2020 Energy Highlights In Latvia

• Published date: 03 August 2021
• Subject Matter: Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Renewables
• Law Firm: Cobalt Legal
• Author: Gatis Flinters and Mārtiņ' Tarlaps

A summary report on key developments in Latvian energy sector in 2020.

ELECTRICITY PRODUCTION

Electricity production market in Latvia has been experiencing increased public and political attention already over the last decade. In result of several widely discussed cases where energy producers had abused state support for renewable energy production, the Latvian regulatory environment has undergone continued upgrades aimed to increase supervision and limit the misuse of state support. The trend continued in 2020 with a change of government authority that supervises electricity producers, increased regulatory requirements for efficiency of production, reporting and compliance, and new rules for the recovery of unlawfully received state aid.

More specifically year 2020 started with the shift of supervision function over producers using feed-in tariffs and guaranteed capacity payments from the Ministry of Economics to the State Construction Control Bureau. Along with the transfer of authority, the State Construction Control Bureau obtained vast powers to carry out on-site inspections on self-consumption, use of measuring equipment and correctness of reported data and the right to suspend or cancel payment of feed-in tariff or capacity payments in case of violations. Furthermore, in 2020 the Latvian government decided to rewrite the body of regulatory framework dealing with state support for energy producers. As a result, the government introduced new Cabinet Regulations 560 and 561 that brought new rules for depreciation of fixed assets, energy efficiency and reporting. In cases where the producer has received illegal state aid, the Cabinet Regulations determine rules how such illegally received state aid is recovered.

However, not all was bad for renewable energy producers in 2020. Following the approach already seen in other countries, Latvia is starting to shift away from subsidised electricity production towards generation capacities that operate on market terms. For example, in 2020 the development of new wind energy projects became more accessible due to revised planning requirements. The amendments to Cabinet Regulations 240 now allow the development of wind farms as close as 800 meters to residential buildings in rural areas and denser placement of wind turbines within wind farms. Likewise, several planning restrictions were substituted with the ability to evaluate and possibly mitigate the effect of such restrictions within environmental impact...