The TIMES Latvia optimization model was developed to evaluate cost-effective pathways for reaching energy efficiency targets in 2030 and carbon neutrality in the Latvian economy by 2050. The model includes both the end-use sectors such as transport, buildings, industry and agriculture and the energy sector, with a well-developed database of existing and future RES and storage technologies. The modelling framework allows to identify the cost-optimal future energy mix by considering the electrification potential of each sector. Therefore, it allows the analysing of the impact of different policy strategies on sectoral integration levels and the necessity for additional energy storage capacities. The results show that one of the optimal solutions for reaching the energy efficiency targets in 2030 is the wide expansion of heat pump utilization merged with ambitious building renovation policy to increase energy efficiency. The building heat supply transformation also brings higher power consumption and interacts with the wider utilization of wind power. Alternative pathway could rely on increased solar power installation for self-consumption coverage which shows lower costs than building energy efficiency increase.