Lithuania is rapidly emerging as an attractive destination for data center development, particularly in high-performance computing (HPC) and artificial intelligence (AI). With a strong combination of reliable renewable energy, robust digital infrastructure, a supportive business environment, and a skilled workforce, Lithuania ticks all the essential boxes for a data center location. 

However, Lithuania offers something even more compelling – its sustainable and long-term energy strategy. This forward-thinking approach not only implies a cost-effective and reliable energy supply but also aligns with global demands for environmentally responsible operations. Together, these factors make Lithuania a future-proof destination for data center investors. This article by KV Baltic delves into why Lithuania, a hidden gem in Northern Europe, is poised to become a leading global hub for data centers.

1. A progressive and sustainable energy strategy

Lithuania's energy strategy is a cornerstone of its attractiveness for data center investments. Historically reliant on energy imports, Lithuania has shifted its focus towards building a resilient and sustainable energy system.

According to the "Energy Strategy 2050" by EPSO-G (State-owned energy transmission and exchange company group), Lithuania aims to achieve energy self-sufficiency while minimizing carbon emissions by 2035, targeting a 70 percent renewable energy share by 2030 (EPSO-G Strategy).

In 2022-2023, Lithuania increased its annual per capita installation of new wind and solar energy capacity 13-fold. Significant investments in renewable energy, including wind and solar, are underway, driving Lithuania towards an independent and green energy supply, which in turn helps reduce electricity costs.

In addition, the 700 MW offshore wind farm near Klaipėda, led by Ignitis Renewables in partnership with Ocean Winds, is expected to begin operations around 2030. This project will generate approximately 3 TWh of green electricity annually, meeting up to 25 percent of Lithuania's current electricity demand (Ignitis Renewables). Such initiatives enhance Lithuania's energy independence and align perfectly with the needs of modern data centers that prioritize renewable energy sources.

By investing early in Lithuania, data center operators can benefit from competitive electricity pricing and favorable conditions before energy demand rises. According to the International Energy Agency (IEA), Lithuania's energy transition is supported by policies aimed at increasing renewable energy capacity, which will further decrease energy costs in the future (IEA Country Profile).

2. Ideal climate for efficient data center operations

Lithuania's geographical location in Northern Europe provides a favorable climate for data center efficiency. The average annual temperature in Lithuania ranges between 5°C and 8°C, which facilitates direct or indirect free cooling throughout much of the year. Studies have shown that free cooling can reduce cooling-related power consumption by up to 40 percent, depending on the climate and data center design (ASHRAE Technical Guidelines).

According to KV Baltic data center specialists’ calculation, more than 90 percent of the total hours per year in Lithuania are suitable for full indirect free cooling when conventional servers are utilized and up to 100 percent full indirect free cooling when new HPC or AI servers with DLC or immersion technologies are utilized.

Therefore, Lithuania is able to significantly reduce operational expenses (OPEX) related to cooling needs, making it a cost-effective choice for data center operations.

This favorable climate directly translates to lower power usage effectiveness (PUE) values, particularly for facilities like the KV Baltic data center project, which utilizes high power density and liquid cooling technologies. The combination of natural cooling opportunities and cutting-edge cooling solutions supports a highly energy-efficient setup, critical for AI and HPC data centers.

3. Robust digital infrastructure and low network latency

Lithuania has made substantial investments in its digital infrastructure, establishing extensive fiber optic connectivity. Lithuania is connected to Sweden via the NordBalt underwater cable, a 453 km high-voltage direct current (HVDC) submarine and underground cable system, ensuring reliable high-speed international connectivity (NordBalt Project). Additionally, Lithuania has established land fiber connections to Germany through the Baltic Highway, a solid fiber-optic backbone that connects the Baltic states to Western Europe, facilitating seamless data transmission.

The round-trip time (RTT) between Lithuania and major European cities is sufficiently competitive for AI and HPC applications, with RTTs to Stockholm, Sweden, at approximately 11 milliseconds, and to Frankfurt, Germany, averaging approximately 21 milliseconds. With Lithuania's strategic position and robust infrastructure, it can deliver impressive RTTs to key European cities, making it an ideal location for serving clients across Europe.

4. Skilled technical workforce

Lithuania is home to several technical universities that produce a steady stream of engineering and IT graduates, providing a technically proficient workforce to support data center operations. According to Eurostat, Lithuania has one of the highest percentages of STEM graduates in the European Union, with 25.2 percent of tertiary education graduates having qualifications in engineering, manufacturing, and ICT fields (Eurostat Education Statistics).

This availability of technical talent is particularly advantageous for projects such as the KV Baltic initiative, which incorporates advanced technologies like liquid cooling and AI-focused systems. A well-educated workforce ensures that the data center industry can operate efficiently and scale effectively, meeting the demands of emerging technologies and data-intensive industries.

5. A stable, business-friendly environment

Lithuania offers a stable, democratic environment for businesses. Lithuania hosts major international companies like Nasdaq, Western Union, Moody’s, and Thermo Fisher Scientific, alongside globally recognized Lithuanian unicorns such as Vinted and Nord Security. As a member of the European Union (EU) and NATO, Lithuania provides political and economic stability, underpinned by the Euro (EUR) as its currency. The World Bank's "Ease of Doing Business" report ranks Lithuania 11th out of 190 economies, reflecting its business-friendly environment (World Bank Ease of Doing Business). Such stability is crucial for data center investors seeking predictable long-term investments.

In addition to political stability, Lithuania offers attractive tax incentives. The corporate profit tax rate is 15 percent, and there are additional incentives for large investments, such as a "green corridor" designed to expedite processes and approvals for qualifying projects (Ministry of the Economy and Innovation). Lithuania also provides VAT reimbursement for eligible businesses and free customs procedures, which lowers the cost of setting up and expanding operations.

Lithuania also ranks well as a place to live, which further supports its attractiveness for business and talent acquisition. According to Numbeo's 2024 Mid-Year Quality of Life Index, Lithuania ranks 23rd globally, surpassing countries like the United Kingdom and France (Numbeo Quality of Life Index).

This ranking reflects favorable conditions in purchasing power, safety, healthcare, cost of living, and climate. The OECD Better Life Index highlights the high quality of life in Lithuania, with a significant proportion of residents satisfied with their water quality and community support (OECD Better Life Index).

Lithuania was also ranked the happiest country in the world for young people under 30 in the 2024 World Happiness Report. This recognition is attributed to its strong economy, affordable cost of living, excellent education system, vibrant cultural scene, and robust mental health initiatives. 

6. Favorable government policies and risk rating

Lithuania's Ministry of the Economy and Innovation has introduced several incentives to attract foreign direct investment, particularly in sectors aligned with Lithuania's strategic goals, such as green technology and high-tech industries. Investors benefit from streamlined regulatory processes, making it easier and more cost-effective to set up a data center. The "green corridor" initiative for significant investments is another example of Lithuania's commitment to welcoming international businesses (Ministry of the Economy and Innovation).

Lithuania also enjoys a favorable risk rating, which further enhances its business appeal. Fitch Ratings affirmed Lithuania's Long-Term Foreign-Currency Issuer Default Rating at 'A' with a Stable Outlook in November 2024, supported by EU and eurozone membership, moderate government debt, and governance indicators above the median for 'A' category peers (Fitch Ratings). Allianz's Country Risk Report further notes that Lithuania's current account has moved back to a surplus of over 1.8 percent of GDP, with continued surpluses expected through 2026, highlighting the country’s economic resilience (Allianz Country Risk Report).

The partnership between KV Baltic and VMG is an example of aligning with Lithuania's forward-thinking policies. KV Baltic's advanced technical design, which integrates liquid cooling and other cutting-edge technologies, along with VMG's green energy supply, positions the project in Klaipėda to attract data-intensive industries such as AI, finance, and large-scale cloud services.

Conclusion

Lithuania is rapidly gaining recognition as an emerging data center hotspot and for good reasons. With its focus on sustainable energy, favorable climatic conditions, robust digital infrastructure, skilled workforce, and stable business environment, Lithuania presents a prime opportunity for investors looking to establish or expand data centers in Europe.

The data center project in Klaipėda, by KV Baltic and VMG, is well-positioned to capitalize on these factors, offering a compelling combination of sustainability, efficiency, and technical innovation.

We invite you to explore this unique opportunity and be among the first movers in this promising market. By investing in Lithuania, you will not only gain access to a competitive and sustainable environment but also benefit from favorable conditions and support that will enable your business to thrive in the long term.

For exclusive details about our data center project, please reach out to Rimgaudas Baltrūnas, project manager, at [email protected] for technical or operational inquiries, or Eglė Julija Mėlinskė, CEO, at [email protected] for strategic or partnership discussions.