Decarbonisation: whether it will have a positive or negative impact on the Lithuanian energy market - the decision is being made now

Transport remains a significant source of greenhouse gases in Lithuania, accounting for 46% of the country's carbon dioxide emissions in 2022. However, the EU (European Union) aims to reduce emissions by 55% by 2030 compared to 1990 levels. To meet the EU's decarbonization targets, Lithuania must start integrating the available renewable energy resources into the transport sector today. Until this happens, Lithuania is confidently moving towards a worst-case scenario where every day that goes by could cost the country €1 million in emission allowances.?

The first deadline is already in July?

By 2030, Lithuania, like other EU Member States, must ensure that renewable energy covers at least 14% of the transport sector. The latest data show that the rate in Lithuania now stands at 6.1%. Experts estimate that 27.59 TWh of petroleum-based fuels were consumed in 2022, so at least 3.86 TWh of renewable energy will be needed to reach the 14% target. By comparison, Lithuania's electricity consumption in 2023 was ~11.72 TWh.?

"It would seem that we still have a long way to go to reach the EU's 2030 targets. But the reality is different," says Povilas Emilis Cesna, Head of Trading and Origination at Green Genius.

He points out that the EU's Renewable Energy Directive was revised at the end of 2023, giving 18 months to implement its provisions into national law. But for some of these provisions on renewable energy permits, the deadline is shorter - until July 2024.?

"In my opinion, we do not see enough effort and cooperation between politicians and market players, and we do not have a clear strategy. However, with the 45% renewable energy quota in the Directive, and the clock ticking, it would be a suitable time to act. Otherwise, every day we wait will create a burden on Lithuania's future budget," said P. E. Cesna.??

Expanding production and consumption is the key aspect?

Energy experts argue that a strategy for cleaner and more sustainable fuels starts with a comprehensive review of current energy sources, infrastructure, and policies. And to meet the EU's targets, it is time to start using alternative fuels such as biomethane and clean hydrogen.

"Lithuania needs to increase its renewable energy capacity by at least a few gigawatts, which requires significant investment, innovation and a progressive regulatory mechanism," says P. E. Cesna, adding that promoting the use of green fuels to create a new market based on the creation of both supply and demand is also important.?

Cost-effectiveness will determine the success of decarbonisation?

Lithuania faces international competition in the production of green hydrogen, especially from "sunbelt" regions such as Morocco and Egypt. These countries have a lower Levelized Cost of Hydrogen (LCOH) due to their abundant renewable resources, which poses a direct threat to Europe's ambitions in the green energy market.

"These factors have a great impact on the economic viability and competitiveness of hydrogen production. Although Europe boasts technological advances in electrolysis technology, the challenge of making it cost-effective for hydrogen production remains," notes P. E. Cesna.

To remain competitive, he adds, Lithuania needs to focus on creating market demand, financing projects, and taking advantage of its ideal geographical location for large wind potential to provide competitive conditions for hydrogen production.?

Such an approach, according to the expert, would not only help to counterbalance the economic advantages of the countries of the "sunbelt", but would also consolidate Lithuania as a major player in the European green hydrogen market.

"We must not forget the hydrogen derivatives such as green methanol and green methane, which will become important in the decarbonisation process in the long term," explains P. E. Cesna. - So, creating a hydrogen market now would provide a solid basis for future greening of the transport sector."?