Selected Issues Papers

This paper discusses strategies to modernize Latvia’s electricity sector, focusing on deeper integration with the EU electricity grid. Based on the Latvian Energy Strategy 2050, which prioritizes a greener, more secure, and efficient energy supply, the paper highlights the advantages of EU grid integration over self-sufficiency. Empirical analysis using firm-level data shows that higher electricity prices and volatility harm manufacturing employment, particularly in sectors like beverages and pharmaceuticals. Looking ahead, Latvia plans to expand its renewable energy capacity, especially inshore wind farms, leveraging its competitive advantages. Closer integration with the EU grid will be crucial to fully realizing the economic, environmental, and energy security benefits from this expansion.