Capacity Market Design for Lithuanian Transmission System Operator LitGrid

Compass Lexecon advised the Lithuanian Transmission System Operator LitGrid on the design and market rules of the Capacity Market in the electricity sector. The Lithuanian Capacity Mechanism (“CM”) will be the first in the Baltic States.

To ensure the security of supply, several European countries have initiated power market reforms to introduce Capacity Mechanisms. The European Commission considers CMs as State Aid measures and requires a thorough assessment of their competitive effect on the electricity market.

LitGrid engaged Compass Lexecon to support in the development of a CM that would be suitable for the Lithuanian electric power system. The system faces specific supply issues related to the retirement of large volumes of existing thermal capacity; high reliance on imports from interconnectors; and plans for the synchronization of the Baltic electricity network with the Central European Network in 2025.

Our energy experts worked closely with LitGrid and their legal advisors, TGS Baltic, to align the CM design, market rules and legislation with the requirements of other project parties, including the Ministry of Energy and National Commission for Energy Control and Prices (NCC).

Our experts demonstrated that the CM complied with EU State aid guidelines and managed interactions with the DG Competition case team. Together with the legal advisors, our experts also assisted in the implementation of the CM and prepared detailed Market Rules defining the terms and conditions of collaboration between the capacity market operator and the capacity market participants.

The Compass Lexecon team included Fabien Roques, Dmitri Perekhodtsev and Mariela Atanasova.