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INTERREG IIIC - REGENERGY
Promoted by the European Union
Development of municipal District heating supply in
Latvia
Gaidis Klavs
Institute of Physical Energetics
Component 2 seminar, Berlin, 8-11of May 2006
INTERREG IIIC - REGENERGY Folie 2
Promoted by the European Union
• Role of DH in the heat supply system of Latvia;
• The main problems and solutions of DHS development in Latvia;
• The main challenges of DHS in future;
Content of the presentation
INTERREG IIIC - REGENERGY Folie 3
Promoted by the European Union
Final energy demand in Latvia, year 2004
12%
15%
26%32%
15%
Electricity
Heat
Fuelwood
Oil products
Other
INTERREG IIIC - REGENERGY Folie 4
Promoted by the European Union
Final energy consumption in households sector, year 2004.
9%
30%
48%
13%Electricity
Heat
Fuelwood
Other
INTERREG IIIC - REGENERGY Folie 5
Promoted by the European Union
Number of households connected to DHS in Latvia
0
20
40
60
80
100
Latvia Riga Vidzeme Latgale
%
OtherDHS
INTERREG IIIC - REGENERGY Folie 6
Promoted by the European Union
District Heating system in Latvia
Big cities
26,50%
Regional towns
and willages 22,50%
Riga 51%
Big cities Regional towns and willages
Daugavpils – 8% Ogre – 1,5%
Liepaja – 6% Jekabpils – 1%
Ventspils – 5% Salaspils – 1%
Jelgava – 4% Valmiera – 1%
Jurmala – 2% Cesis – 1%
Rezekne – 1,5% Bauska – 1%
INTERREG IIIC - REGENERGY Folie 7
Promoted by the European Union
DH production in Latvia
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004
PJ
CHP
Heatboilers
INTERREG IIIC - REGENERGY Folie 8
Promoted by the European Union
Fuel consumption in DHS of Latvia
70%
5%
24%1%
Natural gas
Heavy fuel oil
Fuelwood
Coal
INTERREG IIIC - REGENERGY Folie 9
Promoted by the European Union
Development of DH consumption in Latvia and Riga
10
15
20
25
30
2000 2001 2002 2003 2004
PJactual DHconsumptionLatvia
climate correctedDH consumptionLatvia
actual DHconsumption Riga
climate correctedDH consumptionRiga
INTERREG IIIC - REGENERGY Folie 10
Promoted by the European Union
0 5 10 15 20 25 30 35
Stockholm
Berlin
Helsinki
Vienna
Prague
Copenhagen
Riga
Tallinn
Vilnius
PJ
INTERREG IIIC - REGENERGY Folie 11
Promoted by the European Union
The main problems, difficulties, challenges of DHS in transition economy
Poor and deteriorating service quality
Decreasingrevenue
Non-existent or poorly designed heat policies
Decreasingcompetiti-veness
Financialproblems
Unnecessary costs due to: - heat losses - inefficiency - excess capacity
Tariffs below costs
Non-payment
Poor management
Lack of customer
focus
Increasingtariffs
Lack of control and metering equipment
INTERREG IIIC - REGENERGY Folie 12
Promoted by the European Union
Legends and wrong impressions concerning DHS in transition economy
• DHS does not have place in market economy;• DHS as centralised form of energy is necessarily
inefficient and inflexible;To improve situation:• At the technical and economic level, each system
should be evaluated for optimal performance.• At the policy level, governments need to develop
regimes that support quality district heating and do not encourage inefficient district heating.
INTERREG IIIC - REGENERGY Folie 13
Promoted by the European Union
The main steps of DHS improvement in Latvia
• Improvement of efficiency in all DHS stages (production, transmission, distribution).
• Installation of control and metering equipment.
• Improvement of regulation (separating regulation and ownership).
• Improvement of management (changing of DH organisational structure).
INTERREG IIIC - REGENERGY Folie 14
Promoted by the European Union
Improvement of production efficiency in DHS of Riga
90
91,993
85
90
95
100
2000 2002 2004
%
INTERREG IIIC - REGENERGY Folie 15
Promoted by the European Union
Heat losses in transmission system of Riga’s DHS
0 5 10 15 20
2000
2001
2002
2003
2004
%
INTERREG IIIC - REGENERGY Folie 16
Promoted by the European Union
Development of DH market in Riga
0
1
2
3
4
5
2000 2001 2002 2003 2004
%
INTERREG IIIC - REGENERGY Folie 17
Promoted by the European Union
A Coherent Policy and Regulatory Framework
• Common regulatory principles to ensure that there are no major differences in the way various energy forms are regulated.
• Separating regulation and ownership• The problem of great importance is that of securing
the independence of decisions made by municipal regulators. There are cases when in such decision-making process political factors dominate over economic reasons.
INTERREG IIIC - REGENERGY Folie 18
Promoted by the European Union
DH regulation in Latvia
• A two-tier system of public service regulation. • The first tier regulator – the Public Utilities
Commission – regulates public services on the state level (electricity, gas)
• The second tier regulators – local government regulators – regulate local service providers including heat supply.
• By January 1st of 2006 in the municipality-regulated spheres (heat supply, water supply and waste management) 81 municipalities together had created 17 municipal regulators.
INTERREG IIIC - REGENERGY Folie 19
Promoted by the European Union
DH tariffs in municipalities in Latvia for the heating season 2005/2006.
0
5
10
15
20
25
30
35
40
Aizkraukle Rīga Salaspils Jelgava Limbazi Cesis Kuldiga
EUR/MWh
INTERREG IIIC - REGENERGY Folie 20
Promoted by the European Union
Development of organisational structure of DH companies
Public
State
Public
Municipal
State
Mixed Public Private
Municipal
Lease
Concession
Private shareholder
INTERREG IIIC - REGENERGY Folie 21
Promoted by the European Union
The organisational set-up till year 2005 - Integrated municipal company
D HS ystem
D HD epatrm ent
W ate rD epartm ent
Hous ingD epartm ent
W asteD epartm ent
RoadD epartm ant
***
Municipality
INTERREG IIIC - REGENERGY Folie 22
Promoted by the European Union
Disadvantage
• The company management have little freedom to take necessary actions;
• There is a risk that the budget of the company will be to mixed with budget of other municipal activities;
• The international banks will not provide loans to the company if management structure and budget can not be separated entirely from the municipal administration;
• Usually DH tariffs is used as instrument of political awareness before elections.
INTERREG IIIC - REGENERGY Folie 23
Promoted by the European Union
Organisational set-up from year 2005
• According to the new Commercial Law two main set – up forms could exist - limited liability company and stock company.
• The form of limited liability company is more appropriate for small municipalities and if municipality would like to remain sole owner of DH company.
INTERREG IIIC - REGENERGY Folie 24
Promoted by the European Union
Organisational set-up from 2005 - Independent municipal district heating company
D H sys tem
D is tr ic t hea ting com pany W ater supply com pany X X
Municipa lity
INTERREG IIIC - REGENERGY Folie 25
Promoted by the European Union
Advantage
• The company can be managed exactly as a privately owned company in which the management is only responsible to the board;
• The activities of the company will be kept separate from the other municipal activities and the budget;
• The natural objective of the company will be to minimise the costs of heating (and not minimising the heat price) and the company should therefore have an initiative to advice consumers on energy saving.
INTERREG IIIC - REGENERGY Folie 26
Promoted by the European Union
Disadvantage
• Board does not understand its role of acting on behalf of the owner and setting the objectives for the management;
• Board is to weak and leaves all power to the management with no control or the opposite;
• Board goes into detail and tries to solve the tasks of management.
INTERREG IIIC - REGENERGY Folie 27
Promoted by the European Union
Still challenges for DHS in Latvia
• Improvement of efficiency and more customer focus;
• Co-ordination of DH, Housing Policy and Social Policy.
• Development and integration of CHP technology based on bioenergy.
• The need for a Heat Policy?
INTERREG IIIC - REGENERGY Folie 28
Promoted by the European Union
Thank you
Gaidis Klavs
Institute of Phycical Energetics
Aizkraukles 21, Riga, LV – 1006
LATVIA
E – mail: energy@edi.lv
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