LITHUANIAN PUMPED HYDRO STORAGE

The project concerns the extension of Kruonis pumped hydro storage power plant by installing an additional pump-turbine unit in the existing powerhouse.

The development of hydropower pumped storage hydropower supports national and European targets related to renewable energy production and thus contributes to climate change and security of energy supply objectives of the EU. The project is therefore eligible under Article 309 (c) common interest in energy (renewable energy) and also contributes to the environmental protection (tackling climate change). Additionally, it is also in line with the EIB's priority objectives for energy sector lending in the EU related to renewable energy sources and climate action.

Investment in the project will finance the deployment of additional pumped storage capacity in Lithuania, supporting the country's goal of meeting 100% of electricity demand from renewable energy sources (RES) by 2030. The steep increase in intermittent RES, mainly wind energy and photovoltaic (PV), requires a strong increase of flexibility in the grid, including storage capacity and frequency and voltage control, which can be provided by pumped storage hydropower plants.

Storage technologies act as enabling infrastructure in the energy transition and contribute towards increasing security of fuel supply by reducing dependency on energy imports and ensuring price stability. Security of supply can be considered as a public good, which is not always effectively reflected in market prices.

The financing of this project is in line with the Bank's energy lending policy by supporting the energy transformation as enabling infrastructure (networks, storage) for the integration of renewable energy sources. Thereby also transversal objectives on Climate Action (mitigation) are met by the project.

By enabling the increased deployment of intermittent RES the project also addresses negative climate and environmental externalities, a market failure, through the reduction of carbon and air pollution, compared to generation and provision of grid system services based on fossil fuels.

In terms of project results, the projects are expected to have a positive economic return, considering the economic value of the electricity generated. Therefore, the project is expected to generate a broader positive social benefit by generating clean and renewable power at a cost (LCOE) reasonably below the cost alternatives in Lithuania.

The project is supported by adequate governance and capabilities of the promoter.

The long tenor of the EIB loan is in line with the economic life of the underlying assets. The funding of similar maturities is not available on the Lithuanian market. Customised terms such as flexible drawdown are of value to the Promoter because of the multiannual Project's implementation period. Moreover, the EIB involvement should have a crowding-in effect.

The projects may include components that fall under Annex II of the Environmental Impact Assessment (EIA) Directive (2011/92/EU) as amended by Directive 2014/52/EU, thus requiring a review by the competent authorities at the planning/consent stage with due regard to the necessity for environmental and biodiversity impact and appropriate assessments. Lithuania's Environmental Protection Agency (the Competent Authority) approved the project on 2.6.2022 with the comment that no Environmental Impact Assessment is required. The project is expected to contribute to climate action and environmental sustainability (CA&ES) objectives.

The EIB will require the promoter to ensure that contracts for implementation of the project have been tendered in accordance with the applicable EU procurement legislation Directive 2014/25/EU, with publication of tender notices in the EU Official Journal, as and where required