This is an extract from a recent report “Energy Policy Review Lithuania 2025” by IEA.
Energy independence is central to Lithuania’s energy policy, and the country has taken important steps to reduce its dependency on energy imports, including ceasing all imports from Russia since March 2022. However, imported fossil fuels still account for over half of end-use energy consumption. To address the dependence on fossil fuels imports, Lithuania has set ambitious targets for renewable electricity expansion to enable electrification and reduce energy imports. Lithuania also sees great opportunities for production of hydrogen and its derivatives to use in new domestic industries and for export. The country is facing a rapid and significant transition of its energy system to enhance security and reduce GHG emissions. For this to be successful, energy policy must balance all aspects of a people-centred transition, including affordability and industrial competitiveness.
Energy security and climate
Since regaining national independence in 1990, Lithuania has pursued a strategy of energy security, gradually reducing its reliance on energy imports from Russia. With the completion of the Butinge oil terminal in 1999, Lithuania was able to diversify its crude oil imports. Natural gas dependency in heating declined through a shift to bioenergy in district heating production, and with the commissioning of the Klaipėda liquefied natural gas (LNG) terminal in 2014, Lithuania diversified its gas imports. Since the Ignalina nuclear reactors were shut down in 2004 and 2009, Lithuania has relied heavily on electricity imports, but recent expansions in wind and solar power have increased the share of domestic production in total electricity supply. Lithuania has also diversified its electricity imports through new interconnections. After Russia’s full-scale invasion of Ukraine and the subsequent energy crisis in 2022, Lithuania was one of the first European countries to completely end imports of electricity, gas and oil from Russia, without major disruptions. Furthermore, in February 2025, the electricity systems of the Baltic states were synchronised with and disconnected from the system controlled by Russia, thus further enhancing national security.
National Energy Independence Strategy
Energy independence is seen as essential for national security in Lithuania – a perspective that is clearly present in the National Energy Independence Strategy. The NEIS has been updated twice since it was first approved in 2012 to reflect new challenges and goals for the energy transition. The third NEIS, adopted by Lithuania’s parliament (the Seimas) in June 2024, presents an ambitious vision for the future energy system, formulated in four strategic goals to: 1) ensure energy security, 2) achieve climate neutrality, 3) transition to an electricity economy to develop a high value-added energy industry, and 4) ensure energy resources are available to consumers in a fair and affordable way. The NEIS is based on a scenario analysis for the development of the energy system. Lithuania assessed three scenarios, all projecting strong growth in electricity generation and demand, but with different assumptions on the development of new domestic industries. Based on the analysis, the government developed a Roadmap Scenario that aims to ensure an optimal balance between energy independence, GHG emissions reductions, hydrogen and derivatives exports, and the overall cost of the energy system.
In the Roadmap Scenario, electricity consumption is projected to grow sixfold. Onshore and offshore wind power and solar PV will dominate electricity production. Access to surplus renewable electricity will enable the development of hydrogen and its derivatives, such as green synthetic fuels, methanol and ammonia. To address variability in renewable energy generation, the energy system will need more balancing capacity, reserve systems and flexible demand. New nuclear energy from the deployment of advanced SMRs also contributes to growth in electricity generation in the Roadmap Scenario. With electrification, imported fossil fuels will be replaced by domestically produced electricity, reducing Lithuania’s reliance on energy imports. Lithuania aims to turn the large electricity import dependency to net exports by 2030, or already by 2028 according to statements from the government in early 2025. By 2050, Lithuania aims to not only be fully energy independent, but also to be an exporter of electricity as well as of hydrogen and its derivatives. Based on the status of domestic energy supply and imports in 2024, this is a huge undertaking. Lithuania will implement the objectives and targets set out in the NEIS through the National Energy and Climate Plan (NECP), which was updated in 2024. To monitor progress, the NEIS contains a list of 29 indicators for 2030, 2040 and 2050, with clearly stated reporting responsibilities. Funding for the implementation of the NEIS will come from state and municipal budgets, EU funds, and other international sources, as well as private funding. The strategy will be updated in 2030, and thereafter every five years.
Climate targets and policy
In 2021, Lithuania set national GHG emissions reduction targets for 2030, 2040 and 2050 as part of its National Climate Change Management Agenda (2021-2030). Compared to the GHG emissions in 1990, Lithuania targets a 70% reduction by 2030 and an 85% reduction by 2040 to reach net zero emissions by 2050. The 2050 target includes the use of carbon capture, utilisation and storage (CCUS) technologies to offset GHG emissions in sectors where technological options for zero GHG emissions may not be available. In 2023, total GHG emissions were 18.3 million tonnes carbon dioxide equivalent (Mt CO₂-eq). This was 62% lower than emissions in 1990, with a notable 42% drop in 1992 following the collapse of the Soviet Union. This early decline positions Lithuania more favourably to achieve its 2030 target. Since 2010, emissions have been more stable, though with a visible decline in the last few years. The transport sector has become the largest emitter, contributing 34% of total emissions in 2023. In addition to emissions, the land use, land-use change and forestry (LULUCF) sector is an important carbon sink in Lithuania. In 2022, the LULUCF sector contributed 6.4 Mt CO₂-eq. of negative emissions. In the LULUCF Regulation (EU) 2018/841, the European Union sets a goal for its member states to increase potential removals the LULUCF sector, thus creating incentives for the sustainable use of agricultural and forest land and to restore damaged ecosystems.
Funding and affordability
The NECP foresees a need for EUR 18.5 billion of funding to implement Lithuania’s energy and climate objectives and targets in the period 2021-30, EUR 7.9 billion of which will come from national public funds and EU funds. Energy efficiency investments, particularly buildings renovations, accounts for the largest share of necessary investments, followed by investments in renewable energy. So far, EUR 4.8 billion in public money has been allocated for existing measures, of which over half came from the EU Structural Funds and EU Municipal Development Fund. A significant amount from the public funding will continue to come from the European Union, including the ETS2 fund – which will become operational in 2027 – and the Social Climate Fund. In addition, private investors have provided EUR 3.5 billion of the existing funds for existing measures. Of the additional funds needed, a larger share is set to come from private investors, which will require sufficient incentives for market players, including households, small-scale industries and large companies. There is potential for Lithuania to strengthen tax policy to both raise more money for the transition and incentivise emissions reductions. According to the OECD, around half of Lithuania’s GHG emissions are subject to carbon pricing.
Public funding for energy research and innovation in Lithuania totalled EUR 17.5 million in 2023, up from EUR 13.7 million in 2022. Over the five-year period 2019-23, Lithuania spent around EUR 70 million on a variety of technologies. Energy-related expenditure accounted for 13% of the total government research, development and demonstration budget in 2022. The NEIS highlights the importance of energy research and innovation in contributing to the energy transition and to economic growth. Priority areas include renewable energy, smart and distributed energy generation, new district heating and cooling systems, SMRs, CCUS, power-to-gas and gas-to-power, power system operations, electricity market development, and energy security and cybersecurity. This is a long list, indicating a need for further prioritisation. One of the NEIS’ targets is to establish at least one energy technology development centre by 2030 to promote research and development and provide a platform for collaboration between academia and business. Lithuania also has several innovation clusters and programmes, including the Biofuels Development Cluster to advance Lithuania’s biomass industry, the Smart Green City cluster to promote eco-innovation and a circular economy, and the Photovoltaics Technology Cluster to strengthen Lithuania’s status as the main solar technology exporter in the region.
End-use sectors
Transport and buildings (including services) are the largest consuming end-use sectors in Lithuania, each accounting for around 40% of TFEC respectively, with industry consuming the remaining 20%. In 2023, TFEC was 218 petajoules (PJ), up 10% from 2010. The growth came from the transport sector, where energy demand has increased by 44% since 2010, while energy consumption in the buildings and industry sectors has been stable. However, if including the energy transformation in refineries and fuels used for non-energy purposes, particularly in fertiliser production, industrial energy demand increases significantly.
As outlined in its NECP, Lithuania aims to cap its final energy consumption at 184 PJ by 2030, representing a 16% reduction compared to 2023 levels. Energy consumption is set to decrease further to 166 PJ by 2040 and 151 PJ by 2050. Achieving these reductions will require greater energy savings than the EU average, as determined in the EU EED, necessitating policies that drive energy savings across all sectors. However, these targets exclude energy demand from green hydrogen production and new industrial developments, which are expected to become significant electricity consumers. Distinguishing between efficiency improvements in existing energy consumption and demand from new users is a good way to ensure that energy efficiency targets remain relevant in a changing system.
Major policies related to energy efficiency improvements and decarbonisation of the industry sector lie under the EED, which Lithuania implemented through the Law on Energy Efficiency. The law requires large enterprises meeting pre-determined size criteria to carry out energy audits every four years. The Lithuanian Energy Agency (LEA) oversees the energy auditing process by managing the list of certified energy auditors, ensuring the compliance of the process with the standards requirements and improving the quality of the audits. Based on audits from 2021 to 2023, LEA estimated the energy savings potential to around 4-9% for the companies required to do the energy audits, which equalled around 2-5% of the annual energy consumption in industry
Electricity
Lithuania’s electricity supply has undergone several major transitions. Since the closure of the Ignalina nuclear reactors in 2005 and 2009, Lithuania has been highly dependent on electricity imports. However, rapid growth in electricity generation from wind and solar in recent years has resulted in greater self-sufficiency, and net imports fell below half of total electricity supply in 2024. In addition to renewables, Lithuania has several combined cycle natural gas heat and power plants, the biggest of which is the 455 MW plant in the Elektrėnai Complex, which is also an important source of flexibility. With new interconnections with Poland and Sweden in 2016, Lithuania diversified its electricity imports and reduced reliance on other countries. Electricity trade with Belarus ceased on 3 November 2020 due to safety concerns regarding the Ostrovets District nuclear power plant as set out in Lithuanian law (XIII-451 and XIII-306). Furthermore, thanks to the new interconnections and increased domestic electricity generation, Lithuania successfully ceased all electricity imports from Russia in 2022, and in February 2025, the Baltic states synchronised with the continental European grids, thus taking another step towards a more independent energy system.
The electricity system is now facing its next big transition. Driven by the expansion of wind and solar, electricity generation increased from 4.5 TWh in 2022 to 7.5 TWh in 2024. The NEIS sets a target for Lithuania to be a net exporter of electricity by 2030, and the new government wants to reach this target by 2028. Meanwhile, electricity demand is expected to grow to 24 TWh in 2030, almost doubling in eight years. In the NEIS Roadmap Scenario for 2050, electricity demand and generation increase to 74 TWh, reshaping the entire system. Litgrid is the transmission system operator (TSO) of the Lithuanian electricity system. The Law on Electricity, last amended in 2012, specifies the TSO as the responsible party for a stable and reliable operation of the electricity system. It includes performing national balancing operations and the provision of system services. Litgrid also regularly assesses the adequacy of Lithuania’s electricity system. On the distribution level, there are three active system operators in Lithuania, with Energijos Skirstymo Operatorius AB (ESO) in a dominant position serving 1.6 million customers throughout the country, which is the vast majority.
Lithuania sees low electricity prices as an enabler of green hydrogen production at a competitive price. Retail prices for households in Lithuania are below the EU average while similar to neighbouring Baltic countries and higher than most of the Nordic countries. Prices for both households and industry spiked during the energy crisis and returned to lower levels in 2023 but are higher than before the energy crisis. Following the Baltic states’ desynchronisation from IPS/UPS in February 2025, electricity prices have surged due to the reduction of 500 MW capacity available from Poland (now kept in reserve) and damage to the Estlink 2 interconnector in December 2024, which cut off access to significantly cheaper Finnish electricity, raising concerns about energy affordability and infrastructure security in the region. The Easlink 2 is expected to return to commercial use in July 2025. The Law on Energy of Lithuania regulates price spikes of more than 40% by providing a partial compensation of the cost of electricity for household consumers from the state budget. In addition to the wholesale price and value-added tax, Lithuania includes a Public Service Obligation levy in the electricity retail price to raise the necessary funds, mainly to support renewable electricity generation. The Public Service Obligation budget was reduced significantly from EUR 95 million in 2020 to EUR 7 million in 2025.
Fuels
Lithuania’s energy strategy is based on a transition away from its current oil and gas import dependency towards domestically generated renewable electricity. Fossil fuels currently make up nearly 60% of total energy supply, which highlights the necessity for Lithuania’s energy sector to undergo a structural transformation in the coming years. Ensuring a secure supply of fuels and maintaining important energy infrastructure will remain important during the transition. Oil remains a key component of Lithuania’s energy mix, accounting for 41% of total energy supply (in 2023) and 38% of TFEC (in 2022). The transport sector consumed 75% of oil products in 2023 and has driven overall growth in oil demand in the last decade. The remainder is mostly used in industry and international bunkers. Bioenergy accounted for 23% of total energy supply in Lithuania in 2023, second only to oil. It is also the dominant source of domestic energy production, with a share of 76%. However, according to the NEIS, it will remain a strategic energy source, providing around 50% of district heating and 30% of decentralised heating by 2050. In addition, liquid biofuels are used in the transport sector, while biogas is mostly upgraded to biomethane and used in heat and power generation.
Lithuania’s strategy is to develop hydrogen production close to demand centres and limit the need for transport infrastructure. Initially, the plan is to develop infrastructure around two hydrogen valleys in the central and northwestern parts of Lithuania where the biggest fertiliser and refinery installations are. Over time, pipeline infrastructure will be needed to enable larger hydrogen trade. Lithuania has a well-developed natural gas network that can be adapted to transport hydrogen in the medium- and long-term perspective when natural gas consumption decreases. According to the Hydrogen Roadmap, EUR 196 million has been allocated to support the development of green hydrogen production facilities and the creation of a hydrogen filling infrastructure. In November 2024, Lithuania, together with Austria and Spain, announced new financial support for renewable hydrogen development via the European Innovation Fund. Lithuania is dedicating EUR 36 million from the Modernisation Fund budget to the scheme as part of the second European Hydrogen Bank auction, which will award grants in late 2025. Developing carbon capture and utilisation (CCU) is an integral part of the strategy of how to exploit the potential for low-emission hydrogen production in Lithuania. With good access to biogenic CO2 from the district heating sector and the projected large growth in renewable electricity generation that can be used by electrolysers, Lithuania has good conditions for producing green synthetic fuels at competitive costs.
Electricity system expansion
The NEIS is centred around the expected large expansion of the electricity system. Lithuania aims to turn large electricity import dependencies today into net exports by the end of 2030, or even 2028 according to a government statement from early 2025. In the Roadmap Scenario for 2050, electricity consumption increases sixfold compared to 2023, to 74 TWh. Nearly half is set to be used for hydrogen production, but electrification of transport, heating and other industry applications will also require more electricity. New renewables will provide the main share of electricity generation, with a potential contribution also from nuclear. Managing such significant growth in electricity generation and consumption is a huge undertaking. The investment conditions in new renewable electricity generation and grid infrastructure needs to be in place through the policy and regulatory framework, as do market incentives for flexibility and efficient use of the existing infrastructure. It will also require increased planning to ensure all interdependent parts of the electricity system follow each other, including new consumption and generation, and grids and storage infrastructure.
Lithuania’s initial support scheme for renewables was introduced in 2011 and was based on feed-in tariffs valid for 12 years. Above 30 kW, feed-in tariffs were provided through technology-specific auctions. Below 30 kW, installations could obtain support without participating in an auction, but this threshold was lowered to 10 kW in 2013 after a significant drop in investment costs for solar power. The scheme enabled Lithuania to achieve its 2020 targets for renewables in 2015, after which additional support was suspended and investments slowed down. In 2018, Lithuania revised its Law on Renewable Energy and introduced technologyneutral tenders with an auction-based market premium model for installations exceeding 10 kW. Technology-neutral tenders in combination with a fixed feed-in premium started in September 2019. In January 2020, an onshore wind farm won the first allocated quota of 0.3 TWh with a zero-subsidy bid. The auction-based market premium model was intended to support 0.7 TWh of new renewable power generation per year over the period 2020-22. However, less than three bids were received for the next tender in 2020 and the auction was declared void. The regulator VERT took this outcome as an indicator that the current cost of renewable power plants and the electricity price on the market enable investments under market conditions, and no subsequent auctions were held.
Electricity grid expansion and use
Lithuania faces an imbalance between the high potential for renewable electricity generation in the western part of the country and consumption clusters in the east. The connections of various parts of the electricity system needs to be strengthened to ensure a reliable operation and fast deployment of renewable electricity. There is also a need to further integrate Lithuania’s electricity system with the Latvian system. Litgrid prepares ten-year grid development plans for the transmission network. In its 2024 Transmission Network Development Plan for the period 2024-33, Litgrid expects electricity demand to more than double in a decade. The peak demand would increase from 2.1 GW to 3.9 GW. To accommodate this growth, Litgrid estimates the total investment needed in the development and reconstruction of the transmission network to be around EUR 2.7 billion between 2024 and 2033, a doubling compared to the development plan just three years earlier (for 2021-30). As a result, the total length of the transmission lines will increase by 12%. Similarly on the distribution level, ESO plans to invest EUR 3.3 billion between 2024 and 2033, which is an increase of 74% to the projected investment needs for 2021-30.
The need for upgrading and expanding the transmission and distribution networks depends on the future growth in renewable electricity generation and demand. Investments are affected by uncertainty on both sides, as well as varying lead times for different components in the system. Electricity grid expansion, in particular transmission lines, take a long time and calls for efficient planning. Litgrid’s recent Transmission Network Development Plan states the need to move towards long-term planning of the energy system, with at least a ten-year perspective, which also aligns with EU regulation. A longer term perspective to address the full life cycle of assets can be considered. Furthermore, EU Directive 2019/944 introduced a requirement for electricity distribution system operators to prepare and publish distribution network development plans. It is important that network development plans on the distribution level and transmission level are consistent. Having one dominant distribution system operator in the country could benefit Lithuania in terms of this co-ordination.
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