Most EU countries missed the deadline to submit additional REPowerEU chapters to national recovery and resilience plans on time, including Latvia, where few details about the reasons for the delay have emerged. Here are some ideas on how Latvia can make the best use of EU funds to help decarbonise its energy system and support its citizens.
Maksis Apinis, Green Liberty | 12 May 2023
Latvia will receive a significant boost of EUR 123.9 million as a grant under the REPowerEU chapter of its recovery plan. In addition, Latvia will have access to up to EUR 2 billion in loans for energy investments.
The Ministry of Climate and Energy, Ministry of Economics, and Ministry of Finance are currently finalising the proposed investments and coordinating the preparation of the REPowerEU chapter, which is being carried out alongside suggested amendments to the approved recovery plan. The previous timeline indicated that the consultation with the European Commissionwill commence by the end of April via the electronic portal of legislative acts; however, this has not yet begun.
Latvia does intend to informally share the draft proposal with the European Commission, and informal communication with them has already begun. However, the overall timeframe for the process remains uncertain, posing a challenge for the meaningful involvement of civil society organisations.
What are the planned investments in Latvia’s REPowerEU chapter?
Thus far, informal information has been made available about one investment area that will be proposed under the REPowerEU chapter. The minister for climate and energy has mentioned the addition of funds to an existing measure in the recovery plan (measure 126.96.36.199.i.) with the aim of modernising the electricity grid in urban areas to promote electrification and increase the capacity of transmission lines.
Although further details are not yet available, these investments are significant for Latvia’s decarbonisation efforts and can be seen as a positive step forward. However, the status of loans available under REPowerEU remains unclear, as political consensus has not yet been reached.
Investments that would make the best use of REPowerEU funds
Investments that could maximise the use of REPowerEU funds in Latvia include those targeting residential building renovation, spatial planning for sustainable wind energy, and energy community projects such as smart local energy systems and green industrial parks.
Residential building renovation
Latvia is experiencing the pressing challenge of energy inefficiency in its residential building stocks, which cannot be adequately addressed through existing strategies alone. To accelerate renovation projects and achieve meaningful results, additional measures need to be introduced under REPowerEU, with the allocation of funds focusing on reforms. These measures include:
A standardised approach to improving energy efficiency. Latvia should aim to develop a standardised approach for improving the energy efficiency of Soviet-built multi-apartment buildings of the same type. This approach, similar to what is being implemented in Estonia, would streamline the renovation process for most buildings of the same type by organising joint procurements and producing standard panels industrially.
Municipal capacity-building programmes. Latvia should propose a programme where municipalities can apply for support to increase their administrative capacity. This would include training and hiring project managers to encourage and support residents throughout the application and renovation process. Additional support could be provided to the capital, Riga, to implement a district-based approach with a dedicated team.
Administrative changes for renovation incentives. Latvia should propose to introduce administrative changes in line with the recent amendments to the Energy Efficiency Directive. This includes the introduction of a fee for owners of certain types/ages of houses who do not start renovations within a certain period. Latvia should also consider reducing the value-added tax rate for measures that improve energy efficiency.
Spatial planning for sustainable wind energy
Latvia needs detailed geographical ‘mapping’ for strategic wind energy development. This would allow a concentrated use of knowledge and institutional resources to reduce the risks of biodiversity damage, reduce economic conflicts between land users, increase public acceptance and establish sustainable energy supply systems as soon as possible.
However, the Law on the Necessary Relieved Construction Procedures of Energy Supply Facilities for the Promotion of Energy Security and Independence, passed in September last year, has been criticised by industry representatives for failing to address the real bottlenecks in the deployment of wind power. It should be recognised that a suitable solution has not yet been found and that the act may only be suitable for part of the project plans.
Amendments to the recovery plan should therefore prioritise the task of spatial planning for wind energy.
Energy community projects – smart local energy systems and green industrial parks
Interest in the creation of energy communities is not limited to civil society representatives, but also extends to economic actors and local authorities, including the Association of Latvian Municipalities. Energy communities are emerging as new market players whose level of integration into energy supply systems may vary. It is important to note that energy communities are not primarily focused on financial profit but are value-driven and involve significant investments that can stimulate economic cooperation between various stakeholders, including small and medium-sized enterprises.
Cohesion funds will facilitate electricity sharing in apartment buildings, which will be provided through funding for building renovations. The recovery plan should also support the development of other types of energy communities, such as those in urban neighbourhoods, rural villages in cooperation with local authorities, farms (not only those for biomethane production), and production and service buildings. This holistic approach can promote diverse and inclusive energy communities and contribute to the transition to a more sustainable and decentralised energy system in Latvia.
Public involvement in the preparation of the REPowerEU chapter
To date, no public consultations or discussions have taken place, with government officials citing time constraints as the reason.
Green Liberty has proactively sent letters with recommendations for investments/measures to be included and met with representatives from the Ministry of Economics in July and August last year. This was followed by a second letter requesting a consultation and reminding the ministry of the recommendation process in February. It is not known at this stage whether or to what extent these recommendations have been considered.
The social partners – including the Latvian Association of Municipalities, the Chamber of Trade and Commerce and the Confederation of Latvian Employers – have submitted their recommendations to the ministries. However, these were not considered due to REPowerEU’s limited financial resources.
An opportunity to submit comments on the proposed investments was planned to be made available at the end of April during the reconciliation/consultation procedure within the electronic portal for legislative acts; however, at the time of publication of this post, this procedure has not been initiated yet. Also, only legal entities will be able to submit their opinions, whereas individuals most likely won’t have the chance to comment on certain procedures. It is probable that, apart from sending recommendations, this will be the only opportunity for public participation. However, there is a strong possibility that this process will be rushed and formal to avoid delays in the adoption process.
Although it is understandable that the REPowerEU process is time-constrained and that funds need to be spent as quickly as possible, its design should not be at the expense of public participation. While it is vital that funds are made available quickly to support energy independence, it is even more important that these public funds are truly used for the benefit of the public and in the most strategic and thoughtful way possible.
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