Development of municipal District heating supply in Latvia Gaidis Klavs

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• Development of municipal District heating
  supply in Latvia Gaidis Klavs
• Institute of Physical EnergeticsComponent 2
  seminar, Berlin, 8-11of May 2006

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Content of the presentation

• 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

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Final energy demand in Latvia, year 2004
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Final energy consumption in households sector,
year 2004.
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Number of households connected to DHS in Latvia
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District Heating system in Latvia
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
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DH production in Latvia
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Fuel consumption in DHS of Latvia
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Development of DH consumption in Latvia and Riga
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The main problems, difficulties, challenges of
DHS in transition economy
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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.

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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).

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Improvement of production efficiency in DHS of
Riga
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Heat losses in transmission system of Rigas DHS
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Development of DH market in Riga
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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.

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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-regulat
  ed spheres (heat supply, water supply and waste
  management) 81 municipalities together had
  created 17 municipal regulators.

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DH tariffs in municipalities in Latvia for the
heating season 2005/2006.
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Development of organisational structure of DH
companies
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The organisational set-up till year 2005 -
Integrated municipal company
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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.

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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.

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Organisational set-up from 2005 - Independent
municipal district heating company
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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.

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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.

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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?

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Thank you

• Gaidis Klavs
• Institute of Phycical Energetics
• Aizkraukles 21, Riga, LV 1006
• LATVIA
• E mail energy_at_edi.lv