Purchase of CO2 emission allowances
Inčukalns Underground Gas Storage (hereinafter UGS) is a participant of the European Union Emission Trading Scheme and therefore has a long-standing practice of settling CO2 emissions from its operations.
In the past, due to the stock of CO2 allowances (1 CO2 allowance = 1 tonne of CO2 emissions) established by Conexus Baltic Grid (hereinafter "Conexus"), system users did not need to settle these emissions, however it is currently estimated that the historically allocated "free" CO2 allowances will expire in 2027. Accordingly, in accordance with paragraph 50 of the Decision No 1/14 of the Public Utilities Commission of 1 October 2020 " Regulations Regarding the Use of Inčukalns Underground Gas Storage Facility", the system user shall bear the costs of fuel gas consumption and the CO2 allowances corresponding to the fuel gas consumption, as calculated by the system operator.
The allowance costs will be incurred in proportion to the volume of fuel gas used for the operation of the injection units provided by the system user and the amount of CO2 allowance costs that will not be covered by the free allowances allocated.
As soon as the detailed procedure for the settlement of CO2 emissions resulting from the service provided to the system user - storage and withdrawal of natural gas from Inčukalns UGS - is developed, Conexus will inform the system users about it.
Indicative calculation assuming that all CO2 emission allowances have to be purchased in a given year.
For the 2025/2026 storage cycle, the fuel gas consumption factor is set at KDG=1.17% and the natural gas CO2 emission factor is 0.2 tonnes/MWh. The price of 1 CO2 emission allowance is currently around EUR 80/tonne. Therefore, to inject 1 MWh of natural gas into Inčukalna UGS, approximately 0.00234 tonnes of CO2 could be emitted, resulting in a cost of 0.187 EUR/MWh.
Detailed procedures for the settlement of CO2 emissions incurred by the system user for the injection and withdrawal of natural gas from Inčukalns UGS will be developed during 2025 and will be communicated by Conexus to the system users.