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2019 in the Power Industry — A Year of Customer Growth

2019. gads enerģētikā – patērētāju izaugsmes gads

The power industry reached a kind of maturity last year when consumer costs for electricity and natural gas were primarily influenced by global open market processes and not by changes in local market regulations or the infrastructure. At the same time, this means that, due to the global increase in the price of power resources, government decisions regarding complete opening of the natural gas market and review of the MPC will make all consumers, be they households or a businesses, monitor their consumption much more actively in 2019.

When seeking ways to reduce the impact of price increases and optimize one’s own expenditure for energy, the solution is no longer just opting for the cheapest price of electricity. This is just like with driving. Choosing the cheapest petrol station can save just a couple of euros, but a more substantial reduction in expenses requires a more radical approach, such as changing driving habits, opting for a more efficient vehicle, or choosing an alternative type of fuel.

Adaptation of Customers to Price Increases

The increase in the price of electricity experienced last year was the most rapid in the last five years, but it is a normal market process. Although a lot of snow during winter and much precipitation in spring may increase the amount of water in Latvian and Scandinavian hydroelectric plants, it should be noted that electricity prices will remain higher than usual in 2019.

Already now, the prices of energy resources are serving as a stimulus for the development of the sector and facilitating more active implementation of energy efficiency solutions in companies and households. The next phase in the development of the energy market will continue this year, where, after putting the market infrastructure in order, traders will constantly introduce new solutions; consumers will more actively develop their understanding regarding the improvement of the efficiency of their consumption or choose to become energy producers.

Large households are already the most active installers of solar panels in Latvia. With regard to construction and renovation of buildings, the most topical matter is energy consumption, and businesses and households alike are starting to seriously consider investing in power-efficient solutions. This means a positive tendency where changes in one sector drive the development in many other associated sectors.

Households — The Last Step in Opening the Natural Gas Market

Deregulation of gas prices for households would complete the opening of the natural gas market in Latvia and simultaneously provide momentum for new growth on the trader and consumer side. With deregulation, consumers would have all household energy matters in their hands and be able to control them at their discretion.

Legislation approved at the beginning of the liberalization of the natural gas market envisages that, from January this year, there is no longer a gas price that is regulated according to a standard or approved by the Public Service Regulation Committee. However, no detailed conditions have been developed for the market deregulation process to assure that all market players have a clear vision of active involvement of households in the open gas market.

Considering that gas is frequently a considerably larger expenditure than electrical energy in the heating expenses of a household, the completion of the market opening will cause consumers to act much more proactively in this segment than in the event of the opening of the electric energy market, and the same is expected in the activity of traders when evaluating this segment.

MPC and Political Decisions

In the heat of the pre-election campaign, the matter of the MPC, which is essential for the sector and consumers, became a bugbear in the battle between the parties, with no particular outcome. Furthermore, the discussions, which were full of populist promises, deformed the public understanding regarding support for renewable resources and resulted in a strong stand against them, ignoring the fact that green power resources are of particular importance in the development of sustained energy production in Latvia and the entire Baltic Region.

In the beginning of this year, the new government will have to be able to arrive at concrete decisions to start actual work on the implementation of changes in the MPC, which will have a substantial impact on the further development of the energy sector. However, when evaluating the multiple proposals, it is important to maintain a focus on how to support the use of renewable energy resources purposefully and sensibly instead of whether to do so at all.

The agenda for this year also includes the development of the final version of the National Energy and Climate Plan (NECP). The targets included in it for the reduction of greenhouse emissions will shape the future priorities in the energy sector, including the use of certain energy resources, as well as facilitate transition to much wider use of new and more efficient technologies in the national economy.