Electricity transmission system operator “Augstsprieguma tīkls” (AST) and the Public Utilities Commission (SPRK) have introduced a solution for network balancing costs that aims to encourage new electricity producers to enter the market without placing an excessive burden on consumers, Climate and Energy Ministry (KEM) representative Baiba Jākobsone told news agency LETA.
According to SPRK’s published data, at the beginning of this year, the total projected cost for balancing capacity in Latvia was 40.74 million euros. These costs have been fixed during the transition period and are known to electricity producers, traders, and energy-intensive consumers. At the end of the year, AST will compare the forecast with the actual costs.
To allow the balancing reserve market to gradually adapt to the new system, AST will cover the balancing costs from its own funds during the first half of 2025. Jākobsone explained that this constitutes a transitional or stabilization phase for market participants. As of July 1, the balancing capacity maintenance fee will be set at 0.003 euros per megawatt-hour (MWh), which would add about 0.30 euros per month to an average household’s electricity bill.
Jākobsone also noted that KEM has held meetings with industry stakeholders to discuss balancing costs and gather overall views from the sector.
This, she said, allowed the ministry to better understand the challenges and opportunities faced by producers.
AST developed a proposed methodology for the distribution of balancing costs and submitted amendments to the electricity sector’s Network Code. KEM, along with other sector representatives, participated in AST’s public consultation. Final approval of the methodology lies with SPRK, which also conducted a public consultation before adopting the changes. The model underwent several stages of discussion and has been recognized as the optimal solution. The regulation has been adopted but will only apply from the 1st of July.
In response to industry concerns raised in the TV3 programme “Nekā personīga” that increased costs could halt solar power projects or even lead to insolvencies, Jākobsone said that “this is a clash of conflicting interests between producers and consumers.”
She emphasized that AST and SPRK have worked together to ensure a balanced solution—supporting new energy producers while avoiding undue financial strain on consumers.
Jākobsone also added that Baltic system operators, together with regulators and with the support of the responsible ministries, are continuously monitoring the balancing market and optimizing costs. Although the current trends are positive, both the market and consumers’ bills are under ongoing review, allowing for regulatory intervention if needed.
As previously reported by “Nekā personīga”, high balancing capacity costs could significantly hinder investment attraction in the sector.
The program highlighted that in recent years, solar electricity production has grown significantly in Latvia. However, solar plants are heavily influenced by weather conditions. Producers must estimate the following day’s generation in advance. If a predicted sunny day turns out to be cloudy, the grid may face a shortfall. As a result, solar power plants often bear the brunt of balancing charges due to the daily need to manage the risk of weather-related fluctuations.
The program also noted that since Latvia disconnected from the BRELL power grid earlier this year, it must now independently ensure reserve capacity to cover such deficits. At the same time, several market participants have stated that the cost distribution system for balancing has become chaotic.