The management of the energy policy established in Latvia does not ensure purposeful progress towards the achievement of the objectives of the National Energy and Climate Plan (NECP) and does not offer a clear solution on how to finance the necessary measures, thus the state risks not achieving the objectives of the plan within the specified time period and also receiving European Union (EU) sanctions, as concluded by the State Audit (VK).
The implementation of the plan’s measures requires additional investments of at least EUR 13.1 billion, however, there is currently a lack of a clear plan and regulatory framework for attracting the necessary private financing for the remainder of the plan’s implementation, the auditors stress. Of these funds, only EUR 3.8 billion, or 29.1%, are currently marked for this purpose.
Mārtiņš Āboliņš, member of the Council of the State Audit Office, emphasises that state budget resources are limited, while current activities do not create confidence that it will be possible to attract the necessary amount of investments from the private sector. He also reminds that if objectives are not accomplished, Latvia may be subject to European sanctions, which will not relieve the country from commitments and will serve as an additional burden for the state budget.
Āboliņš reminds that Latvia is close to the middle point of NECP. In his opinion, continuing as before, Latvia risks not achieving the NECP goals within the set deadline. Four years have passed since the adoption of the NECP and six remain until the results are achieved, he points out, stressing that it is high time to set priorities that, under the conditions of time and financial resources, would contribute the most to the achievement of the goals.
The auditors emphasize that the existing institutional framework does not ensure quality implementation and monitoring of NECP. In the assessment of the State Audit Office, after the establishment of the Ministry of Climate and Energy, the elimination of duplication of competences of two ministries – the Ministry of Economics and the Ministry of Climate and Energy – has not been ensured. Although the energy function has been deleted from the Regulations of the Ministry of Economics, at the moment its responsibility for the field of energy remains, as certain subordinate institutions perform tasks related to the energy function.
The audit also found that the implementation of certain tasks related to the implementation of energy policy is not ensured in accordance with the requirements of the NECP and other regulatory enactments. For example, the implementation of the planned NECP measures under the responsibility of Ministry of Economics and Ministry of Climate and Energy with a deadline until 2023 was only partially ensured, the development of the updated NECP project was delayed, and the planned energy research by Ministry of Climate and Energy is not being implemented consistently, although funding is provided for this purpose.
The auditors emphasize that neither the planned permanent monitoring of the implementation of the NECP nor the oversight at the level of the Cabinet of Ministers, which was planned as a tool for the effective implementation of the NECP, is actually ensured and does not work.
The development of the monitoring and reporting system will continue until May 2025. In turn, the National Energy and Climate Council ceased its activities already in 2021, but the Committee on Energy, Environment and Climate Issues, established in 2023, does not meet regularly, although such a requirement is laid down in the Prime Minister’s order.
At the same time, the State Audit Office emphasizes that the competence of state capital companies is not fully used in reducing obstacles to the development of the energy sector and in achieving policy goals. According to the auditors, the current energy policy has not contributed to a clearly understandable and targeted sustainable development of the energy system.
The auditors emphasise that the investments of certain state capital companies in the development of energy infrastructure are basically based on business interests, insufficiently participating in the achievement of the energy goals set by the state. Virtually all the measures envisaged by the capital companies analyzed relate to the field of energy security. This creates a risk that the NECP’s planned results in the field of energy independence will not be achieved, the State Audit points out.
The State Audit calls for the identification of priority measures that would have the greatest impact on the achievement of the NECP goals, taking into account that the funding for the implementation of all planned measures is insufficient and there is not much time left until the deadline for achieving the goals.
Āboliņš also emphasises that the goals are based on fixed deadlines, and there is a lack of interim indicators that would allow for regular assessment of progress and the necessary adjustments.
In general, after the audit, the State Audit made three recommendations to Ministry of Climate and Energy and the Ministry of Economics. First, to improve the management of energy policy by defining priority measures to achieve the objectives of the NECP, improving the monitoring and evaluation of the results achieved, as well as creating preconditions for attracting additional private funding for the development of the energy sector.
Secondly, VK recommends reducing administrative barriers and promoting more active involvement of electricity producers in the development of renewable energy capacity. And thirdly, improving the quality of energy sector development documents by including in them an electricity generation structure suitable for Latvian conditions, assessing the adequacy of capacities and electricity consumption forecasts in various energy sector development scenarios.