Author: Derek Michalski, Editor.
Lithuania’s renewable revenue model is changing
Lithuania’s renewable energy market is entering a new phase.
After several years of rapid solar and wind expansion, the challenge is no longer simply adding generation capacity. The focus is shifting towards how renewable assets generate predictable, optimised revenues in an increasingly volatile electricity market.
Historically, Lithuania developed with a higher level of wholesale market exposure than neighbouring Poland, where auctions and state-backed contracts-for-difference played a much larger role. Access to the Nord Pool electricity market enabled renewable developers to monetise production directly through merchant sales, particularly during periods of elevated wholesale prices.
However, the investment environment in 2026 is fundamentally different.
Rapid renewable deployment, changing electricity price patterns, increasing balancing requirements and growing battery storage capacity are forcing developers and investors to reconsider how much merchant exposure they are willing to accept.
The future is unlikely to be defined by a choice between merchant trading and power purchase agreements (PPAs). Instead, successful renewable portfolios will combine merchant optimisation, contracted revenues, storage and sophisticated trading strategies.
Lithuania’s merchant model was built on market access
Lithuania’s renewable sector benefited from several structural advantages.
The country operates within the Nord Pool electricity market, providing transparent wholesale pricing and access to regional power flows. Unlike Poland, Lithuania did not rely primarily on renewable auctions as the main driver of utility-scale development.
This encouraged developers to pursue merchant-based projects, particularly in solar, where declining technology costs and relatively fast construction timelines allowed assets to be deployed without relying exclusively on long-term subsidies.
The result was rapid growth in renewable capacity. By 2026, Lithuania had moved into a new market phase, with wind and solar becoming increasingly significant components of the electricity system.
The commercial question has therefore changed.
The issue is no longer whether renewable projects can be built.
It is whether they can maintain attractive returns as renewable penetration increases.
The growing challenge of merchant exposure
Merchant revenues remain an important part of Lithuania’s electricity market, but the risks associated with relying exclusively on wholesale prices are increasing.
Capture price is becoming more important than market price
Renewable generators do not receive the average wholesale electricity price. They receive the price available when they generate electricity.
For solar assets, production is concentrated during daytime hours, particularly around midday. As more solar capacity enters the market, generation profiles become increasingly correlated, placing downward pressure on prices during high-output periods.
This creates a growing gap between:
- average market prices; and
- the actual capture price achieved by renewable assets.
For investors, this means that headline electricity price forecasts are becoming less meaningful. The key metric is increasingly the capture rate — the relationship between achieved renewable revenues and the average market price.
Cannibalisation becomes a structural issue
Renewable price cannibalisation is not unique to Lithuania. It is already affecting mature renewable markets across Europe.
The mechanism is straightforward:
- more solar generation enters the market;
- production becomes concentrated during the same hours;
- wholesale prices decline during those periods;
- renewable revenues are compressed.
As Lithuania continues expanding solar capacity, developers will need to focus more heavily on asset optimisation rather than simply adding megawatts.
Balancing and forecasting costs matter more
As renewable penetration increases, the value of accurate forecasting and portfolio management grows.
Intermittent generators face exposure from:
- forecast deviations;
- imbalance settlement;
- balancing costs;
- intraday market movements.
Large portfolios with access to trading desks can manage this exposure more effectively than individual standalone assets.
This creates an advantage for integrated energy companies and aggregators capable of combining multiple renewable assets into a balanced portfolio.
Merchant exposure is not disappearing — it is becoming more sophisticated
Despite increasing risks, merchant trading will remain a core part of Lithuania’s renewable market.
The reason is simple: wholesale markets still provide opportunities that fixed-price contracts cannot.
Sophisticated market participants can optimise revenues through:
- intraday trading;
- weather forecasting;
- cross-border market opportunities;
- portfolio aggregation;
- battery optimisation;
- ancillary services.
The future model is therefore unlikely to be a fully contracted renewable market.
Instead, the industry is moving towards optimised merchant exposure.
The difference is significant.
A passive merchant project simply sells electricity into the market.
An optimised merchant portfolio actively manages when, where and how electricity is sold.
PPAs are becoming a strategic tool
While merchant revenues remain important, long-term offtake agreements are gaining importance among both developers and electricity consumers.
Corporate PPAs provide:
- revenue visibility for generators;
- price certainty for buyers;
- renewable electricity supply for corporate decarbonisation targets.
Lithuania’s corporate PPA market remains smaller than Poland’s, largely because the country has fewer large industrial electricity consumers. However, demand is increasing as companies seek protection against wholesale market volatility and aim to meet sustainability commitments.
Developers increasingly view PPAs not as a replacement for merchant revenues, but as a portfolio management instrument.
A typical strategy may involve:
- securing part of production through a long-term PPA;
- maintaining merchant exposure on remaining output;
- using storage and trading strategies to optimise revenues.
This approach balances bankability with market upside.
Battery storage changes the merchant equation
The rapid development of battery energy storage systems (BESS) is one of the most important changes affecting Lithuania’s renewable market.
Storage allows generators to reduce dependence on the price received at the moment of generation.
A solar-plus-storage project can:
- charge during low-price periods;
- shift electricity sales into higher-value hours;
- participate in balancing markets;
- provide ancillary services;
- optimise intraday trading opportunities.
This transforms renewable assets from simple generators into flexible energy market participants.
For merchant projects, batteries are increasingly becoming a risk-management tool rather than simply an additional technology investment.
The value proposition moves from:
“generate as much electricity as possible”
towards:
“generate and sell electricity when it has the highest market value.”
Lithuania compared with Latvia and Estonia
The Baltic markets are moving in different directions.
Latvia
Latvia has historically relied more heavily on hydropower, which provides a different flexibility profile compared with Lithuania’s rapidly growing solar sector.
The country’s renewable expansion is accelerating, but its corporate PPA and utility-scale solar markets remain less developed.
Estonia
Estonia’s renewable strategy is increasingly centred around wind development, including offshore ambitions.
Compared with Lithuania, Estonia’s challenge is less concentrated around solar cannibalisation and more around integrating large volumes of variable wind generation into the electricity system.
Both countries face the same strategic requirement: increasing flexibility through storage, demand response and stronger market integration.
Lithuania compared with Poland
Poland represents a different renewable investment model.
The country has developed a larger contracted renewable market through government auctions and support mechanisms, while also benefiting from a much larger industrial base.
Key differences:
| Lithuania | Poland |
|---|---|
| Nord Pool electricity market | TGE electricity market |
| Higher historical merchant exposure | Greater use of auction-backed support |
| Smaller industrial electricity buyer base | Large industrial and multinational demand |
| Rapid solar growth | Larger wind and solar pipeline |
| Emerging BESS market | More developed flexibility market |
Poland’s larger industrial sector has supported stronger corporate PPA demand, with multinational companies seeking renewable electricity supply agreements.
Lithuania’s opportunity is different: combining renewable growth with flexibility, storage and regional electricity trading.
What traders will watch after 2026
For energy traders and investors, the key indicators will be:
- renewable capture rates;
- solar and wind build-out;
- frequency of negative pricing;
- balancing market development;
- battery deployment;
- congestion between Baltic markets;
- corporate PPA demand;
- forward electricity curves.
The value of renewable assets will increasingly depend not only on installed capacity but on the ability to manage volatility.
Conclusion
Lithuania is not moving away from merchant electricity trading.
Instead, merchant exposure is becoming a more sophisticated business requiring stronger market intelligence, trading capability and operational flexibility.
From 2026 onwards, the strongest renewable portfolios will likely combine:
- merchant revenues;
- PPAs;
- battery storage;
- balancing services;
- active trading strategies.
The winners will not necessarily be those achieving the highest electricity price. They will be those capable of maximising risk-adjusted asset value in an increasingly complex power market.
