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

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.

Main factors retaining DH undestroyed in Lithuania Big investments during 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)

DH market share in Europe

Members of LDHA – DH companies

Key indicators of the DH sector Unit Heat delivered to the network GWh Heat delivered to consumers GWh Technological heat losses % ,8 Average cost of fuel EUR/toe Turn over for heating mio. EUR Average price EUR/MWh

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

Heat balance, 2004

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

CHP electricity delivered to the network

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.

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%. LithuaniaSweden

Technological DH distribution loss  Main heat transfer lines in the network were installed 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

Heat energy consumption, 2004

Heat users

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

National Energy Strategy - Heat Sector 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 Adopted by Seimas: 10/

Energy Law Adopted by Seimas: 16/ 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.

Heat Law Adopted by Seimas: 20/ 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

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.

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.

There are 60 municipalities in Lithuania

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

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.

Heat consumption in old and new erected houses Build in Consumed heat amount, kWhPrice 1 m 2 LTL (excluding VAT) Period TotalFor heating For hot water preparation Space heating of 1m 2 (kWh/m 2 ) 40 flats multy- family apartment house (heating area 1756 m 2 ) ,281,0410/ ,301,9511/ ,912,1212/ ,043,351/ ,923,522/ ,542,283/ ,471,364/ ,462, flats multy- family apartment house (heating area 6923 m ,730,1810/ ,720,6911/ ,770,4912/ ,861,121/ ,221,162/ ,500,773/ ,730,494/ ,530,70

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.

Legal Acts on Renovation of Legal Acts on Renovation of Multy-family Apartment Houses Lithuanian Housing Strategy (Adopted on ); Support Programme on Renovation of Multy-family Apartment Houses (Adopted on , modified on ) 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 ) Law on State Support for Housing’s Procure or Rent and Modernization of Multy-family Apartment Houses (Adopted with modifications on )

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

Support from the EU Structural Funds for project “Training of District Heating Companies” implementation Project duration – 24 months Project value – Lt Funding – Lt LDHA funding – Lt EU Structural funds support for LDHA

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