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Heating Sector Institutional Reform in the Former Soviet Union Baku, 21 October 2005

Heating Sector Institutional Reform in the Former Soviet Union Baku, 21 October 2005. Challenges in Liberalisation of Large District Heating Networks Dusan Jakovljevic Euroheat & Power, Brussels. "Association of Associations"

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Heating Sector Institutional Reform in the Former Soviet Union Baku, 21 October 2005

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  1. Heating Sector Institutional Reform in the Former Soviet UnionBaku, 21 October 2005 Challenges in Liberalisation of Large District Heating Networks Dusan Jakovljevic Euroheat & Power, Brussels

  2. "Association of Associations" Members in 32 countries, incl. 21 national district heating & cooling (DHC) and combined heat & power (CHP) Associations: Austria, Czech Republic, Denmark, Estonia, Germany, Finland, France, Hungary, Iceland, Italy, Lithuania, Latvia, The Netherlands, Norway, Poland, Romania, Russia, Slovakia,Sweden, Switzerland and The United Kingdom. Euroheat & Power

  3. Areas of Activity • Lobbying • Positioning in EU policies • Pooling of expertise and technical cooperation • Market analysis / statistics and certification • Assessing the societal / environmental impact • Elaborating common guidelines (quality assessment) • Common research platform • Exchange of experience and meeting platform • Forums for utilities / industries • Conferences, exhibitions

  4. Lobbying for CHP/DHC • Eliminate prejudices and market the societal advantages of CHP/DHC • Create transparency and increase credibility • Raise political awareness for opportunities and problems • Link interests to political targets / measures • Create technical toolbox needed for successful policy implementation

  5. Surplus heat from industry Municipal Waste Biofuels Fossil fuels CHP DHC: the link Geothermal

  6. decentralised ownership a large pool of private actors competing in the market place unbundling of production, distribution and supply full market access necessity to change company’s focus from production to customer Policy View Liberalised Market: Characteristics

  7. increased investment increased energy efficiency becoming a market player employment and training customer benefits environmental awareness Liberalised Market: Benefits

  8. Dangers of tariff only model

  9. Private Sector Participation in District Heating Up to 1990 in general • Western Europe: municipal and customer ownership • Eastern Europe: State ownership From 1990 in general • Significant changes • Liberalisation of Electricity and Gas markets • Direct impact on district heating

  10. Private Sector Participation in District Heating Four alternative ownership models • Full state or municipal control • Full private control • Mixed ownership and management – PPP (PPP = Public Private Partnership) • Non profit cooperatives – customer ownership

  11. Private Sector Participation in District Heating Public Private Partnership – different models • Operation or management contracts • Leasing • Concession • Generation-only-privatisation • Minority private equity, invited • Minority private equity, stock market (IPO) • Majority private equity • Full private ownership with municipal support

  12. Current ownership structure

  13. Examples of ownership in District Heating • Full public ownership Helsinki, München, Wien, Gothenburg, Budapest • Full private ownership Berlin, Hamburg, Malmö • Public Private Partnerships Tallinn, Vilnius (leasing) Paris (concession - since 1927!) Warsaw, Brno, Riga, Romania (generation only) Mannheim, Brescia (IPO) Praha, Skopje (private majority) Southampton (full private with municipal support)

  14. Private Sector Participation in District Heating Important prerequisites for private participation • Good regulatory framework (heat tariffs, no gas subsidies) • Detailed regulation must be avoided • Market philosophy • Non political governance, commercial behaviour • Duration of contracts for PPP

  15. Private Sector Participation in District Heating Assessing Private Participation in District Heating • Is the decision process focused on business? • Is a private actor realising environmental benefits? • Is a private actor looking to a long-term perspective? • What local focus will a private actor have? • Is a private partner financially/technically credible? • Is the national legislation appropriate for DH?

  16. Private Sector Participation in District Heating Concluding Remarks • Many types of partnership are possible • Realise that District Heating is local business • Realise that District Heating is infrastructure • Market approach is necessary • Negotiate contracts carefully – also exit options • Private money is often needed – and welcome

  17. www.euroheat.org

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