COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Latvia Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK Third Report on the State of the Energy Union
Date: 2017-11-23
Institutions: European Commission, Secretariat-General
Subjects: Latvia, climate change policy, competitiveness, economic and social cohesion, energy cooperation, energy policy, innovation, investment, regional cooperation, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.11.2017 SWD(2017) 404 final  COMMISSION STAFF WORKING DOCUMENT Energy Union Factsheet Latvia   Accompanying the document  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK  Third Report on the State of the Energy Union  {COM(2017) 688 final} - {SWD(2017) 384 final} - {SWD(2017) 385 final} - {SWD(2017) 386 final} - {SWD(2017) 387 final} - {SWD(2017) 388 final} - {SWD(2017) 389 final} - {SWD(2017) 390 final} - {SWD(2017) 391 final} - {SWD(2017) 392 final} - {SWD(2017) 393 final} - {SWD(2017) 394 final} - {SWD(2017) 395 final} - {SWD(2017) 396 final} - {SWD(2017) 397 final} - {SWD(2017) 398 final} - {SWD(2017) 399 final} - {SWD(2017) 401 final} - {SWD(2017) 402 final} - {SWD(2017) 405 final} - {SWD(2017) 406 final} - {SWD(2017) 407 final} - {SWD(2017) 408 final} - {SWD(2017) 409 final} - {SWD(2017) 411 final} - {SWD(2017) 412 final} - {SWD(2017) 413 final} - {SWD(2017) 414 final}  
 
 
                              Energy Union – Latvia 

 Latvia 
                            Energy Union factsheet1 

1.  Macro-economic implications of energy activities 

Energy and transport are key sectors for the overall functioning of the economy as they provide an 
important input and service to the other sectors of the economy. Together the activity in these two 
sectors2 accounted for 12.3% of the total value added of Latvia in 2015. Similarly, their share in total 
employment3 was 9.4% of total employment in 2015, of which 8.1% in the transport sector and 1.3% 
in the energy sector. 

(source: Eurostat) 

The  decarbonisation  of  the  energy  and  transport  sectors  will  require  significant  investments  and  a 
shift in economic activities beyond these two sectors. The energy transition implies a structural shift 
in economic  activity.  Energy-related investment and  jobs  will in  part  migrate  from traditional  fossil 
fuel  based  activities  towards  construction,  equipment  manufacturing  and  other  services  related  to 
the deployment of low carbon and clean energy technologies. At the moment the efforts related to 
the energy transition in other sectors can only be partially quantified and are therefore not included.  

1   The indicators used in this country factsheet largely build on indicators developed for the Commission Staff 
Working  Document  "Monitoring  progress  towards  the  Energy  Union  objectives  –  key  indicators" 
(SWD(2017)  32 
final)  https://ec.europa.eu/commission/sites/beta-political/files/swd-energy-union-key-
indicators_en.pdf  

2   Gross value added and employment in NACE sectors D-Electricity, gas, steam and air conditioning supply 

and H-Transportation and storage 

3   National accounts, Eurostat 

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                              Energy Union – Latvia 

In the case of renewable energy sector, both the direct as well as the indirect effects on employment 
are being estimated. According to EurObserv'ER, in 2015, the share of direct and indirect renewable 
energy  related  employment  (excluding 
large  hydro-power  plants  owned  by  the  incumbent 
Latvenergo) in total employment of the economy in Latvia was at about 0.77%, above the EU average 
of 0.54%. The turnover of the renewable energy industry (excluding large hydro-power plants owned 
by the incumbent Latvenergo) in the same year was estimated at around EUR 640 million. 

 (source: EC based on Eurobserv'Er and Eurostat; for hydro-power, only small plants are covered) 

An  indication  of  the  level  of  efforts  and  challenges  encountered  by  Latvia  in  the  energy  sector  is 
given  by  the  Gross  fixed  capital  formation  (GFCF)4.  Investments  in  the  electricity  and  gas  sectors 
taken as reference sectors amounted to about 1.5% of the country's GDP in 2015. 

(source: Eurostat) 

4 Gross fixed capital formation consists of resident producers´ acquisitions, less disposals, of fixed tangible or 
intangible assets. This covers, in particular, machinery and equipment, vehicles, dwellings and other buildings. It 
also includes foreign direct investment (FDI). Steam and air conditioning supply are also included in the figures 
mentioned above as Eurostat reports electricity, gas, steam and air conditioning supply together. 

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                              Energy Union – Latvia 

In  terms  of  trade,  Latvia  is  a  net  importer  of  fossil  fuels.  The  trade  deficit  in  energy  products  has 
fallen from about 5.3% of GDP in 2006 to 3.2% in 2015. This is influenced mainly by the falling prices 
on fossil fuels and reduced oil import. Conversely, the trade deficit in gas has increased.  

(source: Eurostat) 

2.  Energy security, solidarity and trust 

2.1. Energy Mix 

With a 36.4% share of renewable energy in the gross inland energy consumption of primary products 
in 2015, Latvia has the third highest share of renewables in the energy mix in the EU (after Sweden 
and  Finland).  It  is  considerably  higher  than  the  EU  average  (13%).  Petroleum  products  and  natural 
gas  also  played  an  important  role  in  gross  energy  consumption  in  2015  with  a  share  of  35.2%  and 
26% respectively. In comparison to the average mix in the EU, Latvia's energy mix has also a much 
lower share of solid fuels (1.1% vs 16.2%).  

(source: Eurostat) 

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                              Energy Union – Latvia 

2.2. Import dependency and security of supply 

51% of Latvia's primary energy is coming from imports, slightly less than the EU average. This is due 
to the high importance of renewables in the energy mix.  

Net import dependency of Latvia decreased between 2005 and 2015, more than in the majority of 
Member  States.  It  was  supported  by  increase  in  indigenous  renewable  energy  production, 
particularly  in  heating  sector,  and  reduction  in  energy  consumption  in  2015,  compared  to  2005. 
However,  Latvia  was  exclusively  dependent  on  Russian  natural  gas  supplies  until  the  Klaipeda 
terminal  in  Lithuania  became  operational.  As  of  April  2017  actual  deliveries  of  natural  gas  from 
Lithuania  to  Latvia  started  both  for  local  consumption  and  for  storing  in  the  Inčukalns  natural  gas 
underground storage facility. During the first 5 months the total delivered amount from Lithuania to 
the Latvian natural gas transmission system reached 1.42 TWh 

(source: Eurostat) 

The only functioning natural underground gas storage facility (UGS) in the eastern part of the Baltic 
Sea  region  (including the  three Baltic  States  and  Finland) is  located in  Inčukalns,  Latvia.   Due  to  its 
capacity  largely  exceeding  domestic  demand,  Latvia  comfortably  fulfils  requirements  of  the  EU 
Regulation on Security of Gas Supply related to ability of Member States to satisfy total gas demand 
during a day of exceptionally high gas demand - up to 294 000 MWh per day. UGS Inčukalns is used 
to supply gas in winter also to neighbouring countries and contribute to the security of supply and 
functioning of the regional market in the Baltic region. 

4 

 
 
 
                              Energy Union – Latvia 

 (source: gas coordination group) 

3.  Internal market 

3.1. Interconnections and wholesale market functioning 

3.1.1.  Electricity 

 (source: EC based on ENTSO-E 
scenario outlook and adequacy 
forecast 2014) 

(sources: EC services based on Eurostat for the left graph  and based on 
Platts and European power exchanges for the right graph) 

Latvia  is  part  of  the  Nordic  and  Baltic  wholesale  electricity  market.  The  interconnection  level5  for 
electricity in the Baltic States increased to around 10% after the Estlink2 interconnection with Finland 
entered into operation in 2014. Once the LitPol Link (connecting Lithuania and Poland) and NordBalt 
(connecting  Lithuania  and  Sweden)  began  operating,  the  interconnection  capacity  rose  to  around 

5   The  interconnectivity  level  is  calculated  as  a  ratio  between  import  interconnection  and  net  generation 
capacities  of  the  country  (i.e.  the  2017  value  is  the  ratio  between  simultaneous  import  interconnection 
capacity [GW] and net generating capacity [GW] in the country at 11 January 2017, 19:00 pm as resulted 
from  ENTSO-E  Winter  Outlook  2016/2017).  For  the  three  Baltic  states  it  is  considered  the  common 
interconnection level with the rest of the EU. 

5 

 
 
 
 
 
                                                            
                              Energy Union – Latvia 

23.7%  for  the  three  Baltic  States  together.  The  launch  of  the  Estlink  2  interconnection  also 
contributed to the increased the connectivity of the Baltic States with the Nordic power market.  

According to data from the Nordic electricity exchange “Nord Pool Spot”, wholesale electricity prices 
improved 
in  Latvia  since  2013  have  experienced  a  decline  of  18.7%,  attributable  to  the 
interconnectivity of the Baltic region with its neighbouring regions.  

Latvia  is  also  among  the  Member  States  with  the  highest  power  generation  market  concentration 
with significantly lower degree of competition compared to the EU average. 

In  2015,  the  three  Baltic  States  agreed  on  a  common  strategic  goal:  the  synchronisation  of  their 
power  systems  with  the  European  network.  It  is  recognised  as  a  self-standing  objective  of  the 
reinforced BEMIP cooperation (Baltic Energy Market Interconnection Plan) as it would contribute to 
achieving a fully functioning and connected internal energy market and to increasing energy security 
in the electricity and gas sectors of the Baltic States. A dedicated BEMIP Working Group was set up 
supported by the Commission to work on the identification of the most cost-efficient synchronisation 
scenario that ensures system stability. The infrastructure element of the synchronisation of the Baltic 
States' electricity system with the European network has been included in the 3rd list of Projects of 
Common Interest. 

Several  projects  in  the  region  have  received  the  label  of  Projects  of  Common  Interest  (PCI)  in  the 
framework  of  the  trans-European  energy  networks  policy.  They  are  expected  to  contribute  to 
enhancing  security  of  supply,  effectiveness  of  operation  and  competitiveness  of  the  electricity 
markets  in  the  entire  Baltic  region.  The  transfer  capacity  on  the  Latvian  –  Estonian  border  will  be 
improved  and  the  existing  bottlenecks  will  be  removed  in  several  steps  by  2020,  2024  and  2025 
through the construction of the Estonia-Latvia 3rd interconnection and the enhancement of transfer 
capacity of internal lines within the Baltic States.  

3.1.2.  Gas 

In  2015,  wholesale  gas  prices  in  Latvia  were  higher  than  the  EU  average  prices,  inter  alia  due  to 
import  dependence  from  only  one  country  and  exclusive  rights  of  gas  supply  given  to  one  gas 
supplier.  

So far, Latvia has been fully and exclusively dependent on Russian gas imports. Nevertheless, other 
sources  of  supply  are  starting  to  become  available.  The  Klaipeda  LNG  terminal  in  Lithuania,  which 
opened in 2015, now provides an alternative source of gas for Latvian consumers. 

On 3 April 2017, the Latvian gas market has been opened to competition ensuring that instead of a 
single  supplier,  consumers  in  Latvia  can  now  choose  between  several  possible  suppliers  who  can 
freely access the system in line with EU rules. 

The vertically integrated gas company JSC Latvijas Gaze is set to be fully unbundled by end of 2017. 

6 

 
 
                              Energy Union – Latvia 

(source: ACER for the left graph and EC services based on Platts, gas hubs, Eurostat for the right graph) 

Enhancing the cross-border gas infrastructure between Latvia and Lithuania and reinforcement of the 
internal  gas  transmission  lines  in  Latvia  are  of  high  importance  for  improving  the  operation  of  the 
whole Baltic  gas  transmission system  operation  and  for  a  development  of  a  regional  gas  market in 
the  Baltic  Sea  region.  Also  the  project  on  Modernisation  and  expansion  of  the  Underground  Gas 
Storage in Inčukalns has been included in the list of the PCI projects. 

3.2. Retail electricity and gas markets 

3.2.1.  Electricity 

Latvia's  electricity  market  was  liberalised  in  2015  and  there  are  currently  15  electricity  suppliers. 
While facilitating investment and choice, the deregulation and the discontinuation of subsidies led to 
a  sharp  increase in household  electricity  prices  by  around 28  %  in 2015,  followed  by  a  decrease in 
2016 and in 2017. For industries, electricity prices remained stable.  

In  the  summer  2016,  an  electricity  tariff  reform  introduced  a  fixed  connection-capacity  payment 
component, favouring consumers with a constant use of their connection capacity. 

Smart electricity meters were introduced in Latvia in 2014. Around one third of electricity customers 
were  equipped  with  electricity  smart  meters  by  March  2017.  Their  share  is  expected  to  increase 
significantly to 80 % by 2020 and 100 % by 2023. 

(source: ACER) 

(source: Eurostat)  

(source: Eurostat) 

7 

 
 
 
 
 
 
 
 
                              Energy Union – Latvia 

3.2.2.  Gas 

Following the gas market liberalisation on 3 April 2017, also household consumers can now choose 
between  several  possible  suppliers.  Regulated  tariffs  are  to  remain  available  for  vulnerable 
consumers to guarantee that they can still access affordable energy. 

(source: ACER) 

(source: Eurostat)  

(source: Eurostat) 

3.2.3.  Market performance indicators 

According to the periodical survey of DG JUST, Latvian consumers are as satisfied with  the services 
received on energy retail markets at the same level as the EU average.  

(source: DG JUST survey) 

3.3. Energy affordability  

In  Latvia,  the  share  of  energy  in  total  expenditures  for  all  households  as  well  as  for  the  poorest 
households is among the highest in the EU (12.4% vs EU average of 8.6%).  

In 2015, around 29% of citizens of the most socially deprived households were not able to keep their 
homes adequately warm. It is 6% more compared to the EU average (23%) but almost 16% less than 
in 2005. Thus, Latvia is among the Member States with the largest improvement over the last decade 
in  this  area.  Nevertheless,  more  needs  to  be  done  in  coming  years  to  improve  the  energy 
affordability.  

8 

 
 
 
 
 
 
 
 
 
                              Energy Union – Latvia 

 (source: ad-hoc data collection of DG ENER based on HBS with the support of Eurostat and national statistics) 

4.  Energy efficiency and moderation of demand 

Latvia reduced its primary energy consumption by 2% from 4.36 Mtoe in 2014 to 4.27 Mtoe in 2015. 
Final  energy  consumption  also  decreased  by  2.8%  from  3.9  Mtoe  in  2014  to  3.79  Mtoe  in  2015 
showing a positive trend. Latvia energy consumption is already below the levels of primary and final 
indicative national 2020 targets. However, in the coming years up to 2020, Latvia is expected to keep 
up the national energy efficiency actions and programmes, in particular the ones under Article 7 of 
the Energy Efficiency Directive. 

(source: Eurostat) 

Although primary energy intensity decreased over the 2005-2015 period at a faster pace than that of 
the EU average, it is still the 7th highest in the EU. While energy intensity has decreased for services 
and residential sectors, energy intensity of Latvia's industry increased in the time period from 2005 
to  2015.  A  set  of  measures  were  introduced  in  Latvia  to  increase  energy  efficiency  in  the 
manufacturing industries, including support from the European Structural and Investment Funds. In 
2015, transport sector was the biggest energy consuming sector in Latvia representing a 30% share in 
the  total  final  energy  consumption,  which  is  below  the  EU  average  (33%).  The  share  in  energy 
consumption of the residential and services sectors in Latvia were above the EU average.  

9 

 
 
 
 
                              Energy Union – Latvia 

 (source: Eurostat) 

Energy  efficiency  financing  instruments  for  multi-apartment  buildings  are  becoming  more  available 
to  their  inhabitants  in  Latvia.  Achieving  further  energy  savings  in  the  residential  sector  is  an 
important investment priority under the European Structural and Investment Funds for the financing 
period 2014-2020, as only some 3 % of apartment buildings have been renovated in the period 2009-
2013. The framework for energy performance contracting is being developed (with an emphasis on 
residential and public buildings as well as public lighting), which is expected to create the functioning 
energy services market in Latvia. 

(source: Eurostat)  

(source: Eurostat)  

  (source: Odyssee database) 

Between  2005  and  2015,  the  final  energy  consumption  in  transport  in  Latvia  increased  by  1.0%, 
slower  than  the  1.8%  average  annual  increase  of  the  GDP.    The  evolution  of  transport  energy 
consumption  is  highly  correlated  to  the  trends  in  passenger  activity  rather  than  with  freight 
transport. 

10 

 
 
 
 
 
 
 
                              Energy Union – Latvia 

(source: Eurostat)  

        (source: Eurostat and DG MOVE pocketbook) 

The share  of  collective  passengers  land  transport  into  total  passengers'  transport decreased by  6% 
between 2005 and 2015, indicating a higher use of private transport means.  

(source: Eurostat)  

The  Latvian  transport  development  guidelines  determines  the  increase  in  energy  efficiency  as  an 
important indirect goal which aimed to be achieved through the majority of actions considered for a 
period of 2014-2020. In particular, railway electrification and Rail Baltic project aim at reducing  the 
current emissions level and increasing energy efficiency. In the same vein, the planned road quality 
improvement  measures  will  contribute  to  better  energy  efficiency  and  will  help  to  decrease  the 
amount of fuel consumed by road transport. 

5.  Decarbonisation of economy 

5.1. GHG emissions 

Latvia is on track to meet its 2020 target of greenhouse gas (GHG) emissions reduction outside the 
ETS by a 9 p.p. margin. Emissions outside the ETS are expected to increase by 8 % between 2005 and 
2020 whereas the target is not to increase more than 17 %. In 2015, such emissions account for 80 % 
of Latvia's total GHG emissions. More than half of this total is due to the transport and agriculture 
sectors.  

11 

 
 
 
 
 
 
 
 
 
       
 
                              Energy Union – Latvia 

(source: EC and EEA)   

 (source: EC and EEA)   

Preliminary accounts under the Kyoto Protocol for Latvia show overall emissions of +4.4 Mt CO2-eq. 
as  an  annual  average  in  the  period  2013-2015.  For  comparison,  the  annual  average  of  the  EU-28 
accounted  for  removals  of  -119.0  Mt  CO2-eq.  Latvia  is  one  of  four  EU  Member  States  which  show 
overall emissions in this preliminary accounting exercise. This is primarily due to Forest Management 
accounts showing emissions; Latvia is one of only three EU Member States with this accounting issue.  

Emissions by Deforestation are by far higher than very limited removals by Afforestation. While the 
initial share of emissions by Forest Management was comparatively small, it strongly overshadowed 
emissions by Deforestation in 2014, and then reduced to the same share in 2015. Overall, there is a 
changing pattern of emissions which is driven by varying emissions by Forest Management. All other 
reported activities remained constant over the course of the three-year period. 

12 

 
 
 
 
                              Energy Union – Latvia 

Note: Forest Management credits are capped and presented as yearly averages when the total Forest 
Management credits of the considered period exceed the simulated cap over the same period. 
(source: EC and EEA) 

CO2 emissions in transport and alternative fuelled vehicles 

Although  the  average  CO2  emissions  from  new  cars  in  Latvia  decreased  slightly  faster  than  EU 
average between 2005 and 2016, they are among the highest in the EU. In 2016 new cars in Latvia 
had CO2 emissions per kilometre of 128.9g CO2/km, against an EU average of 118.1 g CO2/km.  

 (source: European Environment Agency) 

Between 2015 and 2016, the number of charging points in Latvia has been almost stable reaching the 
amount of 72 points in 2016 as reported by the EAFO observatory. The implementation process for 
local charging network only started in 2016 and in two years it is expected to reach a number of 150 
points. 

13 

 
 
 
 
 
                              Energy Union – Latvia 

 (European Environment Agency)  

       (European Alternative Fuels Observatory) 

National Policy Frameworks under Directive 2014/94/EU on alternative fuels infrastructure have to 
establish targets, objective and measures for the development of the market of alternative fuels in 
the  transport  sector  and  the  deployment  of  the  relevant  infrastructure.  Latvia  has  submitted  its 
National Policy Framework as requested under article 3 of the Directive 2014/94/EU.  

A detailed assessment of the Latvian National Policy Framework in terms of its compliance with the 
requirements  of  Directive  2014/94/EU  on  alternative  fuels  infrastructure,  its  contribution  to 
achievement  of  long-term  energy and  climate objectives  of  the  Union  and  coherence of  its  targets 
and objectives in terms of cross-border continuity has been published as part of the Communication 
on  Alternative  Fuels  Action  Plans  (COM(2017)652)  and   the  related  staff  working  document 
SWD(2017)365.  

On April 25, 2017, Latvia approved the Alternative Fuel Development Plan for 2017-2020 which aims 
to  result  in  the  development  of  a  future  policy  of  alternative  fuels  in  certain  transport  sectors  to 
reduce greenhouse gas emissions. 

5.2. Adaptation to climate change 

Latvia is expected to finalise its National Adaptation Strategy (NAS) to climate change, including an 
Action Plan up to 2030,  by the end of 2017. Climate change risk an vulnerability assessments, cost-
benefit and cost-effectiveness assessments for adaptation measures were developed in 2017 for the 
most vulnerable sectors,  which include biodiversity and ecosystem services, forestry and agriculture, 
tourism  and  landscape  planning,  health  and  welfare,  building  and  infrastructure  planning,  civil 
protection and emergency planning.  The draft NAS includes an adaptation monitoring, reporting and 
evaluation system with 32 adaptation indicators and 38 climate change parameters. 

5.3. Taxes on energy and transport6 

The overall tax burden on energy and transport in Latvia amounts to 2.6% of GDP, slightly above the 
EU  average.  The  significant  increase  registered  from  2007  of  0.7  p.p.  is  due  both  to  a  higher  tax 
burden  on  heat  and  electricity  (0.4  p.p.)  and  transport  vehicles  (0.2  p.p.).  The  tax  burden  on 
transport fuel has in contrast remained broadly stable. 

6 There is no data on fossil fuel subsidies for Latvia. 

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Between 2009 until 2016, Latvia had a registration tax that took into account the CO2-emissions. As 
of  2017,  provisions  on  CO2-emissions  are  incorporated  in  annual  circulation  tax,  i.e.  the  Motor 
Vehicle  Operation  tax  (concerns  the  vehicles  with  first  registration  as  of  2009).  This  tax  is  paid 
annually according to the vehicle's emissions of CO2 g /km. For vehicles registered before 2009, the 
previous  tax  regime  still  applies  due  to  lack  of  data  and  reflects  the  mass  of  the  vehicle,  engine 
capacity (cm3) and engine power. The circulation tax is not applied on electric vehicles.  

(source: Eurostat) 

5.4. Renewable energy  

Latvia  has  historically  high  share  of  renewables  (large  hydro  and  biomass)  in  its  energy  mix.  The 
overall share of renewable energy in Latvia's final energy consumption reached 37.6% in 2015 which 
is 2.4 p.p. away from its 2020 target of 40%. The largest share of renewable energy was reached in 
the electricity sector (52.3%), followed by the heating and cooling sector (51.8%).  

 (source: Eurostat-SHARES) 

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                              Energy Union – Latvia 

(source: Eurostat-SHARES) 

In 2015,  the  share  of  support  for  renewable  energy and  fossil fuel based co-generation  in  national 
electricity prices in Latvia was the fifth highest in the EU for households and the fourth highest for 
industry.  Support  for  renewables  and  co-generation  is  based  on  a  complex  feed-in  tariff  system 
which also includes elements of a quota system and tenders. It is closed for new installations since 
2011. In 2017, a new provision was introduced requiring an examination of supported installations in 
view of avoiding over-compensation.  

On 1 January 2014, net-metering for electricity produced by self-consumers and injected into the grid 
through  a  small-scale  connection  (≤3*16A)  was  introduced.  Self-consumers  connected  to  the 
electricity grid are required to pay a grid use charge.  

In  the  heating  and  cooling  sector,  significant  investment  support  is  provided  by  using  the  EU 
structural Funds – in April 2017 a large investment programme for investments in energy efficiency 
and  the  use  of  renewable  energy  in  the  heating  sector  was  launched  (the  first  stage  financing 
projects to be finalised by end of 2020). Support from the EU Cohesion Fund is foreseen to reach EUR 
35 Mio. 

Main  support  scheme  for  the  increased  use  of  renewable  energy  in  transport  sector  is  a  blending 
obligation of biofuels into liquid transport fuels. Due to the high share of renewable energy in Latvia's 
electricity sector, support for increased use of renewable energy in transport sector is also supported 
by measures to improve the infrastructure for recharging of electric vehicles. 

Due to a consistent deployment of renewables since 2005, it is estimated that in 2015 Latvia avoided 
about  7.5%  of  the  fossil  fuel  in  gross  inland  consumption  and  about  6.1%  of  GHG  emissions  at 
national level7. 

7 Avoided GHG emissions mentioned here have a theoretical character as the contributions do not necessarily 

represent net GHG savings not are they based on life-cycle assessment or full carbon accounting. 

16 

 
 
 
                                                            
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 (source: EEA) 

5.5. Contribution of the Energy Union to better air quality 

Air  quality  in  Latvia  is  reported  to  be  generally  good,  with  exceptions.  Nevertheless,  for  the  year 
2013,  the  European  Environment  Agency  estimated  that  about  2,080  premature  deaths  were 
attributable to fine particulate matter (PM2.5) concentrations and over 110 to nitrogen dioxide (NO2) 
concentrations8. 

For NO2, Latvia reported exceedance of the binding EU air quality standard9. For the year 2015, Latvia 
reported exceedance of the limit value for NO2 in 1 out of the 2 air quality zones in Latvia as shown in 
the figure below10.  

(Source: EEA) 

The health-related external costs from air pollution in Latvia have been estimated to be more than 
EUR 748 million/year (income adjusted, 2010), which includes the intrinsic value of living a healthy life 

8   European  Environment  Agency,  2016,  Air  Quality  in  Europe  –  2016  Report,  table  10.2.  The  report  also 

includes details as regards the underpinning methodology for calculating premature deaths.    

9   Directive 2008/50/EC of the European Parliament and of the Council of 21 May 2008 on ambient air quality 

and cleaner air for Europe, OJ L 152, 11.6.2008, p.1-44 

10   Compliance data as reported by the Member States as part of their official annual air quality report for the 
calender  year  2015  (available  on  the  European  Environment  Agency's  (EEA)  Eionet/Central  Data 
Repository), http://cdr.eionet.europa.eu/lv/eu/aqd  

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without premature death as well as the direct costs to the economy such as healthcare costs and lost 
working days due to sickness caused by air pollution11. 

The  Energy  Union  can  substantially  contribute  to  addressing  these  air  quality  problems  through 
measures reducing emissions of both GHG and air pollutants such as PM and nitrogen oxides (NOx) 
from major contributing sectors such as (road) transport, energy production, industry and residential 
heating (e.g. stoves and boilers) as shown in the figure below12. 

(Source: EEA. This table reflects only sources of primary PM2,5 emissions.)  

6.  Research, innovation and competitiveness  

6.1. Research and innovation policy 

Priorities  in  energy  research  in  Latvia  include  regional  energy  sector  analysis  and  optimisation, 
management  of  energy  savings,  energy-related  environmental  policy,  renewable  energy  resources, 
energy efficiency, electrical networks and electricity supply systems clean fossil energy technologies, 
electrical devices and machines, advanced materials and solid-state physics. 

Public  funding  for  energy-related  research  is  managed  under  the  National  Research  Programme 
LATENERGI,  which had a  reduction in  budget  in  the financial  period  2014-2017  compared  to  2010-
2013: from EUR 4.1 million to EUR 2.25 million. 

 Latvia  participates  to  varying  degrees  in  five  (out  of  fourteen)  temporary  working  groups  for  the 
implementation of the integrated Strategic Energy Technology (SET) Plan, and is generally an active 
contributor to the ongoing work of the SET Plan. 

Participation  in  the  EU  financed  projects  plays  important  role  in  the  viability  of  the  Latvian 
organisations  involved  in  energy  research.  Regarding  the  Horizon  2020  programme,  Latvia  has 
received so far 0.3% of the EU contribution devoted to the 'secure, clean and efficient energy' part of 
the programme. As of September 2017, 42 participations from Latvian organisations energy projects 
have been awarded EUR 6 million in Horizon 2020. This includes a grant of over EUR 0.6 million to 
Riga's Technical University for its participation in project RealValue (smart electric thermal storage) 

11   See also the EU Environmental Implementation Review Country Report for Latvia, SWD(2017)50 final of 

3.2.2017 

12   National emission data as reported by the Member States to the EEA (available on the EEA's Eionet/Central 

Data Repository), http://cdr.eionet.europa.eu/lv/eu/nec_revised 

18 

 
 
 
                                                            
 
                              Energy Union – Latvia 

and six grants totalling EUR 1.3 million to Latvian beneficiaries participating in the project SUNShINE 
(energy efficient buildings).  

6.2. Investments and patents in the Energy Union R&I priorities  

The European Commission does not have any data regarding the total public (national) investments 
in the Energy Union R&I priorities.  

Private  investment  in  the  Energy  Union  R&I  priorities  in  2013  was  estimated  at  EUR 1.4  million 
(0.01% of the private R&I investment in Energy Union R&I priorities in the EU). The focus was on the 
Renewables R&I priority of the Energy Union, which received 69% of the investments. The remaining 
31% was dedicated to the Efficient Systems priority. 

In 2013, the most recent year for which complete patent13 statistics are available, 6 companies and 
research organisations based in Latvia filed 16 patents in low-carbon energy technologies (0.25% of 
the EU total). The focus was on Sustainable transport (39%), followed by Renewables (26%) and the 
Efficient Systems priority (16%). 

In  2013,  both  private  R&I  investments  and  patents  in  Energy  Union  R&I  priorities  were  lower  than 
the EU average when normalised by GDP and by population respectively. In the period 2007-2013, 
private  R&I  investments  decreased  by  34%  per  year  on  average,  contrary  to  the  EU  indicator  that 
increased  by  6% on average. For  the same period,  the number of patents in the Energy Union  R&I 
priorities increased by 14% per year on average, a rate of increase just under the EU average (15%). 

(Data  sources:  Patent  data  based  on  the  European  Patent  Office  PATSTAT  database14.  Private  investment  as 
estimated by JRC SETIS. Detailed methodology available from the JRC15.) 

6.3. Competitiveness 

In  2014,  the  real  unit  energy  costs  (RUEC)16  in  Latvia  (19.3)  were  above  those  at  the  EU  average 
(15.3). These costs were more than two times higher than those in the US but below those in Japan, 

13   In  the  context  of  this  document,  the  term  'patent'  refers  to  patent  families,  rather  than  applications,  as  a 
measure  of  innovative  activity.  Patent  families  include  all documents  relevant to  a  distinct  invention (e.g. 
applications to multiple authorities), thus preventing multiple counting. A fraction of the family is allocated 
to each applicant and relevant technology. 

14 https://www.epo.org/searching-for-patents/business/patstat.html#tab1  
15 https://setis.ec.europa.eu/related-jrc-activities/jrc-setis-reports/monitoring-ri-low-carbon-energy-technologies  

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                              Energy Union – Latvia 

China and Russia. This can be partly explained by the presence of energy intensive industries in Latvia 
(e.g. cement and steel industries). The electricity prices paid by industrial customers in Latvia are at a 
similar  level  as  the  EU  and  OECD  averages.  Gas  prices  for  industrial  consumers  are  below  the  EU 
average but higher than the OECD averages. 

(source: ECFIN) 

                   (source: Eurostat and IEA) 

Regarding the competitiveness in wind and solar energy, Latvia is performing around the EU average 
for solar energy and well below for wind energy as indicated by a revealed comparative advantage 
below  117.  Nonetheless,  the  Latvian  economy  is  specialised  in  power  electronics  for  solar 
photovoltaic  panels  and  the  manufacturing  of  wind  turbine  towers.  The  relative  trade  balance18 
shows that Latvia is a net exporter of solar energy components, in particular power electronics and 
has balanced position in terms of wind technologies and components, due to a relative trade surplus 
in  towers  for  wind  turbines.  The  revealed  comparative  advantage  in  both  sectors  has  not  changed 
significantly since 2005.  

16   This indicator measures the amount of money spent on energy sources needed to obtain one unit of value 

added. 

17 The RCA index for product "i" is defined as follows: RCAi =

Xj,i
∑ Xj,i
i
Xw,i
∑ Xw,i
i

 where X is the value of exports, and j is 

the country and w is the reference group, the World economy. 2005 refers in the text to the indicator average 
over the 2000-2009 period, while 2015 represents the average over the 2010-2016 period. The same applies for 
the RTB indicator - see below. 
18 The RTB indicator for product "i" is defined as follows: 𝑅𝑇𝐵𝑖 =
exports and 𝑀𝑖 imports. 

 where 𝑋𝑖 is the value of product's "i" 

𝑋𝑖−𝑀𝑖
𝑋𝑖+𝑀𝑖

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                              Energy Union – Latvia 

7.  Regional and local cooperation 

Latvia is part of the Baltic Energy Market Interconnection Plan (BEMIP). BEMIP’s main objectives have 
been to develop a regional energy market between the EU Member States in the Baltic Sea region 
and  integrating  it  fully  into  the  EU's  energy  markets  thus  increasing  security  of  supplies.  BEMIP 
projects  have  been  part  of  the  European  Economic  Recovery  Plan  (EERP)  and  the  Trans-European 
Energy  Networks  Programme.  BEMIP  projects  have  also  been  funded  through  the  EU's  structural 
funds, including the European Regional Development Fund (ERDF) and the Cohesion Fund (CF). Many 
infrastructure projects of the BEMIP Priority Corridors for gas and electricity are supported through 
CEF  co-funding  amounting  to  534.3  million  euro.  In  the  framework  of  the  societal  challenge  for 
secure, clean and efficient energy of the Horizon 2020 programme, 16.9 million euro is allocated to 
participants from the Baltics to stimulate research and innovation in this field. 

The  Baltic  region  was  the  first  region  that  adopted  in  2012  a  joint  Risk  Assessment  of  the  risks 
affecting  the  security  of  gas  supply  in  the  region  under  the  Regulation  on  Security  of  Gas  Supply 
which is currently being updated19. The three Baltic countries and  Finland are  working together on 
the preparation of a joint Preventive Action Plans and an Emergency Plan for the region.  

The EU macro-regional strategy for the Baltic Sea Region in which Latvia takes part can be used as a 
basis  for  regional  cooperation  on  energy.  Latvia  is  a  co-coordinator  of  the  policy  area  'Energy'. 
European  Territorial  Cooperation  –  'Interreg'  –  –under  EU  cohesion  policy  also  provides  further 
opportunities for cross-border, transnational and interregional cooperation, including in the Energy 
Union areas. 

Cities and urban areas have a key role in the energy and climate challenge. The Urban Agenda for the 
EU,  established  by  the  Pact  of  Amsterdam  in  May  2016,  better  involves  cities  in  the  design  and 
implementation of policies, including those related to the Energy Union. It is implemented through 
Partnerships, in which the Commission, Member States, cities and stakeholders work together on a 
number  of  important  areas,  including  on  Energy  Transition,  Urban  Mobility,  Air  Quality,  Climate 
Adaptation  and  Housing.  Latvia  is  participating  in  the  partnerships  on  Energy  Transition,  with 
Vidzeme Region as member, and Housing, with the country as well as the city of Riga as members. 

19   Regulation (EU) No 994/2010 

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                              Energy Union – Latvia 

By  2016  on  Covenant  of  Mayors,  the  sustainable  energy  action  plans  delivered  by  19  Latvian  
municipalities had been assessed. Overall, these 19 municipalities cover about 1.4 million inhabitants 
representing  around  68  %  of  the  total  population  in  Latvia.  All  together,  these  municipalities 
committed to reduce by 2020 the GHG emissions by 49.7% (as compared to 1990 baseline).  

(source: JRC 2016. Notes: SEAP=sustainable energy action plan, GHG=greenhouse gas emissions) 

In  Latvia,  by  September  2016,  1  city  (covering  0.01  million  inhabitants)  has  committed  to  conduct 
vulnerability and risk assessment and develop and implement adaptation plans in the framework of 
the Covenant of Mayors for Climate and Energy. 

8.  Cohesion policy and EU clean energy investments  

EU  cohesion  policy  makes  a  key  contribution  to  delivering  the  Energy  Union  objectives  on  the 
ground, including important investment possibilities to implement energy policy objectives in Latvia 
which are complemented by national public and private co-financing, aiming at optimal leverage. It 
also  ensures  integrated  territorial  solutions  to  energy  and  climate  challenges,  supports  capacity 
building and provides technical assistance. 

is 

investing  some  EUR  459  million 

in  energy  efficiency 
Over  2014-2020,  cohesion  policy 
improvements  in  public  and  residential  buildings  and  in  enterprises,  as  well  as  in  in  high-efficiency 
cogeneration and district heating, renewable energy and smart energy infrastructure (in relation to 
local gas and electricity connections for enterprises in industrial zones and connections of degraded 
territories to main networks of engineering communications of the city) in Latvia. Cohesion policy is 
also  investing  significantly  in  R&I  and  in  SME  competitiveness  in  Latvia,  based  on  the  national 
strategy for smart specialisation. For Latvia, the strategy includes a focus on smart energetics. At this 
stage,  the  allocations  foreseen  for  investments  in  R&I  and  adoption  of  low-carbon  technologies  in 
Latvia are not specified, but should become available in line with the evolving content of the smart 
specialisation  strategy.  A  further  estimated  EUR  630  million  is  invested  in  supporting  the  move 
towards an energy-efficient, decarbonised transport sector. 

22 

 
 
 
                              Energy Union – Latvia 

 (source: DG REGIO) 

These  investments  are  expected to  contribute  to  around 14,000  households  with improved energy 
consumption  classification,  a  decrease  of  around  50,100,000  kWh  per  year  of  primary  energy 
consumption  of  public  buildings  and  around  40  MW  of  additional  capacity  of  renewable  energy 
production, as well as to around 300 km of reconstructed or upgraded railway lines and 8 km of new 
or  improved  tram  lines.  Overall,  the  EU  cohesion  policy  investments  in  Latvia  over  2014-2020  are 
expected to contribute to an estimated annual decrease of GHG emissions of around 63,000 tonnes 
of CO2eq. 

For example, the Energy Efficiency Programme for Multi-Apartment Residential Buildings 2007-2013 
was a traditional grant scheme, with partial reimbursement of investment costs). Total investments 
represented  EUR  133  million,  of  which  public  funding  from  the  European  Regional  Development 
Fund  (ERDF)  EUR  101  million  (grants).  The  average  reduction  of  heat  consumption  of  supported 
apartment  buildings  has  been  46%  as  comparing  to  a  planned  15%,  due  to  fact  that  project 
implementers have chosen multi-insulation works, thus achieving greater savings. For example, the 
project "Energy efficiency improvement measures for Multi-Apartment Residential Building in Venta 
Street  2,  Liepaja"  (total  cost  EUR  0.285  million,  including  EUR  0.143  million  ERDF)  resulted  in  total 
heat energy saving after the renovation of 74 kWh /m2 (53%). The total heat energy consumption of 
the building after renovation is 66 kWh/m2 . The project duration was 2 years.  

Another  example  is  the  project  "Improvement  of  Heat  for  Multi-Apartment  Residential  Building  in 
Bauskas  Street  51,  Riga  (total  cost  EUR  0.156  million,  including  EUR  0.064  million  ERDF),  which 
resulted in total heat energy savings after the renovation of 66 kWh/m2 (53%). The total heat energy 
consumption  of  the  building  after  renovation  is  60.3  kWh/m2  and  this  is  reflected  into  a  strong 
reduction of heating costs for apartment owners. The project duration was also 2 years. 

The Energy Efficiency Programme for Multi-Apartment Residential Buildings 2014-2020 includes both 
grants  and  financial  instruments.  Public  funding,  of  which  85%  from  the  European  Regional 
Development Fund (ERDF), represents EUR 166 million and includes grants of EUR 121 million. Total 
investments will be around EUR 300 million, supporting an estimated 1,030 projects, with the goal of 
increasing  energy  efficiency  in  multi-apartment  buildings  leading  to  an  energy  consumption  (for 
heating) of less than 90 kWh/m2 per year after renovation. 

23 

 
 
 
                              Energy Union – Latvia 

As  another  example,  the  project  on  environmentally  friendly  mobility  in  Latvia  involves  the 
establishment of charging infrastructure for electric vehicles, aiming to create a country-wide Latvian 
network of 150 electric vehicles charging points in line with the EU’s alternative fuel infrastructure 
requirements  (an  estimated  747  electric  vehicles  registered  for  use  across  Latvia  by  2023).  Total 
investment  of  EUR  7.8  million,  of  which  the  European  Regional  Development  Fund  (ERDF)  EUR  6.6 
million. 

Through  its  support  to  sustainable  transport  systems,  the  Connecting  Europe  Facility  (CEF)  also 
contributes to the goals of the Energy Union. Following Latvian participation in the CEF  – Transport 
2014-2015  Calls,  the  Latvian  action  portfolio  comprises  8  signed  grant  agreements,  allocating  EUR 
254.7 million of actual CEF Transport Funding to Latvian beneficiaries (state-of-play February 2017)20. 
The  transport  mode  which  receives  the  highest  share  of  funding  is  rail  (95.8%  of  actual  funding). 
Latvia is participating in two multinational, cross-border rail actions, which are both dealing with the 
Rail Baltica line, the most significant and strategic Global Project of the North Sea-Baltic Corridor. The 
Latvian  activities  of  these  two  CEF  actions  cover  preparatory  and  technical  studies  combined  with 
land acquisition and with the first set of works. A smaller share of the Latvian portfolio constitutes 
two multi-beneficiary air actions concerning the deployment of the SESAR Pilot Common Project, two 
multi-beneficiary maritime actions concerning hydrographic surveys for the Baltic Motorways of the 
Sea,  as  well as  one  mono-beneficiary  air  action  contributing  to  the  modernisation  of  the  air  traffic 
management (ATM) system in Latvia.21 

20 Note that European Economic Interest Groups and International Organisations are excluded from the analysis. 
21 Source: INEA 

24