Latvia Energy Storage: The EU is sending money, Chinese companies are rushing in, this Baltic dark horse hides an 18%-25% IRR opportunity.

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As the Lithuanian energy storage market is being fervently discussed due to subsidy policies, Latvia, another Baltic state, is quietly rising. This country, which just completed its "independence revolution" in the power grid in 2025, has become a "value lowland" in the eyes of energy storage investors with its unique advantages of "40% frequency fluctuation gap, 70% share of cross-border projects, and EU fund backing." More importantly, Chinese companies such as Kehua Data and Hema have already taken the lead in landing benchmark projects, and a competition to seize the dividends of energy transition in Eastern Europe has already begun.

1. Independent Power Grid + Surge in Green Energy: Energy Storage Becomes the "Essential Need Among Essential Needs"

The energy storage boom in Latvia began with a "grid decoupling battle" concerning energy sovereignty. In February 2025, with the complete disconnection from the Russian BRELL grid, Latvia officially connected to the European continental grid through the LitPol Link. However, data from the transmission system operator (TSO) Augstsprieguma tīkls shows that after the decoupling, the frequency fluctuations in the regional grid surged by 40%, and traditional peaking units were unable to meet the demand for second-level response.

The explosive growth of renewable energy has exacerbated the demand for energy storage. In the past four years, Latvia's installed capacity for wind and solar power has surged by 55%, with renewable energy accounting for 42% of the total electricity generation in 2024. Lithuania's Green Genius company has invested over 100 million euros to build a solar park locally, which, after being put into operation in 2026, will generate more than 150 GWh annually. Without supporting energy storage, the curtailment rate could exceed 10%. Not to mention the 300 MW hybrid offshore wind farm being jointly promoted with Estonia, where the EU directly mandates a storage ratio of no less than 15%.

"Now the stability of the power grid relies entirely on energy storage." An engineer from Latvia's national electricity company (Latvenergo) admitted at the site of the Hema 20MWh energy storage project. This project, which is set to be operational by the end of 2024, uses intelligent liquid cooling temperature control technology, enabling precise participation in primary frequency modulation of the power grid, becoming a "ballast" for regional grid stability. The second phase is now in preparation.

II. The EU is sending money + paving the way locally: Policy dividends have arrived.

For investors, what is most attractive about Latvia is the dual policy package of "EU funding and local acceleration," where every bit of support is precisely allocated to project costs.

The "real money" from the EU fund has already been in place. The €40 billion innovation fund provides a maximum subsidy of 30% of the investment cost for energy storage and hydrogen integration projects; the Connecting Europe Facility (CEF) directly funds cross-border energy storage, covering 50% of the grid connection costs for the Estonia-Latvia wind power supporting energy storage project. Green Genius's solar storage park has successfully applied for innovation fund subsidies with these policies, significantly reducing initial investment.

Although local policies have not introduced independent subsidies, the "green light signal" is clear. In Q3 2025, the flexible resource expansion plan will enter the detailed public announcement phase, clearly prioritizing the approval of BESS to replace coal-fired peak-shaving units; in 2026, mandatory storage standards will also be introduced, and subsidies for solar storage projects are expected to increase by 10%. This combination of "EU safety net + local enhancement" significantly enhances the project's risk resistance capability beyond expectations.

3. Chinese Enterprises Seizing Opportunities + Cross-Border Explosion: The Wave of Project Implementation Has Arrived

In the energy storage sector of Latvia, Chinese enterprises are upgrading from "technology export" to "project leadership," jointly sparking a wave of implementation with European companies.

Chinese Enterprises Benchmark Projects Land Ahead of Schedule

HeMai 20MWh Sample Project: As a large-scale energy storage benchmark in Latvia, it adopts the HoyPrime integrated container system, which adapts to the temperature differences in the Baltic Sea through intelligent liquid cooling technology. It can not only participate in grid frequency regulation but also arbitrage in the energy balancing market. Partner C3 candidly stated that "its project management capabilities exceeded expectations," with the second phase set to commence in September.
Kehua Energy's breakthrough in commercial and industrial applications: Customizing a 1.1MW/2.4MWh liquid cooling energy storage solution for local ecological farms, controlling the temperature difference of the battery cells within ±1.5℃, ensuring stable operation even in severe winter conditions, and the millisecond-level fault switching function ensures that farm production is not affected by grid fluctuations;
Winning Science and Technology can deliver in bulk: securing an order for 15 units of 258 energy storage cabinets, utilizing AI algorithms to monitor electricity prices and wind-solar output in real time, achieving intelligent scheduling of "charging during off-peak hours and discharging during peak hours," providing a "Chinese solution" for peak shaving and valley filling in the power grid.

Cross-border projects become the main battlefield

Nearly 70% of the planned projects carry a "cross-border gene": the 50MW/100MWh Riga Bay offshore wind power supporting energy storage, which relies on the EU CEF fund to cover 40% of the costs, specifically serving the peak regulation of the Polish power grid; the 40MW/80MWh Latvia-Lithuania interconnected energy storage, funded jointly by the three countries, has become the core hub for collaboration in the Baltic power grid. These projects not only avoid the limitations of local market scale but also enjoy the benefits of cross-border electricity price differentials.

Four, 18%-25% IRR is expected: Now is the right time to enter.

The investment value of Latvia ultimately rests on "high certainty and low competition" returns. Relying on the booming auxiliary service market in the Baltic Sea region, local energy storage projects can achieve an IRR of 18%-25%, far exceeding the 6%-10% of mature markets in Western Europe.

Specifically, the revenue account is clear: the annual income from the secondary automatic frequency restoration reserve (aFRR) service reaches 120,000 euros/MW, and the Riga Bay project can quickly recoup costs relying solely on this service; if electricity arbitrage is added, the winter peak-valley price difference can further amplify profits. The enervis index shows that the average revenue of energy storage projects in Europe has reached 147,800 euros/MW·year, while Latvia has a competitive advantage due to less competition, resulting in even higher actual revenues.

The more critical factor is the "window period advantage": Before the implementation of the domestic配储 policy in 2026, the competition pressure for EU fund applications is low, and the project approval cycle only takes 6 months, which is twice as fast as Western Europe. As a core node of the Baltic hydrogen energy corridor, the hydrogen storage and electrochemical energy storage integration project can also receive additional subsidies, further enhancing returns.

V. Entrance Guide: The Optimal Path for Three Types of Players

The energy storage opportunities in Latvia are promising, but choosing the right track is essential to seize the benefits. Different types of investors have already clarified their focus:

Industry investors: Bind cross-border and green power projects

Prioritize the connection with projects that have already received EU funding, such as the Riga Bay offshore wind power and Green Genius energy storage park, which can draw on the HeMai model—binding local partners (such as C3 Company) through technology output, upgrading from equipment supply to EPC general contracting, and securing long-term benefits.

Equipment Supplier: Targeting Climate Adaptation Needs

Latvia has severe cold in winter and significant temperature differences in summer, which places high demands on the stability of energy storage devices. Kehua's liquid cooling solution and Yingke's intelligent temperature control system have already verified market acceptance and can be重点推广 standardized products that adapt to the Eastern European climate, quickly penetrating the market through Nordic distributors.

Financial investors: Focus on EU fund coverage projects

Prioritize projects supported by CEF funds or innovative funds, such as the Latvia-Lithuania interconnected energy storage project. These projects have stable funding sources, and their cross-border nature can hedge against local market size limitations. Currently, three projects exceeding 30MW have entered the financing stage, presenting a good opportunity to get involved.

Don't wait for the policy to be implemented before entering the market.

When the Western European energy storage market is caught in a price war, Latvia is opening a new door to Eastern European energy storage with its threefold advantages of "EU subsidies + essential demand gap + Chinese enterprise technology adaptation." Here, there are ready-made models like the Hema 20MWh project, as well as giant cakes like the Riga Bay cross-border project; it can ensure returns with an IRR of 18%-25%, while also laying out a long-term ecology through the Baltic Energy Corridor. The period before the implementation of the local mandatory energy storage policy in 2026 is the golden window period with the lowest costs and minimal competition. While others are still studying reports, companies like Kehua Shuneng have already proven with projects that Latvia's energy storage story is not in the future tense, but in the present continuous tense.

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