Lithuania Generates More Electricity, But Prices Rise: What's Driving Costs and When Will They Fall?

Lithuania is producing more electricity domestically than ever before, yet consumers are facing higher prices for fixed-term plans. In July, prices for 12 and 24-month fixed electricity plans were significantly higher than in the same period last year, with the average price for a 24-month, single-zone plan reaching approximately 29.5 cents per kWh, up from about 24.6 cents per kWh in July 2023. Paradoxically, during one week in July, Lithuania generated 98% of the electricity it consumed. Mantas Kavaliauskas, Commercial Director at "Elektrum Lietuva," explains that the situation appears paradoxical but is rooted in the complex factors influencing electricity costs. "At first glance, it might seem paradoxical that we have more and more solar and wind power plants, and at certain times we can generate almost all the electricity we need ourselves, yet newly fixed prices are higher than a year ago," Kavaliauskas stated. He emphasized that electricity prices are affected not only by the quantity produced but also by *when* it is produced, the cost of other raw materials, grid transmission capabilities, and the overall situation in the region. Renewable energy generation in Lithuania remains uneven. Solar power plants primarily produce electricity during the day, while wind power generation is dependent on weather conditions. However, electricity demand persists around the clock. Consequently, a high volume of electricity produced over a month or even a single day does not guarantee sufficient supply during peak consumption periods when solar and wind output decreases. This was evident in June, when Lithuanian solar power plants produced a record 421.8 GWh, covering nearly 45% of the country's electricity needs. Including all local generation sources, Lithuania met about 93% of its total demand that month. Despite this high domestic production, the average wholesale electricity price increased by 14% during June. "June's results clearly show that simply increasing the volume of green energy production is not enough – it is important that we can use as much of the generated energy as possible when it is most needed. This requires greater storage capacity, more flexible consumption, and better coordination of different generation sources. This is precisely what can help reduce price fluctuations in the long run," explained Kavaliauskas. He also noted that Lithuania's electricity prices remain dependent on neighboring markets due to its integration into the common energy system. Therefore, factors beyond domestic production, such as prices in neighboring countries, regional demand, energy resource costs, and cross-border transmission capacity, significantly impact local prices. These external influences are reflected in the fixed-price offers presented to consumers, which incorporate market expectations for the future, including anticipated risks for the upcoming winter, such as lower solar generation, increased consumption, and gas prices.

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At first glance, it might seem paradoxical that we have more and more solar and wind power plants, and at certain times we can generate almost all the electricity we need ourselves, yet newly fixed prices are higher than a year ago.