Baltic Ring

Fact Sheet

* * *

Energy

(Doc. DK-98/65)

The Second Heads of Governments Meeting
on Baltic Sea Co-Operation
Riga, 22-23 January 1998

Council of the Baltic Sea States
Agenda item 1 -C: Energy

Energy
Fact Sheet

Strengthening the Co-Operation in the Field of Energy in the Baltic Sea Region.

1. Introduction.

The members of the Council of Baltic Sea States (CBSS) are committed to international cooperation and joint actions in the Baltic Sea region in the field of energy and environment. The CBSS members are also parties to the European Energy Charter, the UN Convention on Climate Change, the Rio Agreement, and the recent Kyoto Protocol to the Convention on Climate Change. Moreover, the countries applying for membership of the European Union will have to adapt to the legislation and general rules of the European Union and to strengthen their institutional performance.

The summit in Visby, May 1996, introduced the Baltic Agenda 21. The year 1996 also saw the adoption of the Kalmar Action Programme in July by the Ministers of Foreign Affairs establishing working programmes on democracy and stability, economic co-operation, and environment, and in October 1996, the Ministers of Environment adopted the so-called Saltsjöbaden Declaration defining the seven sectors and establishing guidelines for the activities in the framework of Baltic Agenda 21. In June 1997, the Nordic Prime Ministers issued the so-called Bergen Declaration calling for closer energy co-operation in the Baltic Sea region.

A key element in the co-operation in the Baltic Sea Region is Baltic Agenda 21. Moreover, major studies are being carried out of the possibilities of integration of natural gas supply systems and of electric systems in the Baltic Sea region with repercussions for both security of supply, economics of energy supply and transmission, and impact on the environment.

2. Sustainable Energy Development.

The co-operation in the framework of Baltic Agenda 21 is structured around seven different sectors, one of which is energy. The lead parties in the energy sector co-operation are Denmark and Estonia. A Senior Officials Group (SOG) is in charge of co-ordinating the work in Baltic Agenda 21. For each of the seven sectors of co-operation, a report will be produced; the sector reports will be constitute the basis for the final Baltic Agenda 21 document expected to be ready for consideration mid- 1998. The basic objective of Baltic Agenda 21 is jointly to investigate the possibility of and prospects for region-wide sustainable solutions. In the field of energy, the major issues subject to co-operation in the framework of Baltic Agenda 21 cover a wide range and include the following:

• Ensure an adequate level of energy services in all countries, including space heating, electric appliances and transport;
  
  
• Reduce air emissions and acidification, including fulfilling environmental and climate agreements;
  
  
• Deal with nuclear hazards, mainly controversial nuclear power plants, including issues of upgrading and decommissioning of nuclear power plants;
  
  
• Promote a rational energy policy, including enhanced energy efficiency and energy savings, ensuring security of supply, and increase the use of renewable energy resources
  
  
• Enhance regional co-operation in the field of energy supply and transmission, and in order to ensure long-term benefits also in the field of energy research, development, and demonstration.

Co-operation among the parties is expected in particular to address four major objectives:

1. Improved utilisation and further development of district heating and natural gas networks;
   
   
2. Energy savings exploiting the potential in the whole Baltic Sea region, and not least the considerable potential in the economics in transition;
   
   
3. Enhanced combined heat-and-power (CHP) production; and
   
   
4. Increased and efficient use of the large renewable energy potential.

Finally, a study, Perspectives on the Energy Markets in the Baltic Sea Region, is dealing with the energy markets in the area. The study expects to identify the main issues and problems in the markets and to outline prospective energy developments. While the study covers the whole region, the emphasis is on the Baltic states, Poland and Russia. The market study is closely co-ordinated with Baltic Agenda 21 and the follow-up of the Bergen Declaration.

3. The Bergen Declaration.

In June 1997, the Nordic Prime Ministers issued the so-called Bergen Declaration on "Sustainable Energy Supply in the Baltic Sea Region" calling for closer energy co-operation in the Baltic Sea region engaging all governments in the vision of a more sustainable development of the energy sector. More specifically, the Declaration suggested considering the establishment of integrated gas supply systems and of integrated electric transmission systems around the Baltic Sea. National agencies in the Nordic countries and other Baltic Sea countries are involved in the subsequent implementation of the said Declaration.

The Declaration underlines the need for a long-term approach to the energy issue. Employment and value-added must be ensured; the energy systems in the Baltic Sea region must reflect the demand for sustainable development; and there is a need for further political, economic, and technological integration in the Baltic Sea region.

4. Integrated Baltic Supply Systems in the Field of Natural Gas and Electricity.

Among the major energy projects in the region, especially the Baltic Sea integrated supply systems projects are in focus. Consistent with the major guidelines, including the Bergen Declaration, studies on integrated natural gas grids in the Baltic Region and a Baltic Sea "electric ring" are being carried out. Integrated supply systems in the respective fields are likely to have repercussions in terms of security of supplies, economics of energy supply and transmission, and the environmental impact of energy production.

The possible integration of the Baltic Sea gas transmission systems has been subject to several studies. The Baltic Gas Study of February 1997 deals with the natural gas sector in the Baltic countries. The study covers, inter alia, pipelines, storage facilities, and organi-sational structures. The study has resulted in a series of recommendations concerning security of supply, market development, technical issues, organisational aspects, legal and fiscal measures, and international cooperation. The Nordic Gas Grid Study initiated in June 1997 investigates the possibilities of integrating the Nordic gas grids and possible supplies from especially Norway and Russia. Seven gas companies in Denmark, Sweden and Finland carry out the study; it is expected to be completed in June 1998. The North Trans Gas Study initiated in January 1997 investigates the possibility of a gas transmission system in the Baltic Sea between Russia, Finland and Germany. Russian and Finnish gas companies are carrying out the study, which is expected to be completed in the autumn 1998. As the latter studies remain to be completed, general conclusions or recommendations are not yet available. A number of important commercial negotiations are under way, e.g. current negotiations between Norwegian and Polish gas companies.

In the field of electricity, The Baltic Ring Study carried out by 18 power companies and utilities 1998 has investigated the possibilities of creating a common electricity market around the Baltic Sea, emphasising the need for environmental improvements and benefits for the consumers. The study has just been completed. The study emphasises that an open market will benefit both consumers and producers; it will reduce running costs, reduce or postpone investment in needs, enhance security of supply, and reduce emissions if common environmental standards are accepted. The Baltic Ring Study underlines the importance of combined heat-and-power (CHP). The creation of a framework where environmental investment, including rehabilitation of existing thermal power plants and new CHP plants, can be financed on market terms is an important recommendation of the study. Moreover, the parties to the study recommend a number of specific projects supporting the vision of a Baltic Ring and reflecting the need for environmental improvements. Likewise, the Baltic Ring study can be expected to indicate that existing and already decided transmission systems cover the need for transmission capacity with the exception of the Polish-Lithuanian link. Consequently, the state and capacity of transmission systems do not seem to constitute a barrier to trade and exchange of electricity in the Baltic Sea region. On the other hand, there seems to be an urgent need for rehabilitation and improvement of the power plants in order to increase efficiency and reduce harmful emissions.

The 18 power companies and utilities intend to establish the Baltic Ring Electricity Co-Operation (BALTREL). The report underlines the need for harmonised environmental standards. The study recommends a rehabilitation of CHP installations in Riga and Kaliningrad. The companies expect to implement a joint study with participation of electricity and natural gas companies and utilities in the Baltic Sea region.

Copenhagen, 12 January 1998