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IP/09/945

Brussels, 17 June 2009

The Baltic Sea Region States reach agreement on the Baltic Energy Market Interconnection Plan

Eight Baltic Sea Member States signed today a Memorandum of Understanding on the Baltic Energy Market Interconnection Plan with European Commission President, José Manuel Barroso. The Baltic Energy Market Interconnection Plan (BEMIP) is the fruit of nine months work at the initiative of the Commission to look at concrete measures to connect Lithuania, Latvia and Estonia better to wider EU energy networks.

“The signature of the Memorandum of Understanding reflects the solidarity which has driven work between the Commission and Member States on this, since we met last October, we have agreed on a number of steps to improve energy security for the Baltic Sea Region”, said Commission President José Manuel Barroso at a pre-European Council dinner with the Heads of State and Government of the eight Member States from the Baltic Sea Region. “ My special thanks go to the High Level Group who through their continuous commitment and hard work have produced an action plan in just a few months."

Commissioner Piebalgs added " Ending the effective isolation of the Baltic States, which still form an energy island, is an urgent task to deal with. Looking at the actions and projects the plan contains and which are now endorsed by the countries of the region, I am now confident that this objective can be achieved in a mid-term perspective''.

The signature of the Memorandum launches the implementation of this action plan which has as a main objective the creation of a fully functioning and integrated energy market supported by the necessary infrastructures in order to strengthen energy security in the Baltic Sea Region. The Swedish presidency is expected to facilitate and give high priority to the concrete follow - up to the plan.

Effective interconnection of the Baltic region was identified as one of 6 priority energy infrastructure projects in the Second Strategic Energy Review adopted by the Commission in November 2008. The BEMIP and the extension of the Nordic electricity market model to the Baltic States are also designated as flagship projects in the Commission's contribution to the Baltic Sea Region that the Commission presented a week earlier, on June 10 th.

The idea of a Baltic Energy Market Interconnection Plan was initiated last October by President Barroso at a similar pre-Council dinner. Soon after, a High Level Group was set up with members from the eight Baltic Sea states: Denmark, Estonia, Finland, Germany, Lithuania, Latvia, Sweden and Poland; as well as from Norway as observer, chaired by Matthias Ruete, Director General of TREN. The Commission has facilitated the process and will now continue to monitor the BEMIP implementation. A first progress report will be presented in December 2009.

Several of the proposed BEMIP infrastructure projects are part of the European Economic Recovery Programme (EERP). This potentially means more than half a billion euros as additional support for the energy infrastructure projects in this region. This should be seen in complement to other existing financial support sources, such as cohesion fund, TEN-E programme etc.

BACKGROUND

The main conclusions of the BEMIP High Level Group final report are in the form of an Action Plan which covers the following 3 areas:

Electricity market integration

The Electricity market design has been agreed, based on the Nordic electricity market model. A specific "Roadmap" that describes practical steps on how to reach the new market model and aims at removing the barriers for a regional electricity market in the Baltic States in conformity with the EU internal electricity market rules has been proposed, covering for example, removal of regulated tariffs, separation of TSO activities and roles, removal of cross-border restrictions, establishment of market based congestion management as well as common reserves and balancing power market, full opening of the retail market and establishment of common power exchange for physical trade in Nordic and Baltic area. Progressing on these market design aspects represents a crucial element for the integration of the electricity systems of the three Baltic States into the Nordic electricity market model. The Joint declaration of the three Baltic States' Prime Ministers signed in Vilnius on April 27 th confirmed their political commitment to pursue real market opening and integration in electricity sector.

Electricity interconnections and generation

The infrastructure projects allowing the integration of the Baltic Sea Region electricity markets are identified and have been assessed based on a simplified methodology. There are three sets of projects:

  • The Nordic Master Plan covers the projects between the Nordic countries such as Fenno - Skan II linking Finland and Sweden, Great Belt in Denmark, Nea - Järpströmmen between Sweden and Norway, South Link in Sweden and Skagerrak IV between Denmark and Norway and others.

  • Regarding the projects linking the Baltic area with the Nordic countries, as well as Poland, all identified interconnections – NordBalt or the previously called SwedLit linking Sweden to Lithuania, Estlink – 2 between Estonia and Finland and LitPol between Poland and Lithuania - are commercially viable. Strengthening the electricity grid between the three Baltic States belongs to this set of projects.

  • The interconnections between Poland and Germany form the third set of projects. The main driver behind these – as opposed to market integration which is the case for the previous ones - is the loopflows caused by wind generation in the North. Initiatives launched by the European Coordinators Mr Adamowitsch with the so called 'heptalateral' Central Eastern Forum and Prof Mielczarski cover these projects.

Gas internal market and infrastructure

For infrastructure, the main driver is enhancing security of supply by aiming at a higher level of diversification of routes and sources. There is a good view on the potential projects that could satisfy this objective, which includes interconnections - new or implementation of reverse flow, LNG facilities as well as development of gas storages. It was agreed by the HLG to further develop the BEMIP gas sector aspects.

For more information see the website .


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