January 9, 2024

Geopolitics of Cross Boarder Electricity Grids

By Amy Myers Jaffe, Ted Loch-Temzelides, and Chiara Lo Prete

Introduction

Can supply of electricity be used as an energy weapon? This question rises in importance as more countries deepen electrification of their economies and increasingly trade electricity across borders.

As the global energy transition takes hold, the growing deployment of low-carbon electric technologies will bring about a deep transformation of the global energy landscape that will have profound geopolitical implications. This transformation will alter relations between states, affecting the global distribution of power, and creating new vulnerabilities (Scholten, 2018; Hafner and Tagliapietra, 2020; Jaffe, 2021). The share of electricity in satisfying global electricity demand is expected to more than double, rising from about 20% of final energy consumption today to 50% by 2050 (International Energy Agency, 2021). In the United States, the Net-Zero America report by Princeton University projects that electrification of transportation and heating will also increase electricity demand, which is expected to more than double by 2050 across all pathways to net zero (Larson et al., 2021).

As countries transition to greater energy use in the form of low-carbon electricity, they are seeking greater opportunities for cross border electricity trading, which can facilitate optimal dispatch of renewable energy across regions to eliminate regional supply surpluses and deficits. This kind of trading market would address cross border imbalances resulting from local supply surpluses and shortages. It would improve efficient supply and dispatching of electricity to smooth out fluctuations in generation capacity and demand load by aggregating the variability of renewable energy and demand over multiple operating areas. Because weather patterns and availability of renewable energy can vary significantly in different geographical locations, drawing on multiple electricity sources from a wider variety of locations can address intermittency issues and enhance electricity reliability. Cross-border electricity trade is already on the rise, as more countries are integrating increasing amounts of intermittent power and look improve cost-efficient dispatching of electricity across large geographic areas.

As increased electrification and rising use of renewable energy take further hold, cross-border electricity grids will gain in importance. Europe has notably hastened electrification and cross border electricity trade in the aftermath of Russia’s incursion into Ukraine in 2022, but the trend is also evident in other regions such as the Asia-Pacific, Africa, and the Middle East. China’s Global Energy Interconnection Development and Cooperation Organization (GEIDO) set up by the Chinese State Grid Corporation (SGCC) aspires to connect power grids in various locations and to be a technical standards setter for equipment in a wide number of locations.

In a more electrified world, there will be economic and geopolitical gains for countries which serve geographically as a hub for electric infrastructure management and trade or, alternatively, for countries who could threaten those hubs. The United States, by virtue of its geographic position on a relatively isolated continent — distant by sea from key U.S. allies in Europe, Asia, the Middle East and Africa- is unlikely to play a direct role connecting its vast domestic electrical grid to other countries. Instead, it must consider other ways to remain relevant to the energy and security needs of its allies in those regions as energy trade “by wire” becomes potentially as prominent, if not more prominent, to the global economy than seaborne trade in energy commodities. While electricity trade by wire is unlikely to completely replace shipment of energy commodities by sea, electricity will become more ubiquitous across a wider spectrum of national economies, representing a critical input to not only routine household heating, cooling and lighting, but also to the operation of critical digital data, transport vehicles, automated machinery, and manufacturing and industrial processes. In essence, the reliable and smooth operation of electricity grids will become an even more critical prerequisite for an advanced economy and a driver for prosperity and growth, making their protection increasingly important.

Yet, despite the growing importance of cross-border electricity flows, the geopolitical relevance of electricity trade has traditionally been understudied. Inquiry at the intersection of energy and geopolitics have mainly centered around the commerce of fossil fuels, which differ from electricity in several important ways. Unlike primary energy sources like coal, oil, and natural gas, electricity cannot be directed along a politically-determined, specific route because laws of physics dictate that power flows along the path of least resistance. Further, unlike oil and natural gas which can be stockpiled for commercial or strategic purposes in massive quantities in tanks or ships, large amounts of electricity cannot be stored economically using today’s technology. Utility-scale pumped air and water systems that can be used to deploy electricity generated at an earlier time of day remain expensive.

Commercial scale batteries can provide some cost-effective electricity storage options for several hours, but most grid operators do not yet have facilities that can provide large-scale storage of electricity over long periods of time. This means that electricity demand and supply need to be balanced at all times and all locations on a synchronized grid. Any interruption to flows have immediate cascading effects. Even with limited electricity trading between countries in the same interconnected electricity grid, control over frequency and voltage stabilization affects grid functioning in a neighboring country so even a slight hiccup in one location can have far-reaching impacts in a connected grid.[1] As more services electrify, governments need to confront a new set of sophisticated threats (including hybrid threats such as cyberattacks) to protect their grid infrastructure. In turn, this requires different equipment and tools than those being used to defend primary energy supplies.

There are several reasons why “the impact of electricity interconnection on international relations and geopolitics deserves the closest possible scrutiny” (Westphal et al., 2022). First, electricity is essential to modern society, and many different types of energy infrastructure (from pipelines to refineries, natural gas wells and pipeline compressors), as well as other vital infrastructures (e.g., banking, communications, and water systems), depend on it to function. Second, as noted above, greater use of renewable energy will further increase electricity’s role going forward. As a result, initiatives driving greater international electricity interconnection are gaining importance and momentum, as highlighted by electricity investments via China’s Belt and Road Initiative (BRI) (Freeman, 2018). U.S. analysts note that international linkages can create technological dependencies and susceptibility of networks to backdoor access that can become national security problems for connected countries.[2]

In fact, security concerns to integrated electricity networks are not without precedent. Russian hackers, for example, were able to briefly disconnect three Ukrainian electricity distribution companies in December 2015 in an event allegedly linked to Moscow decision-makers.[3] More recently, the Russia-Ukraine war highlights that striking the electrical infrastructure of a country is an effective means of warfare (Popik, 2023). Can electricity supply be used as an energy weapon? Serious inquiry cannot exclude the possibility that power asymmetry does exist in specific grids and could proliferate, as more nations link grids in an effort to lower carbon emissions and tap into different kinds of resources.

To date, much of the geopolitical analysis around energy transition has focused on supply chains for input metals and materials to clean tech products and technologies. By contrast, our analysis abstracts from the fact that electricity cut-offs may pose additional risks to fossil fuel disruptions, given the present inability to economically store electricity in very large quantities. Electricity sabotage represents a distinct but related concern. Russia’s attacks on Ukraine’s electricity grid in 2015, 2016 and 2022 were considered a wake-up call to the possibility of large cyber and sabotage risks.[4] Cyber threats in the region are not new. Estonia suffered cyberattacks across several public web-based services during tensions with Moscow in 2007. The unattributed sabotage of the undersea Nord Stream 2 pipeline in 2022 also brought more credence to concerns about security for subsea electricity cables in European waters.2 Indeed, in October 2023, Finland began investigating the role of a Hong Kong-registered container ship, recently sold to a Russian company, as the culprit in the damage of a gas pipeline and data cable that run between Finland and Estonia.[5] A Russian ship, operated by the Russian state nuclear-powered icebreaker company Atomflot, was also in the area at the time of the incident.[6] The event was significant because of the importance of undersea electricity connections between the Baltic countries and key European nations.

Earlier this year, with U.S. input, NATO launched a new center for protecting undersea cables and has boosted its presence in the Baltic and North Sea areas, adding dozens of ships, supported by maritime patrol aircraft and undersea monitoring equipment like drones. The stakes are high since cross-border electricity cut-offs or sabotage may result in blackouts and failures that cascade across infrastructures and neighboring countries, with significant and potentially catastrophic effects. Despite these risks, the potential use of electricity as a foreign policy weapon has not been the subject of thorough scholarly analysis.

In this paper, we investigate the potential for exploiting asymmetric power in electricity grids for geopolitical goals. We consider the literature on the benefits and risks associated with greater electricity interconnections and then examine a specific case study on the special current situation of three Baltic countries — Latvia, Lithuania, and Estonia — who are actively seeking to disentanglement from Russia’s electricity grid and synchronization with the Continental European Network (CEN).

In the detailed Baltics case study, we examine whether Russia may credibly use electricity trade as a geopolitical weapon in the Baltic region. We conceptualize the process of the synchronization project as a sequential-move game between three main actors: Russia, the Baltic states, and the transatlantic alliance (the EU-U.S.). The U.S. is considered as an interested party both because it is a dominant global power that has interests in the Baltics, and because it has long been a security guarantor of Europe through the North Atlantic Treaty Organization (NATO) security alliance. We analyze whether Russia is likely to try to reap geopolitical gains from its leverage over the frequency and voltage of the Baltics connection to its transmission system which includes the three Baltic states, Russia and Belarus under a treaty (the BRELL agreement) that was signed in February 2001. As the operator of the transmission system, Russia has the ability to affect the operations of the electric power system in the Baltic states through its control over grid frequency in the BRELL power ring. We consider the possibility that Russia might threaten or employ coercive actions, such as cyberattacks, to gain geopolitical leverage or to delay or disrupt the Baltics-Europe synchronization project.

We conclude that coercive threats to electricity grids are possible as players such as Russia consider geopolitical factors in electricity trade and connectivity. In the case of our specific case study on the Baltics, our findings indicate that Russia would potentially suffer a geopolitical reputational loss by cooperating fully with the Baltics’ withdrawal from the BRELL agreement. Therefore, we suggest that Moscow would be likely to use the desynchronization period to gain coercive leverage in order to maintain its geopolitical status and avoid appearing weakened. We conclude that severe threats such as a cyberattack would be less likely, provided that the U.S. and its allies signal a strong likelihood of deterrent retaliation. However, establishing a powerful deterrent signal may prove difficult and thus we conclude with recommendations for policy steps that the United States, Europe, and the Baltic states should take to prepare for all contingencies.

Geopolitics of Governance of Cross Border Grid Communities

Few studies have examined the geopolitical benefits and risks associated with greater electricity interconnection. Some of the early literature contends that electricity trade will be characterized by more symmetric interstate import-export relationships because power flows in both directions, unlike unidirectional oil and gas pipeline trade. For example, Overland (2019) argues that future electricity trade will involve more symmetrical relationships between prosumer (producer-consumer) countries that are mutually dependent on each other and have an equal stake in the well-functioning of the grid. Thus, physical interconnection and re-routing possibilities in an electricity grid would leave little room for direct geopolitical pressure. Additionally, cross-border electricity trade may foster regional cooperation, creating “grid communities” centered around economic blocks or great powers. Although grid communities have existed for decades,[7] their development is on the rise, and several renewable “super grids” have been proposed, including China’s proposal for a global grid network (Freeman, 2018). Because electricity is costly to store and electricity exports are not easily redirected in the short term, replicating strategic stockpiling behavior that characterizes petroleum and natural gas politics would be difficult in practice.

Although these studies generally argue that the benefits of increased electricity interconnection outweigh its risks, there is evidence that geopolitics may hinder cross-border electricity interconnections. In fact, several transnational interconnection projects have been subject to substantial delays and not advanced beyond the conceptual level for geopolitical reasons. Further, aversion to cross-border electricity hookups has persisted where countries fear an asymmetry of related dependence could create a means for the electricity provider to extract political concessions on matters unrelated to electricity trade. A case in point is represented by the cross-border integration of electricity grids between Israel and its Arab neighbors. Fischhendler et al. (2016) examined Israeli negotiation protocols to analyze ten attempts to connect these grids between 1991 and 2015, finding a direct relationship between the success (or failure) of these interconnections and geopolitical factors. Their analysis shows that two bottlenecks, in particular, discouraged cooperative grid connections in the region: lack of trust due to ongoing or past political relations, and Israel’s perception that cross-border electricity interconnection may create asymmetric dependencies whereby its Arab neighbors could use electricity exports for coercive foreign policy objectives.

The Middle East is not the only region of the globe where geopolitical bottlenecks slowed down or prevented electricity cooperation. Different domestic paradigms of energy security and the deterioration of bilateral relations and trust between Germany and Poland after the construction of Nord Stream 1 (connecting Russian gas to the German market bypassing Poland) played an important role in explaining the “grid-lock” in a third German-Polish interconnector (Puka and Szulecki, 2014). Further, energy security concerns over sourcing renewable electricity imports in MENA countries with higher geopolitical risks led to the failure of the Desertec project and the Mediterranean Solar Plan, given the wave of political and social upheaval that unleashed in the Middle East and North Africa in 2010–2011 (Escribano, 2019).

It has been suggested that China’s stated plans to build a global electricity grid as part of its Belt and Road Initiative (BRI) could create technological dependencies and susceptibility of networks to backdoor access that could become national security problems for connected countries (Cornell, 2019). China’s active role in supplying components and construction services for international electricity networks has not been the subject of systematic inquiry to date. China’s State Grid Corporation, for example, now owns a 40% stake in the National Grid Corporation of the Philippines — an entity responsible for operating the Philippines entire electricity transmission network including those connected to its military bases that remain a resource for the U.S. military. Africa’s electricity is also increasingly being organized around multi-country power pools that rely heavily on hydro-electric power generation, coal, and renewable energy plants built by China. China has been active in building utility-scale renewable energy as far afield as Argentina, Pakistan, and Bulgaria and dominates the construction of major renewable energy projects throughout Africa (Bhandary, et al, 2022).

India also has a prominent role in South Asian electricity grids. Many countries in South Asia have bilateral interconnectors to India’s electricity grid network. However, U.S.-sponsored bilateral connections between India and Nepal have been hampered by geopolitical issues.

Nepal is a net importer of electricity, mostly from India. But Nepal has huge hydropower potential. Nepal experiences significant declines in hydro generation in winter, and thus could benefit from improved access to other electricity generation capacity from neighboring countries (Singh et al., 2018). In 2019, an agreement was signed to build a new cross-border transmission line with India, to be followed by the synchronization of the Nepali and Indian electricity grids. However, this process has been hampered by geopolitical tensions involving not just India and Nepal, but also Nepal’s relations with China and the U.S. Specifically, the U.S. is partly financing the project of the new cross-border transmission line through an agreement with the Nepalese government known as the Nepal Compact, the ratification of which in 2022 led to widespread protests in Nepal. The program began implementation in late 2023. Nepal is also planning of a cross-border transmission line with China, under a grant from Beijing offered during bilateral meetings in late 2023.

Early research on cross border grid communities suggests that, on a technical basis, the party who has the political authority to plan and regulate electricity networks and who controls their technical operation could have geopolitical implications in additional to “who has the technology and components to develop the electricity grid” (Westphal et al, 2022). No concrete evidence of how this technical authority translates geopolitically has been investigated thoroughly, however. Ho (2020) lays a more general groundwork to consider how infrastructure influences power projection, but at present, there is no existing study of how geopolitics is influencing new networks that are just now being set up. Few studies have contributed to improved understanding of what gets built and why and how parties will manage any political asymmetries that emerge from regulation of cross border electricity flows and governance systems for its management.

We attempt to fill this gap in the literature by investigating the case study of how geopolitical factors influencing the Baltic states’ planned synchronization with the Continental European Network (CEN). The paper proceeds with background information on Baltic synchronization with Europe and then considers a game between multiple actors to tease out the ways the main players in the Baltics’ disconnection from Russia and synchronization process with Europe contemplate their future decisions. In the baseline scenario, which begins in early 2023, we posit that Russia makes the first move. We assume this starting point because it is not in the Baltics’ interest at this time to make a dramatic change by preemptively removing themselves from the Russian grid in violation of the BRELL agreement. By contrast, Russia is facing the choice of action because it knows that, supported by the EU-U.S., the Baltics intend to synchronize their electricity grid with the CEN. Accordingly, Russia must choose between cutting off the Baltics prematurely from its power grid before synchronization is completed, or acting cooperatively during the transition by continuing to engage with the Baltic states during the interim process. Subsequently, in the model, the Baltic states decide whether to discontinue electricity trading with Russia entirely or trade at a reduced level once synchronization is complete. It is worth pointing out that, although the Baltics have expressed their desire to fully disconnect from BRELL, they cannot credibly do so by themselves without EU-U.S. support. Thus, the Baltics need to carefully weigh the choices of the other more powerful actors before making their own decisions.

Background on the Baltic synchronization with the Continental European Network

The Baltic states joined NATO and the European Union in 2004, but their electric power systems remain connected and synchronized with those of Russia and Belarus within the Integrated/Unified Power System (IPS/UPS), which was created during the Soviet times and is centrally managed by Moscow (Juozaitis, 2021a). The five countries form a circular transmission system that is part of the IPS/UPS and is commonly referred to as the Belarus-Russia-Estonia-Latvia-Lithuania (BRELL) power ring or loop (Figure 1). The technical rules defining the participation in the transmission system are set up under a treaty (the BRELL agreement) that was signed in February 2001 and is automatically renewed every year absent a notice of withdrawal from one of the parties by August, six months before expiration.

Figure 1: The BRELL power ring. Source: Brinkis et al., 2011.

Baltic desynchronization from the IPS/UPS system and synchronization with the CEN have been considered a strategic priority for EU energy policy since 2013, leading to the inclusion of some of the necessary grid infrastructure reinforcements into the list of Projects of Common Interest (PCIs) eligible for EU funding.[8] Prior to 2016, the Baltic states were connected to the EU electricity markets via just two transmission lines between Estonia and Finland (Estlink 1 and 2). Two projects built with EU support (the 500 MW LitPol HVDC line connecting Lithuania to Poland, and the 700 MW NordBalt undersea cable between Lithuania and Sweden) were inaugurated in December 2015 and became operational in early 2016, laying the technical foundations for synchronizing the Baltic states’ power grids with the rest of the EU.[9] In June 2018, the governments of Estonia, Latvia, and Lithuania signed an agreement with Poland and the European Commission on the Political Roadmap for synchronization with the CEN by 2025. While several scenarios for Baltic desynchronization were proposed,[10] the Roadmap outlined a technical plan for synchronization with the CEN via Poland through the existing LitPol link (whose capacity would be doubled from 500 MW to 1 GW), complemented by a new submarine cable between Lithuania and Poland (the Harmony Link) and other reinforcements (including internal transmission network reinforcements in the Baltic states) to support grid stability, such as the installation of synchronous condensers for inertia.[11] In March 2019, a CEF grant agreement was signed to fund the first phase of the synchronization process.[12] Further, in May 2019, the European Network of Transmission System Operators (ENTSO-E) and the High-Level Group for Baltic Energy Market Interconnection Plan (BEMIP), a working group overseeing the integration of electricity markets between EU countries in the Baltic sea region, formally approved the conditions for the interconnection project.[13] Lastly, the political roadmap for implementing the synchronization was signed by the EU, the Baltics and Poland in June 2019.[14]

Transmission network reconstruction and reinforcements to complete the synchronization project have proceeded at a steady pace, receiving over 1.2 billion euros in EU support so far,[15] as well as U.S. funding.[16] For example, preparations for construction of the Harmony link have been underway since 2019, with expected completion in the 1st quarter of 2028,[17] and a new high-voltage electricity line connecting Estonia and Latvia was completed in June 2023.[18]

Synchronization with the Continental European Network has been elevated in importance following Russia’s 2022 cyberattacks on Estonia (Mix, 2022) and physical attacks on Ukraine’s grid (Popik, 2023), out of concern that one or more of the Baltic states’ infrastructure could be targeted by Russia, given the ongoing war in Ukraine. It is important to note that the Baltic states do not currently buy electricity from or sell electricity to Russia/Belarus.[19] Market data from Nord Pool show that imports into Latvia and Lithuania from Russia/Belarus and exports from Estonia to Russia/Belarus have fallen since 2021 (Figure 2). However, some flows remain since the five countries still operate as part of a single synchronous transmission system, making it difficult to halt power flows within their interconnected grid.

Figure 2: Imports and exports between the Baltic states and Russia/Belarus. Source: Own elaboration based on Nord Pool data.

Despite limited power flows between Russia and the Baltics, Russia plays an important role for frequency and voltage stabilization of the IPS/UPS, and can thus influence the functioning of the electricity grids in the Baltic states. In the early stages of the synchronization project, Russia was unable to cut off energy supply to the Baltics without affecting its semi-exclave Kaliningrad. However, recent completion of infrastructural upgrades may allow Russia to threaten to prematurely disconnect the Baltic states from the BRELL synchronous system before the Baltic states are ready to do so (Tuohy et al., 2018; Juozaitis, 2021a, 2021b; Westphal et al., 2022), possibly leading to severe blackouts (Lazarczyk and Le Coq, 2023). The region has developed contingency plans, should Russia take steps to abruptly detach Lithuania, Latvia or Estonia from the IPS/UPS.[20]

While the Baltics are in agreement about the need to move as quickly as feasible on a technical level, their viewpoints and preparations on the specific timeline for synchronization have not been perfectly aligned. Lithuania’s state-owned energy firm EPSO-G has initiated a special purpose company called Energy Cells which is now operating four battery storage projects connected to substations throughout the country. The batteries will facilitate the country’s ability to run on island mode.[21] In April 2023, Lithuania’s transmission system operator successfully tested the ability of its individual electricity system to disconnect from the IPS/UPS system and operate in “energy island” mode for ten hours.[22] Lithuanian officials had previously noted that, if the test was successful, the country could consider unilateral withdrawal from the BRELL agreement from February 2024. Lithuania has argued for a decoupling date of early 2024, which was deemed feasible by a technical study by the University of Gdańsk.[23] In contrast, Estonia and Latvia believe it is preferable to move up the target date to the beginning of 2025.[24] Estonia, in particular, is opposed to decoupling in 2024 because it would bear most of the associated costs and power outage risks.[25] A compromise was reached in July 2023, when Lithuania confirmed that it had no plans to separate independently from the BRELL system,19 and the Baltic states agreed to bring the new target date for desynchronization from BRELL up to February 2025 (instead of the end of 2025), with a formal notification made to Russia in August 2024, as required under the BRELL agreement to withdraw from that system. After the technical details of the synchronization process are finalized based on the results of ongoing technical feasibility studies, the Baltic states will make a final political announcement.16

The Baltics synchronization project has been elevated in importance after Russia’s 2022 cyberattacks on Estonia (Mix, 2022) and physical attacks on Ukraine’s grid (Popik, 2023), out of concern that the Baltic states could be the next targets for aggressive Russian ambitions and that electricity coercion could be a lever used in a hybrid war context. Russia was previously technically constrained from asserting threats to the Baltic grids because it could not cut off any of the Baltic countries without also destabilizing the electricity grid of its semi-autonomous enclave in Kaliningrad. However, recent completion of infrastructure upgrades to the BRELL synchronous system that connects Russia, Belarus, Kaliningrad may allow Moscow more leeway to prematurely disconnect a Baltic grid, should relations deteriorate further.

Europe and the Baltic states are moving as quickly as they can to minimize such risks until they can implement a target date for desynchronization of February 2025 (and formal notification of that fact by August 2024 BRELL system contract renewals). It is noteworthy that undisclosed material shortages are slowing the construction of the Harmony link.

The stability of Baltic grids as well as those grids the Baltic states are already connected to, including Finland, Poland, and Sweden, are now a strategic matter for both NATO and the United States, and the U.S. and its allies have had to consider how much electricity equipment and technical assistance can be provided to Ukraine without leaving other regions in Europe vulnerable to any additional disruptions and repair requirements. Moscow has targeted electricity transformer manufacturing facilities in Ukraine as well as its power plants and substations during the first phase of the 2022 war. The United States has provided $53 million in equipment for the repair of Ukraine’s electrical system, including small transformers, circuit breakers, disconnectors, and backup generators. But the ongoing bombing of Ukraine’s electricity system creates a challenge as there exists a shortage of large transformers globally and therefore the United States and European allies need to keep spare equipment in reserve at home. Attempts in the U.S. Congress to fund expansion of U.S. domestic production of large transformers and needed input grain-oriented steel got cut from 2022 bills and remain a pressing area for increased U.S. Congressional attention.

Russia and Baltics Strategies: A Synchronization Model

We consider a game with three actors: Russia, the Baltics (a unitary actor representing Lithuania, Latvia, and Estonia), and the transatlantic alliance denoted as EU-U.S. We consider the U.S. as an interested party both because it is a dominant global power that has an interest in the Baltics, and because it has long been a security guarantor of Europe through NATO (Mix, 2022).

As of now, the war in Ukraine has reinforced the U.S. security role. Our effort assumes that the U.S. and the EU have formed a largely unified decision-making body, as the two allies are already closely consulting with each other and have agreed on a joint policy stance on the issue.[26] A coordinated policy response to the Baltics electricity situation has already been announced by Brussels and Washington, and it seems unlikely at this juncture that Russia could drive a wedge between the two parties since the bulk of financial and technical assistance necessary to complete synchronization has been implemented. While there remains a small possibility that Europe and the U.S. might differ in strategic response to an unexpected Russian military attack on the last infrastructure connection still under construction–the Harmony Link between Lithuania and Poland–, both Lithuania and Poland are NATO members, thereby obligating both Europe and the U.S. to respond. This fact, per se, is likely a deterrent to direct Russian military action against the Harmony Link except if a wider war were to erupt. In a cloudier, less clarified situation such as a Russian cyberattack, we envision that the U.S. would provide security guarantees including a credible threat of counterattack, as well as necessary assistance in the event that the CEN was attacked and destabilized post synchronization with the Baltics. The United States already provides cyber assistance to Europe and the Baltic states, and NATO has added a new special effort in June 2023 to guard undersea cables throughout Northern Europe.[27] In the autumn of 2023, a U.S. Air Force plane delivered custom-built equipment designed to withstand Russian electronic warfare attacks on Ukraine’s power grid.[28]

We begin our analysis in early 2023 and based on the timeline of events already outlined above, we posit that Russia makes the first move. We assume this starting point because it is not in the Baltics’ interest at this time to make a dramatic change by preemptively removing themselves from the Russian grid in violation of the BRELL agreement. By contrast, Russia is facing the choice of action because it knows that, supported by the EU-U.S., the Baltics intend to synchronize their electricity grid with the CEN. Accordingly, Russia must choose between cutting off the Baltics prematurely from its power grid before synchronization is completed, or acting cooperatively during the transition by continuing to engage with the Baltic states during the interim process.

In analyzing strategic choices, we consider both geopolitical and economic payoffs. This is an important ingredient in our analysis since, as we mentioned earlier, geopolitics might imply that certain outcomes are very unlikely, even if they are technologically feasible and economically desirable. Economic payoffs would include the direct costs of synchronization and the respective benefits from electricity trading between the Baltics and Russia. The geopolitical payoffs include the respective gains or losses to each individual actor’s reputation and to their geopolitical influence. We systematically consider the sequence of moves based on these payoffs. In particular, we consider whether Russia would benefit from breaking the terms of its contract with the Baltics and notify them to prepare for early termination.

We distinguish this case from a sudden cut-off by Russia leaving no time for the Baltics and Europe to prepare for the shutoff. The latter case, in our view, would be considered a hostile act rising above the level of a simple contract violation. Such a hostile act has happened before. For example, Russia abruptly shut off natural gas supplies to Poland and Bulgaria prematurely in April 2022 despite their valid contracts due to end later that year, amid the context of Russia’s attacks on Ukraine earlier that year.[29] Our work suggests that the Baltic states should be prepared for this worst-case scenario.

Our analysis implies that a sudden cut-off of electricity by Moscow would result in the end of the strategic interaction between Russia and the Western actors surrounding electricity coercion. In this case, the Baltics would have no choice but to take emergency actions. In this final response, the sudden cut-off would mean that the EU-U.S. and the Baltics would have to activate an emergency plan. Any strategic retaliation would be contextualized by the facts on the ground in the war in Ukraine and is beyond the scope of this paper. We discuss what emergency planning might look like in the conclusion.

In considering the EU-U.S. responses, we build in the EU-U.S. choice to support Baltic desynchronization from the BRELL system. This policy appears to have a firm commitment in the wake of Russia’s behavior since 2013, taking into account the Russian occupation of Crimea and the alleged 2015 Russian cyberattack on Ukrainian electricity companies. After an EU-backed financial plan for the Baltic states’ robust electricity connection to Europe was announced back in 2013, it made slow progress but more recently, since 2022, the Baltic synchronization process with Europe’s CEN system has gained momentum. In our game sequence, Russia is then presented with the choice of whether to engage in coercive behavior, such as hybrid style cyberattacks, which can be harder to attribute and raises a more complex set of response alternatives.

At the final stage, we assume that the Baltics must decide whether to discontinue electricity trading with Russia entirely or trade at a reduced level once synchronization is complete. It is worth pointing out that, although the Baltics have expressed their desire to fully disconnect from BRELL, they cannot credibly do so by themselves without EU-U.S. support. Thus, the Baltics need to carefully weigh the choices of the other more powerful actors before making their own decisions.

Some critical decision points are identified in our scenarios. One such juncture is whether the Baltic states will or won’t continue to trade electricity with Russia after the physical synchronization with Europe is completed. Here outcomes must take into account specific precursors: whether Russia signals hostile intent with a cyberattack or offers a cooperative stance to disconnection; whether EU-U.S. continued support is locked in; whether the Baltic states will have a shortfall of electricity and can benefit from some degree of reduced electricity trade with Russia.

In the case of continued support from the EU-U.S., continued electricity trade with Russia would still subject the Baltics to a geopolitical cost of continued dependence from Russia via an existing physical electricity connection and vulnerability to any potential Russia threats. On the other hand, the Baltics could see an economic benefit to some degree from having reduced electricity trade with Russia. However, the possibility of Russia conducting cyberattacks or other threats during the transition period could make a difference in risk assessment that would weigh against economic benefits.

Throughout our analysis, we assume that Russia would suffer a reputational cost, if it chooses to be cooperative in the desynchronization process. Ultimately, our analysis suggests that such a choice would signal Russia’s weakness given that there is minimal goodwill left for Russia to cultivate in Europe and the U.S. in light of the Ukraine war. Therefore, all payoffs for Russia on the path where it chooses a negotiated transition have a negative geopolitical/reputational component.

The evaluation of the different scenarios must also take into consideration that, although the costs associated with the synchronization are large (including financial and technical assistance, as well as adjustments within the grids of neighboring countries like Poland), the geopolitical costs of continuing some electricity trade with Russia may be seen as an even larger problem for the Baltics and Europe.[30] More specifically, continuing to trade with Russia would give Russia leverage to threaten to cut off that amount of supply to the Baltics abruptly at an inopportune time, temporarily disrupting the balance of demand and supply between the Baltics and the CEN. Europe is spending considerable resources to minimize the risk that a continuing Russia grid connection with the Baltics could subject them to coercive threats or hostile Russian actions resulting in grid instability. Therefore, Europe will likely insist that the Baltics not trade with Russia in an effort to minimize physical and geopolitical risks from the synchronization with Europe. That is, the reason Europe will resist even minimal Baltic electricity trade with Russia is that such trade would give Moscow the leverage to pose a coercive threat not only to the Baltics, but also to Europe. That geopolitical risk of coercion likely outweighs any cost savings that could be achieved from limited electricity trade between the Baltics and Russia.

The model prediction: Unilateral Termination by Russia

We investigate in turn all possible scenarios regarding strategy configurations, including whether Russia begins by disconnecting the Baltic state early or negotiating a smooth transition and whether the EU-U.S. continues to assist with the transition or not. We then determine each player’s likely responses. Finally, we consider the equilibrium for the entire game by comparing each player’s payoffs under different decision tree circumstances. We find that Russia’s best strategy is to choose early termination to protect its stature as a geopolitical power. The logic behind Russia’s likely choice is that the equilibrium outcome will be no different for Russia regardless of what path it chooses. More specifically, the geopolitical risk of having continued electricity trade with Russia is likely to be deemed extremely high by the West, no matter what exact posture Moscow takes on the wind-down of the BRELL agreement. That is because all possible actions will be contextualized by the ongoing tense relationship between Russia and the West since the Ukraine war, and the still unfolding negative consequences for Europe from its energy dependency on Russia. This implies that regardless of Russia’s decisions, all subsequent paths are likely to lead to Baltic synchronization with Europe under conditions of no Baltic electricity trade with Russia, regardless of whether Russia offers to negotiate favorable terms for desynchronization of the Baltics or takes a more coercive posture. Consequently, assuming that there is some reputational cost for Moscow, either domestically or internationally, from appearing conciliatory with the West, our analysis implies that Russia is unlikely to remain cooperative over the course of the synchronization process.

While the possibility that the EU-U.S. would abandon its current policies regarding Baltic synchronization with Europe cannot ever be ruled out with certainty, we consider it the most realistic scenario. In an alternative case where Europe stopped its assistance of the synchronization process, the Baltics might consider continued reduced electricity with Russia to meet electricity shortfalls, if supplemental supply was no longer abler to be made available from Europe. This choice would likely, however, be colored by whether Moscow continued to engage in coercive actions.

Implications for Policy: The Geopolitics of Electricity Management, Resilience, and Technical Support

The United States currently provides technical collaboration with the Baltics and Ukraine under the umbrella of the Partnership for Transatlantic Energy and Climate Cooperation (P-TECC). However, the United States might not be fully prepared to provide the necessary assets to effectively serve as a resource for electricity protection and repair in light of Russia’s challenge to European cross border electricity trade. U.S. policy makers need to become more aware of the importance of America as a supplier to transformers and other grid components that will play an increasing role in securing cross border electricity networks that are of vital U.S. interest. Additionally, the United States’ own domestic grid vulnerabilities hinder its effective role as a guarantor of European electricity networks.

For U.S. policy makers, understanding the technical and geopolitical features of cross border electricity flows and what stockpiled equipment and operational expertise will be required to permit it to maintain its dominant role in protecting secure electricity supply is increasingly pressing (Jaffe, 2023). European scholars note that “…it is foreseeable that the US — as an extra-regional and extra-continental power — will become increasingly involved in the European and Asian electricity systems. Washington thus attempts to contain Chinese and Russian influence in strategically important border and/or bridging areas…..using its financial, developmental and regulatory levers to achieve this.” (p. 51, Westphal et al., 2022).

Our exercise projects that the Baltic countries will opt to fully desynchronize from the Russian BRELL system and cut off all electricity relations with Russia, regardless of the negotiating stance of Moscow. Chances are, then, Russia will have no real incentive to offer concessions or pursue a smooth negotiated transition. The more cooperative a stance taken by Russia, the more likely it would be to suffer reputational costs in appearing weak or ineffective in the eyes of its key domestic or international audiences. As a result, our analysis predicts that Russia will take an uncooperative approach as desynchronization approaches.

At a minimum, one can expect Russia to try and exploit the geopolitical capital already expended by the U.S. and Europe regarding Baltic grids to gain something for itself, either reputationally or financially. Russia’s previous actions in the natural gas market could be construed as an informative precedent that Moscow will not feel constrained by contractual obligations and processes. We believe that a strong risk exists that Moscow will be inclined to take unilateral actions, including a possible premature unilateral termination of electricity connections between the Baltics and the Russian network. Geopolitically, Russia would not want Europe to achieve a clear win with a smooth transition for Baltic synchronization to the CEN. Western attitudes towards Russia are equally soured by ongoing conflicts. Chances are negotiated outcomes will have limited scope.

Our research demonstrates the importance for the United States and Europe to provide a joint and credible threat of retaliation in order to ensure Russia would find the costs too high to engage in cyberattacks or overt sabotage of Baltic electricity grids and/or connector infrastructure to Europe. A U.S. deterrence element is a key driver of ultimate outcomes, and so is a continual strong cooperation between the US and Europe. The recent October 2023 incident at Estonia’s natural gas pipeline connector with Finland is a warning that the United States’ and NATO’s efforts to establish the necessary level of deterrence may be lacking.

U.S. defense and retaliatory readiness must be positioned to leave Russia with no costless actions that it can take to undermine synchronization, including hybrid or direct attacks or early unilateral disconnection. This means that the United States and NATO must maintain superiority in offensive cyber capabilities related to electricity networks. But offensive capabilities are just part of the story. The United States and other NATO member countries must also be able to credibly stand in a premiere position in cyber protection of their own domestic grids from cyber counterattack. That will require a sharper focus on upgrading and maintaining American electricity assets and networks than is currently taking place.

In addition, to the extent possible, Europe and the United States should adjust technical assistance to the Baltics to ensure that any sudden cut-off or disruption to stable frequency and voltage regulation in the Baltics can be adequately met with emergency procedures. The Baltics must have an emergency backup plan to reduce the leverage that Russia reaps from its ability to interfere with Baltic electricity voltage and frequency.

Ukraine offers a useful precedent. In the early days after Russia’s February 2022 military attack on Ukraine, Kyiv quickly shifted its grid to “island mode” and then hastened to activate small connections to Europe. Ukraine is in the process of installing static synchronous compensators to enhance power stability, but risks remain and the path to full synchronization to Europe is likely to be influenced by ongoing outcomes of the war with Russia.[31] It should be pointed out that Ukraine’s two-week synchronization was predated by nearly two decades of planning. This foundation allowed the nation to successfully operate in island mode, thereby meeting the minimum requirements to safely transition to the centralized European grid. Part of this success may also be due to the country’s energy mix which is dominated by nuclear, coal, and gas. These conventional fuel sources provide higher levels of rotational inertia, which in turn safeguards against grid instability enabling a smoother transition.

The Baltic States, in contrast to Ukraine, have all worked to diversify their grids with renewables, which now account for 24%,[32] 32%[33] and 42%[34] of energy production in Lithuania, Estonia, and Latvia, respectively. Additional complexity could arise from the difficulty that the Baltics would have to synchronize to the European grid in unison. For its part, Lithuania has taken the most aggressive stance in decoupling from BRELL: as noted above, the country has successfully operated an island mode test[35] and invested in preparation for synchronization with 200 MWh of battery storage.[36] Cumulatively, these actions have enabled Lithuania to call for an expedited transition. Estonia has cited technical feasibility and other hurdles to rapid transition,[37] but recently announced its first grid-scale battery storage project would be undertaken in 2024.[38] The country is also constructing a 550 MW pumped hydro storage facility. Latvia has not yet announced plans to build storage assets as a means to enhance grid stability.

Finally, the stability of Baltic grids as well as those grids the Baltic states are already connected to, including Finland, Poland, and Sweden, are now a strategic matter for both NATO and the United States. Therefore, the U.S. and its allies have had to consider how much electricity equipment and technical assistance can be provided to Ukraine without leaving other regions in Europe vulnerable to any additional disruptions and repair requirements. Moscow has targeted electricity transformer manufacturing facilities in Ukraine as well as its power plants and substations during the first phase of the 2022 war. The United States has provided $53 million in equipment for the repair of Ukraine’s electrical system, including small transformers, circuit breakers, disconnectors, and backup generators. But the ongoing bombing of Ukraine’s electricity system creates a challenge as there exists a shortage of large transformers globally, and therefore the United States and European allies need to keep spare equipment in reserve at home. Attempts in the U.S. Congress to fund expansion of U.S. domestic production of large transformers and special input steel got cut from 2022 bills and remain a pressing area for increased U.S. Congressional attention.

Going forward, the ability to rapidly launch and manage electricity smart grid assets and install backup systems will play a critical role in alliance networks such as NATO. The United States and Europe need to boost capacity to be able to provide equipment for the repair of Ukraine’s electrical system, including small transformers, circuit breakers, disconnectors, backup generators, and other kinds of distributed energy systems (DERs) such as solar panel systems with battery storage. However, they also need to consider how to bolster the speed at which such DER systems could be deployed within the Baltic states, should undersea infrastructure get damaged or a sudden cut-off by Russia take place. Manufacturing of DER solution technologies is prioritized in the U.S. Inflation Reduction Act, but the U.S. Department of Defense will need a coherent strategy on how to utilize DERs and other technologies related to resilience and restoration of services as part of its deterrence posture and projection of power.

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[1] “Synchronisation with Continental Europe.” 2023. 

[2] Cornell, Phillip. “Energy Governance and China’s Bid for Global Grid Integration.” Atlantic Council. May 30, 2019. 

[3] Park, Donghui, and Michael Walstrom. “Cyberattack on Critical Infrastructure: Russia and the Ukrainian Power Grid Attacks.” The Henry M. Jackson School of International Studies at the University of Washington. October 11, 2017.

[4] Howell O’Neill, Patrick. “Russian Hackers Tried to Bring down Ukraine’s Power Grid to Help the Invasion.” MIT Technology Review. April 12, 2022. ; Lyngaas, Sean. “This pizza box-sized equipment could be key to Ukraine keeping the lights on this winter.” CNN. November 21, 2023. 

[5] “Finland blames Chinese ship for Baltic Sea gas pipeline damage.” Euronews, October 25, 2023, 

[6] Milne, Richard. “Chinese ship becomes focus of inquiry into Baltic pipeline damage.” Financial Times. October 20, 2023. 

[7] For example, Nord Pool, the world’s first multinational exchange for electricity trading, was established in 1993 as a Norwegian electricity exchange, and extended its trade to Norway and Sweden in 1996.

[8] PCI status is a precondition for grants under the Connecting Europe Facility (CEF) (“European solidarity on Energy: Synchronisation of the Baltic States’ electricity network with the European system strengthens security of supply”, June 28, 2018; “Commission Delegated Regulation (EU) No 1391/2013 of 14 October 2013 amending Regulation (EU) No 347/2013 of the European Parliament and of the Council on guidelines for trans-European energy infrastructure as regards the Union list of projects of common interest”, 

[9] “Completion of NordBalt and LitPol closes the Baltic Ring”, March 23, 2016,  The LitPol HVDC line was listed on the first EU list of PCIs adopted by the Commission in 2013.

[10] Options under consideration included the synchronous operation of the Baltic states and the Nordic countries, the autonomous synchronous operation of the Baltic states, and the synchronous operation of the Baltic states and the Continental European Network. Technical studies indicated that the latter option would minimize de-synchronization costs (Purvins et al., 2017).

[11] “Questions and answers on the synchronization of the Baltic States’ electricity networks with the continental European network (CEN).” June 28, 2018. 

[12] Hyndle-Hussein, Joanna. “EU Support for Synchronising the Baltic States’ Power Grids.” OSW Centre for Eastern Studies. January 30, 2019. 

[13] “Conclusions of the Baltic Energy Market Interconnection High-Level Group on the synchronisation of the Baltic States network with the continental European Network (Senior Officials’ level).” May 28, 2019. ; “First Milestone of Future Synchronous Connection of the Baltic Power System with Continental Europe.” May 29, 2019. 

[14] “Political Roadmap on implementing the synchronization of the Baltic States’ electricity networks with the Continental European Network via Poland.” ; “Energy security: The synchronisation of the Baltic States’ electricity networks — European solidarity in action.” June 20, 2019.

[15] “Lithuania completes electricity grid test, ‘giant step towards energy independence’.” April 24, 2023. 

[16] “Why the Baltic States Are Reconfiguring Their Electric Grids.” August 13, 2020. 

[17] “Harmony link.” 

[18] Rats, Liisbeth. “Updated Estonian-Latvian electricity connection launches.” June 9, 2023. 

[19] “Baltics agree to move up European power grid synchronization target.” July 25, 2023.  “Synchronisation with Continental Europe.” 2023. ; Lazarczyk and Le Coq (2023) also note that “The synchronization is set for 2025, with no trade between the Baltics and Russia (or Belarus)” (p. 10), and “commercial trading in the Nord Pool DA market does not exist, as in the case of Estonia, or is limited, as in the case of the other two Baltic states” (p. 16).

[20] As shown by the case of Ukraine, which completed an emergency synchronization with the European grid in March 2022, expediting desynchronization is feasible.

[21] Murray, Cameron. “Testing starts on Fluence 200 MWh battery storage projects in Lithuania for spring 2023 activation.” Energy Storage News. February 13, 2023.

[22] “Lithuania completes electricity grid test, ‘giant step towards energy independence’.” April 24, 2023. 

[23] Patricolo, Claudia. “An Early Power Synchronisation in 2024 Is Feasible, New Study Finds — CEENERGYNEWS.” June 30, 2023. ; Zylm, Wojciech. “Baltic Countries Ready to Synchronize with European Power Grids in 2024, Confirms Study.” June 15, 2023. 

[24] “Baltic states look into expediting synchronization with continental grid.” July 14, 2023. 

[25] “Baltics unable to decouple from Russian power grid sooner, official says.” July 17, 2023.

[26] “US and Baltic States reaffirm commitment to the power synchronisation project.” March 7, 2023. 

[27] “NATO establishes new centre to safeguard undersea pipelines, cables as concern mounts over Russian sabotage threat.” June 17, 2023.; “NATO Moves to Protect Undersea Pipelines, Cables Amid Concern Over Russian Sabotage Threat.” June 16, 2023. 

[28] Lyngaas, Sean. “This pizza box-sized equipment could be key to Ukraine keeping the lights on this winter.” CNN. November 21, 2023. 

[29] Poland had indicated it did not plan to renew its existing natural gas supply contract with Russia as early as 2019. “UPDATE 1-Poland’s PGNiG tells Gazprom it plans to end gas supply deal in 2022.” November 15, 2019.  As a second example of sudden move, Russia reduced natural gas supplies to Poland, Slovakia, and Germany in the autumn of 2014 ahead of implementation of a new round of European sanctions against Moscow.

[30] We discuss the case where c>g in the next section.

[31] Baustein, Anna. “How Ukraine Unplugged from Russia and Joined Europe’s Power Grid with Unprecedented Speed.” Scientific American. March 23, 2022. 

[32] International Renewable Energy Agency. 2022. “Lithuania Energy Profile.” 

[33] International Renewable Energy Agency. 2022. “Estonia Energy Profile.”

[34] International Renewable Energy Agency. 2022. “Latvia Energy Profile.” 

[35] “Lithuania completes electricity grid test, ‘giant step towards energy independence’.” April 24, 2023. 

[36] Murray, Cameron. “Testing starts on Fluence 200 MWh battery storage projects in Lithuania for spring 2023 activation.” Energy Storage News. February 13, 2023. 

[37] Ots, Mait. “Lithuania Speeding Up Desynchronization Process Breaches Agreement.” June 16, 2023. 

[38] Colthorpe, Andy. “Estonia’s first grid-scale battery storage project to ‘launch next year’ though tender.” June 1, 2023. .

 




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