Free Electrical Energy Market – New Opportunities for Users

Free Electrical Energy Market – New Opportunities for Users

The Ministry of Energy submitted a draft amendment of the Law on Energy to the Government in 2019, whereby it endeavoured at changes in the currently regulated market of electrical energy. These proposals would improve flexibility of the electrical system, its management, creation of innovative energy starts-up, and more effective use of electrical energy. New participants of the market – independent suppliers of electrical energy are awaited.

Although changes in Lithuania are planned only now, they were implemented in Latvia and Estonia in 2013-2015 already. Almost all domestic users in Lithuania are buying electricity from public supplier (mainly “Ignitis”), and the price of electrical energy is set not more frequently than every half year by the decision of the National Energy Regulatory Council (NERC). If the changes are implemented, the conditions will be created in the market for active operation of more suppliers of electrical energy, and the users will have real opportunities to choose from several alternative offers. Yet only the business clients have been able to choose freely the supplier of electrical energy since 2007 in Lithuania.

Now the main supplier of electrical energy for household in the country, UAB “Ignitis” acknowledges that the main challenge is to get ready for appropriate operation in deregulated market of electricity supply opened for competition: “The most important success factor becomes proportion of quality and price of services, as well as solutions adjusted to needs of each user. The independent electricity suppliers are going to experience transformation in the near future that the sector of telecommunications experiences in 2003 in Lithuania, when the market of that sector was demonopolized. Similar situation will be formed in the area of energy supply in the approaching years”, - notes Mr. Darius Montvila, head of public supplier UAB “Ignitis”. He is seconded by Mr. Martynas Giga, head of one of the market’s participants, UAB “Elektrum Lietuva”. According to him, it is “not only a challenge, but also an opportunity for independent suppliers or retail market to provide sustainable solutions and convenience for the users for acceptable price, by getting adjusted to the users expeditiously”.

Although the energy market is experiencing transformation at present, it is still too early to predict the underlying services, the services that will be chosen by the users, what is acceptable and suitable for their homes. However, it is undoubtful that a deregulated market will turn into a push for creation of new services. “We will pass from the monopolized market economy to the one based on the laws of competition not only with intention to offer the products of electrical energy that would fulfil the user’s needs the vest. We will be able to make full use of global transformation of energy industry, and pass to wider spread of electromobiles, smart control of home energy, and wider use of green energy,” – forecasted Mr. Vytenis Koryzna, Managing Director of UAB “Enefit”.

Push to Changes – Smart Meters

With regard to experience of the neighbouring and European countries, it is evident that deregulation of the electrical energy market is also pushed by smart electricity meters. According to Mr. D. Montvila, Managing Director of UAB “Ignitis”, accurate data of consumed electrical energy will allow independent suppliers to assess needs of each user better and then to offer the most suitable services and payment plans for residents. The insights and advice, how to optimize electricity use could be provided. While “fighting” for the client, the offers with the most relevant conditions of services and contracts and beneficial electricity-saving services could be provided.

The change will enable the user to analyse and make decisions – such is a benefit for the user named by Mr. V. Koryzna, head of UAB “Enefit”: “The smart meters will open possibilities for the users to save by choosing electricity-supply solutions adjusted to their use habits. Meanwhile, the suppliers will be able to provide information to users more precisely and expeditiously, and to prepare individual offers, in consideration to specific use habits of the clients. If sufficient competition becomes predominant in the market, the costs saved by the supplier will turn into direct financial benefit to the users.

At present, independent suppliers are accumulating experience in Lithuania while working with business clients, whereas they may analyse performance results in Latvia and Estonia in consideration to experience of business and residents, and use of smart meters. “Smart meters are one of the main factors to offer innovative products of electrical energy to the market. If today business may choose Nord Pool Spot, the product of dynamically changing price of electrical energy, every hour, the price formation of such a product to the domestic user would depend on common domestic average use schedule and not on individual use. We attempt to bring more conscious use to the market; however, these changes are impossible without smart meters,” - notes Mr. Martynas Giga, head of UAB “Elektrum Lietuva”.

According to Mr. D. Montvila, Managing Director of UAB “Ignitis”, more and more personalized offers to the user will be made in the electricity market in the nearest future. These offers will be similar to the ones made by the mobile connection operators: “the supplier will be able to invite the client to enter into a contract in exchange to a tablet, for example, where the client will be able to monitor own electricity usage and receive recommendations, how to optimize expenses of electrical energy. Maybe the supplier will offer a discount card for charging an electromobile, etc.” – considers Mr. D. Montvila, head of the public supplier.

The electricity suppliers believe that some 4-5 active market participants may exist in Lithuania and at least the same number of suppliers, who will be ready to compete for new clients, but who will not carry out an active campaign of client attraction.