Lithuanian Experience in District Heating Reform

1. Lithuanian Experience in District Heating Reform Vytautas Stasiūnas Lithuanian District Heating Association President 21 October, 2005 International conference “Heating Sector Institutional Reform in the Former Soviet Union “ Baku, Azerbaijan

2. WORLD • “Why are you throwing away the exhaust steam from your engines when people are willing to pay you three times its cost of production for heating purposes? All that is necessary is to install our sytem of Underground Steam Heating Mains” (Birdsill Holly, who established the first district heating system in 1876 and a little later was granted a patent for the first combined heat and power plant) LITHUANIA • In 1903 a low-pressure steam heating was installed in Vilnius Central Power Plant. This was the first district heating in Lithuania. Heat was delivered througout the premices of power plant: machinery room, accumulator room, workshops, office and residential premises.

3. Main factors retaining DH undestroyed in Lithuania • Big investments during 1960-1990 • Cold climate conditions, where heating season lasts for 6 -7 months/year • Big demand for heat energy for hot water preparation all-year-round • The effective and well-timed support from West European countries (particularly from Scandinavia)

4. DH market share in Europe

5. Members of LDHA – DH companies

6. Key indicators of the DH sector

7. DH Ownership structure, 2004 The lease of heat utilities to foreign and domestic investors started in 2000 (ownership 100% in municipality) (9.5% with JV)

8. Heat balance, 2004

9. Guidelines of DH Development • The share of CHP electricity would make up not less than 35% in 2020 (currently it makes about 17.2%) • The share of CHP heat would make up not less than 75% in 2020 (currently it makes about 50%) • Modernize CHP plants in Vilnius and Kaunas and construct a pilot CHP plant in Panevėžys • Construct modern CHP plants in Siauliai, Klaipėda, Alytus, Marijampolė and other cities until 2020

10. CHP electricity delivered to the network

11. Fuels used for DH production It is foressen that production of heat using local, renewable and waste resources would make 17% in general heat balance in 2010, and 23% - in 2020.

12. Fuel input for DH production 2004 • DH companies more and more often go for installation of biofuel fired boilers. The total installed capacity of such boilers has reached more than 220MW. • Biofuel makes 10.0% in the general fuel balance and this share in the regional DH companies exceeded 21%. Lithuania Sweden

13. Technological DH distribution loss • Main heat transfer lines in the network were installed 30-40 years ago and their operational resource is coming to the end. • In 2004 approx. 72 mio. LTL (about 21% of the total investment amount) invested in this field

14. Heat energy consumption, 2004

15. Heat users

16. Average DH tariff in Lithuania, 2004 • The average price of heat is dropping down: • it was 115.1 LTL/MWh in 2003, • while in 2003 – 113.5 LTL/MWh

18. National Energy Strategy - Heat Sector Adopted by Seimas: 10/10-2002 • Strategy for the Heat Supply Development • Heat supply development plans for municipalities • CHP in DH systems (after the closure of Ignalina NPP) • Encourage use of local and renewable energy sources • Improve energy efficiency • Competition among heat producers • Procedure for independent heat producers • Modernise heat supply systems • Procedure for the purchase of CHP electricity

19. Energy Law Adopted by Seimas: 16/5-2002 • Energy savings • Energy efficient use of primary energy sources • Reducing energy intensity • Diversification (fuel imports, indigenous fuels) • Promotion of indigenous fuels • Reliable and cost-effective production • Reducing effects on the environment • Forming legal and economic conditions for investments • Increase economic efficiency: competition, private invest.

20. Heat Law Adopted by Seimas: 20/5-2003 • Heat operator tasks (supply heat, maintain system) • Heat planning and zoning etc. • Relation with heat consumers (responsibilities) • New customer contract principles • Regulation of consumers’ disconnection options • Transparency for consumers • Access for external parties to supply heat • Separation from municipal economic activities

21. Competition in DH sector • The competition between the suppliers of alternative types of fuels. • The heat production shall be based on the competition between the heat producers. • The hot water preparation and supply shall be based on competition. • The state (municipalities) shall promote competition in the field of maintenance of heating and hot water systems inside the multy-family apartment houses.

22. Municipal Heat Plans • The municipalities shall manage the heat sector in conformity with the special Municipal Heat Plans. • The main objective of the Municipal Heat Plans shall be to satisfy the consumers heat demand on least costs. • The Municipal Heat Plans shall be in conformity with the state strategy, national objectives in the energy industry. • The government may provide assistance and support in implementing the Municipal Heat Plans.

23. There are 60 municipalities in Lithuania

24. Heat Supply License • The heat suppliers shall obtain the heat supply license. • The heat supply license to the heat supplier supplying not less than 5 GWh of heat/year is issued by the National Control Commission for Prices and Energy. • The heat supply license to the heat supplier supplying less than 5 GWh of heat/year is issued by Municipalities

25. Heat pricing • The heat and hot water prices shall be the single - component or the double - component. • The heat and hot water prices might be differential depending on the heat supply system, consumer groups, volume of heat consumption, season of consumption.

26. Heat consumption in old and new erected houses

27. Long-term renovation program “Let’s renovate dwelling- renovate City” • On June 2004 Vilnius City Municipality started the implementation of long – term renovation program “Let’s renovate dwelling - renovate City”. • World fund for Environmental Protection gave a loan of 6,5 million USD(3 million USD is intended for building renovation). • Pilot project– overall renovation of 3 multi-family apartment buildings - is implemented within this project framework.

28. Legal Acts on Renovation of Multy-family Apartment Houses • Lithuanian Housing Strategy (Adopted on 21-01-2004); • Support Programme on Renovation of Multy-family Apartment Houses (Adopted on 23-09-2004, modified on 21-06-2005) • Measures and terms of implementation of Directive 2002/91/EC of the European Parliament and of the Council on the energy performance of buildings (Adopted on 27-12-2004) • Law on State Support for Housing’s Procure or Rent and Modernization of Multy-family Apartment Houses(Adopted with modifications on 24-03-2005)

29. Bilateral Danish Support • Support from the Danish Energy Authority for implementation of “Lithuanian DH Training Network” project • Project duration: 2001 – 2004y. • Project results: • 11 training programmes prepared • 25 employees from DH companies were trained • 6 guidelines prepared • LDHA strategy for 2004 developed

30. EU Structural funds support for LDHA • Support from the EU Structural Funds for project “Training of District Heating Companies” implementation • Project duration – 24 months • Project value – 204 900 Lt • Funding – 150 842 Lt • LDHA funding – 54 058 Lt

31. Project “Training of District Heating Companies” • Project Goal – increase skills and knowledge of the employees of the District Heating Companies in the area of management, marketing, finance management and accounting, EU energy policy • Projected group: 47 high level and middle level managers and accountants from heat supply companies

32. DISTRICT HEATING - CITY WITHOUT CHIMNEYS