The war in the Persian Gulf is already having a long-term negative impact on global fuel markets, and after a brief 4-month pause – as central heating in Latvia is finally turned off in May! – another specter of energy poverty will confront our republic… But, looking at the real facts, it is not so bad.
If I Had Known Where to Fall, I Would Have Laid Down Straw
Of course, in such a situation, one has to look for ways to save. The Saeima Commission for Long-term Development met last week under the chairmanship of Uģis Mitrevics (National Alliance) to discuss the report of the State Audit Office (SAO) "Do Investments in Heat Supply and Energy Efficiency of Buildings Ensure Long-term and Economically Justified Heating?".
The Director of the I Audit Department and a member of the SAO Council, Mārtiņš Aboliņš, assessed the heating market in Riga, the activities of the state-owned AS Latvenergo and partially municipal AS Rīgas Siltums; as well as the situation in 13 municipalities of Latvia – from Dienvidkurzeme to Kraslava, and from Alūksne to Balvi. Thus, it turned out to be quite a representative study. "With the support of EU funds, heating has been modernized in Latvia, inefficient boilers have been replaced, and heating networks have been reconstructed, thereby reducing energy losses," the auditors state. "The main factors affecting municipal tariffs are:
- choice of fuel,
- share of labor costs,
- age of equipment,
- (non)use of EU funds.
The audit found a significant difference between effective large-scale heating systems and small systems, the infrastructure of which has become financially burdensome due to low consumption. The weak financial state of heat producers increases investment risk, limits access to financing, and delays new investments in the development of heating."
What Fuels Latvia
According to the study data, the overwhelming majority of heating boilers in Latvia included in the sample use the following raw materials:
- firewood (102 boilers with a total capacity of 53 megawatts, average equipment age 16 years);
- wood chips (84 boilers with a total capacity of 236 megawatts, average equipment age 12 years);
- natural gas (61 boilers with a total capacity of 83 MW, 17 years);
- pellets (63, 23 MW, 8 years);
- peat pellets (5, 2 MW, 18 years);
- liquefied petroleum gas (1, 7 MW, 17 years);
- diesel fuel (1, 0.3 MW, 7 years).
Tariff Variation
Experts calculated the linear heat density in megawatt-hours per minute – in this indicator, the Balvi region emerged as the champion – 3.99. Given that the threshold value for the "viability" of the heating network is 1.5. However, there is no shortage of those boilers in Latvia that barely breathe according to this criterion: in the Preili region (1.04), Ventspils region (1.04), and Alūksne region (0.85). As the auditors note, the heating networks in these administrative entities operate with insufficient load – and due to high costs.
The absolute champion for the price of megawatt-hour last month across the country was Koceni – a village in the Valmiera region, a former collective farm center. A rather picturesque place where thermal energy costs… more than 140 euros per MW/h. In comparison, in the village of Jumprava, Ogre region, a price below 60 euros per MW/h was recorded in March. More than a 100% difference between comparable municipalities in the same Vidzeme region!
Capital City Peculiarities
Rīgas siltums, in turn, remained in the middle with its 80 euros per MW/h. The capital's enterprise distributes and manages heat on both banks of the Daugava, developing energy procurement conditions throughout the state city, as Riga is now officially called.
Rīgas siltums, as stated in the State Audit report, "has created a mechanism whereby in the market zone, the amount of thermal energy necessary for the right bank of Riga, or 178 MW of the total required thermal energy volume, is purchased daily, which equals the total installed capacity of independent producers. In turn, the remaining necessary volume of thermal energy Rīgas siltums acquires from Latvenergo."
In practice, the right bank is supplied by private companies – Rīgas Bio Enerģija (96 megawatts), Gren Riga (25), Riga West CHP (24), Juglas jauda (18), and Eco Energy Riga (15). In comparison, the state-owned Latvenergo produces 689 megawatts in cogeneration mode and 928 megawatts in water heating boilers.
Idling
The State Audit is confident that in the largest city of Latvia, heating tariffs can be reduced. Currently, a significant portion of heat – over 500 thousand megawatt-hours, "is thrown into the air." Independent producers work for their own pockets, while state CHP plants operate idly. The audit found 80 days a year when AS Latvenergo "released heat into the atmosphere without participating in the electricity market."
If at least half of this could be accepted into the system by Latvenergo, it would receive an additional income of 6 million euros over the year. "To produce electricity, a relatively small additional volume of natural gas is needed," the report notes, "to simultaneously produce useful thermal energy along with electricity."
Meanwhile, completely abandoning small biofuel stations is counterproductive – it would lead to an increase in costs for Riga residents by 25.2 million euros per season.
The recommendations of the State Audit: improve heat procurement by RS; simultaneously reviewing the tariff calculation by the Public Utilities Commission.
A hindering factor for using gas in heating remains the high cost of CO2 emission quotas. In turn, when determining tariffs, Rīgas siltums, thermal energy itself constitutes only 56% of the price, as tariffs also include personnel costs, equipment depreciation, and – calculated profit!
HEAT AUTARKY
Currently, the left and right banks of the Daugava are not connected by a heating pipeline; these markets in Riga are completely separate.
