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enero 30, 2025

Suspension of the offshore wind auction in Lithuania: tensions between the government and investor confidence

The decision to temporarily postpone Lithuania's second offshore wind auction reflects tensions between the objectives of stabilizing electricity prices and the need to attract foreign investment. Linas Sabaliauskas, CEO of the Lithuanian Wind Power Association (LVEA), told Strategic Energy Europe that while the measure has a limited short-term impact, it exposes structural vulnerabilities in the country's energy strategy.
By Guido Gubinelli

By Guido Gubinelli

enero 30, 2025
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The recent proposal by Lithuania’s Ministry of Energy to temporarily suspend the country’s second offshore wind auction has sparked debate about its impact on energy transition goals and investor confidence. Linas Sabaliauskas, CEO of the Lithuanian Wind Power Association (LVEA), told Strategic Energy Europe that in the short term, the suspension will not affect immediate energy objectives, as the country currently has 4,700 MW of onshore wind projects under development. “Offshore energy was expected to become operational by 2032,” Sabaliauskas explains.

However, the long-term effects of this decision raise concerns about Lithuania’s ability to meet its ambitious energy targets, including the operation of 1,400 MW of offshore wind capacity by 2028. Sabaliauskas described this goal as a “bold statement” made by the former Minister of Energy, given that industry timelines suggest a more conservative outlook.

Price Stabilization vs. Market Competitiveness

One of the government’s arguments for the suspension is to minimize the impact on electricity prices for consumers. However, according to Sabaliauskas, the current design of offshore wind auctions could harm the competitiveness of Lithuania’s energy market. “With 6,000 MW of onshore wind capacity and another 6,000 MW of solar already secured, adding offshore energy with 15 years of priority dispatch and Contracts for Difference (CfD) could dominate 60% of national energy consumption, creating risks of market manipulation,” he warns.

Sabaliauskas also highlights that Lithuania’s limited commercial interconnection capacity with Poland and the lack of incentives for green hydrogen projects exacerbate these risks. “Even with an increase in domestic consumption of 4-5 TWh by 2030, offshore energy could overload the market and discourage new investments in more competitive onshore projects,” he states.

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Impact on Investor Confidence

The postponement of the auction adds to a history of regulatory changes that have eroded foreign investor confidence in Lithuania’s wind sector. Sabaliauskas recalls that in 2021, leading companies like Orsted, RWE, and Total were ready to invest but exited the market in 2022-2023 following modifications to support mechanisms and changes in auction conditions.

“Trust was already damaged. Now we have to rebuild it from scratch,” says Sabaliauskas. He also points out that the redesign of the current auction process allows a winner to be declared even if there is only one participant, an approach that could discourage competition and send negative signals to the market.

Lessons from Neighboring Countries

In this context, examples from Poland and Estonia provide valuable lessons for Lithuania. Sabaliauskas stresses the importance of not underestimating investors’ ability to assess risks and returns. “It’s not about competing against the market but collaborating with developers. Changing auction rules at the last minute, as has been done in Lithuania, only drives participants away,” he explains.

In contrast, Estonia stands out for its calculated and stable approach. “While Lithuania runs back and forth unsuccessfully, the Estonians think and calculate twice, achieving the right results from the first attempt,” Sabaliauskas comments.

A Path Forward?

To ensure favorable conditions for both consumers and developers, Sabaliauskas recommends a more strategic and thoughtful approach. “If the government decides to continue with auctions under the same conditions, private investors may halt their onshore projects and leave the country, a devastating blow to confidence in Lithuania,” he warns.

Although the immediate impact of the auction suspension may be limited, the future of Lithuania’s offshore wind sector depends on the government’s ability to restore investor confidence and design policies that promote a competitive and sustainable market.

The suspended auction was intended to allocate a 700 MW offshore wind farm in the Baltic Sea. This capacity was part of a broader strategy to diversify the country’s energy mix and reduce reliance on energy imports. However, policy uncertainty and constant regulatory revisions have created unique challenges for Lithuania compared to its Baltic neighbors.

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