Translated using ChatGPT service.
On April 11, 2024, the Saeima adopted amendments to the Electricity Market Law aimed at reducing the cost burden for establishing new high-capacity distribution system connections, thereby promoting business development and innovation.
The changes introduce a principle of cost-sharing for connection construction, where half of the costs are covered by the user and the other half by the system operator, AS “Sadales tīkls,” for high-capacity electricity users in the medium voltage (6 – 20 kilovolts (kV)) network and 0.4 kV network connections with a capacity (input protection device size) above 100 amperes (A).
Previously, this cost-sharing principle was only applied to low-capacity connections (up to 100 A). For higher-capacity connections, users had to prepay 100% of the connection establishment costs, but during the connection usage period, a reduced service fee was applied for efficient load usage, allowing users to recover their investment over a five-year period. However, if users opted to install solar panels, they lost the right to receive the reduced fee, even if the efficient load criterion was met.
“By reducing the cost burden for establishing a new connection and starting operations for entrepreneurs, a significant step is taken to improve the availability of electricity system connections, as well as the development of high-capacity manufacturing connections and the overall investment environment,” emphasizes Minister of Economics Viktors Valainis.
The cost-sharing solution for construction will encourage the abandonment of other, less efficient and environmentally harmful energy resources. Additionally, it will promote the increase of connected consumption capacity and distributed electricity by the electricity distribution system operator, resulting in more efficient use of the existing electricity supply system and its capacities.
AS "Sadales tīkls" points out that this approach ensures the principle of equality and is a step towards promoting the electrification of the economy. “A similar approach is already successfully working in Lithuania. This innovation will not only ensure the principle of equality for all customers but also create a more favorable investment environment and promote electricity consumption, which is currently quite low in Latvia compared to other European countries," emphasizes "Sadales tīkla" Board Chairman Sandis Jansons.
The revised approach intends to gradually phase out the efficient load usage solution, which is currently outdated and administratively complex. This solution will no longer be applied to new connections after May 1, 2024, when the approved amendments to the law come into force.
It is intended that the user must start using the connection immediately after its establishment and maintain the agreed connection capacity for at least five years without reducing the allowed load (connection capacity). These conditions require end-users to carefully choose the capacity of the connection to be established. Similar restrictions exist in neighboring countries; for example, in Lithuania, the installed allowed load of a connection must be used for 10 years.
Additionally, the Saeima approved amendments proposed by the Ministry of Climate and Energy (KEM) allowing the electricity transmission system operator to apply a tariff discount for the transmission system service in the case of introducing new high-capacity connections. More information is available on the KEM website at www.kem.gov.lv/lv.