuanian interconnection are essential for developing the joint Baltic and Finnish gas market with a possible single entry-exit zone. This is due to the fact that implementing these projects will enhance the distribution of gas between gas systems and they are also expected to improve competition in the markets. There is also an understanding amongst the Baltic States that infrastructure developments are essential in order to increase the afford- ability of natural gas for consumers and bridge the gap between gas prices in the region and the more developed markets in North-West Europe.

BEMIP Gas Regional Investment Plan 2017 | 9