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Finnish Fortum CHP Plant Dents Russian Dominance in Lithuania

Russian gas supplier Gazprom’s 100 percent prevalence in Lithuania has been shaken up in the seaport city of Klaipeda, where Finnish energy firm Fortum has opened a $173-million combined heat and power plant (CHPP). The 20-MW biomass and waste-fuelled plant will produce 40 percent of Klaipeda’s heating needs and decrease its dependency on Russian gas approximately as much.

“Use of sorted waste and biomass as fuel in the CHPP will offer a sustainable and cost-effective solution for city and is expected to reduce CO2 emissions by about 100,000 tons annually in the city,” said Andrius Kasparavicius, head of the communications department at Fortum Klaipeda.

The plant is believed to have far-reaching political and economic ramifications. “Finland is known for high transparency of business. The plant will be not only an example for Lithuania of an excellent foreign investment but also an example of political and business culture investment,” said Lithuanian President Dalia Grybauskaite.

Combined heat and power plants make up nearly 30 percent of the energy mix in Finland.

Kestutis Girnius, a prominent U.S.-born political analyst, explains the Fortum investment as “a slow but inevitable Gazprom retraction from the Baltics and Lithuania.” 

“The Finnish CHPP is a dent in the Gazprom prevalence in Lithuania,” said Girnius. “If Lithuania manages to build a LNG terminal in Klaipeda by the end of 2014 as planned, and interconnect its electricity grid through the NordBalt (700 MW) and LitPol Link (500 MW) projects with Sweden and Poland by 2016, it will deal a severe blow to Gazprom.”

The European Union’s decision to unbundle energy suppliers and operators, which has been embraced by Lithuania but excoriated by Russia, has also had a significant impact, explained Girnius. The Fortum plant will be a “big stride” for Lithuania in fulfilling its EU-commitment to produce 355 MW of energy capacity from biomass and biogas by 2020.

“The Fortum facility has enhanced Lithuania’s chances to meet the commitment on time. Development of bio-mass-fuelled energy production has been the steadiest among other renewable energy sources in Lithuania,”  said Ruslan Sklepovic, president of Lithuania’s Renewable Energy Producer Association (LREPA). “As the public opposition against anything what is related to renewables is still high in Lithuania, the successful project will also diminish the resistance, and possibly expedite other renewable energy projects.”

Fortum operates two CHPPs, one in Chelyabinsk and one in the Tumen region. Klaipeda is the first waste-and-biomass-to-power plant in the Baltic States and one of the four that Fortum plans to launch in the Baltic and Nordic countries this year.

“The fact that Russia let the Finns step into its market shows the changing energy landscape in Russia and weakening Gazprom prevalence” noted Kasparavicius.

Girnius agreed. “The plant will not only diminish Lithuania’s energy dependency on Russian gas, but also Russia’s political influence in the Baltic country as economics and politics go along with each other when we speak of Gazprom,” he said. “The renewables are against the Gazprom interests.” 

Fortum is considering two additional CHP plants in Lithuania in the near future. “The procedures in Kaunas (the second-largest Lithuanian city) are ongoing. If we manage to get the construction permit in fall of 2014, then the plant will be opened in fall of 2016,” Kasparavicius said.

Fortum’s bid in the Lithuanian capital, Vilnius, has been more problematic. The city has refused Fortum’s technical design conditions for the project four times. It is believed that this reluctance is related to Vilnius’ favoring the present heat provider, JSC ICOR, a subsidiary of the French heating company Dalkia, according to multiple local media outlets.

Lead image: Lithuania via Shutterstock

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