IN BRIEF:
Latvia lacks purposeful governance of energy policy, and there is no drive to achieve the targets of the National Energy and Climate Plan (NECP).
Implementing the measures planned in the NECP requires additional investment of at least EUR 13.1 billion. At present there is no clear plan or regulatory framework for attracting the private funding needed over the remaining NECP implementation period.
No system has been set up for the effective implementation and monitoring of energy policy. The responsible ministries are not ensuring that certain tasks related to the implementation of energy policy are carried out, even though this is required by the NECP and other legislation.
The potential of state-owned enterprises to help meet the energy sector's targets is not being fully used, while administrative barriers are holding back the development of renewable energy.
The energy policy governance arrangements established in Latvia do not ensure purposeful progress towards the ambitious targets of the National Energy and Climate Plan (NECP) and offer no clear solution for funding the measures needed to meet them. Substantial improvements are required in the implementation of energy policy and in monitoring the achievement of the targets, planned activities and indicators set out in the NECP. Priority measures must also be identified — those that would have the greatest impact on meeting the NECP targets — given that funding is insufficient to implement all the planned measures and that little time remains before the deadline for achieving the targets, according to the findings of an audit by the State Audit Office.
In total, Latvia has 18 policy planning documents in force that touch on energy and climate change mitigation matters. The NECP for 2021–2030 is the core planning document of Latvia's energy policy, setting out national targets and courses of action for meeting the climate targets set by the European Commission (EC). The NECP has been drawn up in line with the principles laid down in EC regulations and covers five main dimensions: decarbonisation, energy efficiency, energy security, internal energy markets, and research, innovation and competitiveness. Although the NECP was approved in 2020 and updated in 2024, it cannot be regarded as a fully fledged energy strategy, as it lacks a balance between the targets set by the EC and the needs of Latvia's economy, security considerations and the provision of affordable energy prices. Latvia's energy policy needs a long-term strategic document that will steer the sector not only towards meeting the NECP targets set by the EC, but towards the overall development of the sector. In 2024, the Ministry of Climate and Energy (MCE) began work on drafting an Energy Strategy up to 2050.
"By 2030 Latvia has committed to meeting very ambitious energy policy targets that stem from our international obligations. We are now close to the midpoint of the NECP implementation period and, if things carry on like this, Latvia risks missing the NECP targets by the set deadline. The targets are essentially tied to final deadlines, and there is a lack of interim indicators that would allow progress to be assessed regularly and the necessary corrections to be made. What is more, two years after the MCE was set up, it still lacks effective instruments for implementing energy policy, and the Ministry of Economics (MoE) still plays a significant role in performing certain energy functions. Although the MCE has taken the first steps towards drafting a long-term strategy, the State Audit Office points out that substantial action and coordination are needed from all parties involved — state institutions, local authorities, businesses and the public," says Mārtiņš Āboliņš, member of the Council of the State Audit Office.
Most of the targets can only be met by taking additional action and attracting additional funding. The impact of the measures and actions planned in the NECP on the achievement of the target indicators cannot be traced. For the planned actions, the necessary resources and their sources have been identified only in part. According to the Ministry of Finance's calculations, implementing the measures described in the updated NECP requires additional investment of at least EUR 13.1 billion, of which only EUR 3.8 billion, or 29.1%, has been earmarked so far.
"Without attracting funding, the NECP targets cannot be met. Given that four years have already passed since the NECP was approved and six remain before the results are due, this is the last moment to set priorities that, under constrained time and financial resources, would do most to advance the achievement of the targets, so that the NECP does not remain merely a wish list. State budget resources are limited, while current
activities do not inspire confidence that it will be possible to attract the required volume of investment from the private sector. If the targets are not met, Latvia may face EU sanctions, which will not release it from its obligations but will be an additional burden on the state budget," M. Āboliņš adds.
The existing institutional system does not ensure high-quality implementation and monitoring of the NECP. In the State Audit Office's assessment, following the creation of the MCE, overlapping competences between the two ministries — the MoE and the MCE — have not been eliminated. Although the energy function has been deleted from the MoE's by-laws, its responsibility for the energy field currently remains, because certain institutions under its authority carry out tasks connected with the energy function.
The audit found that certain tasks related to the implementation of energy policy are not being carried out as required by the NECP and other legislation. For example, the NECP measures under the responsibility of the MoE and the MCE with a deadline of 2023 have been implemented only in part; the drafting of the updated NECP was delayed; and the studies in the energy field planned by the MCE are not being carried out consistently, even though funding has been allocated for this purpose. In practice, neither the planned ongoing monitoring of NECP implementation nor the higher-level oversight at Cabinet of Ministers level — intended as an instrument for effective NECP implementation — has been put in place or is operating. Work on developing the monitoring and reporting system will continue until May 2025. Meanwhile, the National Energy and Climate Council ceased operating back in 2021, while the Committee on Energy, Environment and Climate Matters, set up in 2023, does not meet regularly, even though such a requirement is laid down in an order of the Prime Minister.
The expertise of state-owned enterprises is not being fully used to reduce barriers to the development of the energy sector and to meet policy targets. Energy policy to date has not fostered clearly understandable and targeted sustainable development of the energy system. The investments of certain state-owned enterprises in developing energy infrastructure are based primarily on business interests, with insufficient involvement in meeting the energy targets set by the state. Practically all the measures envisaged by the enterprises analysed relate to the field of energy security. This creates a risk that the results planned in the NECP in the field of energy independence will not be achieved.
State Audit Office recommendations #AfterTheAudit
In the audit, three recommendations were made to the MCE and the MoE for improving the governance of energy policy: (1) improve energy policy governance by defining priority measures for meeting the NECP targets, improving the monitoring and evaluation of the results achieved, and creating the preconditions for attracting additional private funding for the development of the energy sector; (2) reduce administrative barriers and encourage electricity producers to become more actively involved in developing renewable energy capacity; (3) improve the quality of energy sector development documents by including in them an electricity generation structure suited to Latvian conditions, assessing the adequacy of capacity and electricity consumption forecasts under various energy sector development scenarios.
Further information: audit report, recommendation implementation schedule, infographic