What to expect next heating season: Prices haven’t been this low for a decade

Heat providers have already sourced cheap biofuels, and if natural gas had to be unexpectedly cooled and natural gas had to be burned, they are cheap too, says Valdas Lukoševičius, president of the Lithuanian Heat Suppliers Association (LŠTA).

“It just came to our notice then. Since most biofuels are already purchased and prices are known for the heating season, it is possible to expect relatively low heating prices. Whether the bills will be low will also depend on the weather conditions.” , says V. Lukoševičius.

Throughout the year, the price of heat fell by 27.5% in Kaunas, 20.4% in Vilnius, 13.7% in Klaipėda and 11% in Panevėžys, and remained similar in Šiauliai. Overall, in October, heating prices in Lithuania decreased by 17% compared to the same period last year. And compared to 2012, heat is more than twice as cheap, according to the forecast of the State Energy Regulatory Council (VERT).

“We are really facing a record low heating price this heating season. Record, I emphasize. The very low heating prices in Kaunas in October have not been for 23 years, ”says Ūdrys Staselka, Communication Project Manager at Kauno Energija.

In some areas, the heat will rise slightly – last year’s warm winter meant that the uncovered fixed costs of boiler rooms would have to be offset.

The heating season is delayed this year due to hot weather; it usually begins when the average daily temperature drops below 10 degrees Celsius, which is decided separately by municipalities. Residents of individual houses may decide to turn on the heat earlier. Last year, the heating season started in late September, and the end of September this year was the warmest since 1961, according to the Lithuanian Hydrometeorological Service.

Plan that the heat will be cheaper all season

Heating prices are regulated by costs incurred by companies. V. Lukoševičius assures that the situation is not the same in all cities, but the general trend is that prices will be lower.

“Big cities: everyone is planning much lower prices. For example, a new base price was approved in Panevėžys, which is less than 10%, even compared to last year. In Šiauliai, minus 6 percent, in Mažeikiai, minus 11 percent. In Vilnius, the price is also known, it is 2.6 percent. smaller, in Kaunas – 4 percent. Big cities will go to lower price levels if nothing changes. And there are increases in smaller cities, but they are also insignificant, up to 10%. You should not be intimidated, “says V. Lukoševičius.

In October, prices are higher than last year in Raseiniai, Šalių, Kelmė, Lazdijai. Districts of Pakruojis, Švenčionys, Kaišiadorys. The differences in heating prices between districts are more than double. If in Kaunas a kilowatt-hour of heating costs 3 cents, and in Vilnius – 3.4 cents, in Biržai – 8.3 cents, in Šakiai – 7.6 cents, in Kazlų Rūda – 7.2 cents, according to the forecast by VERT.

Why is the price of heating more expensive in some districts?

“Due to the conversion programs of the heat conversion components. Because the previous heating season was much warmer than planned, some components and fixed costs need to be reimbursed for the next heating season. However, cheaper biofuels reduce heating prices. It just goes, making up for that lost income will drive up prices in some places. Therefore, several percent of heating prices can fluctuate in one direction or another compared to last year’s season, “explains V. Lukoševičius.

Miroslovas Mečkovskis, director of the Vilnius Heat Network Production Department, says that this year’s heating season, considering only heating prices, could be 10-12 percent. cheaper due to lower prices for biofuels and natural gas. Already in November, 10.6 percent. The heat will be purchased at the waste-to-energy plant. Efficiency also contributes.

“When comparing the current price of heating with the price of previous periods, we note that 10 years ago the constant component of the price of heating was 48 percent, 5 years ago, 32 percent. higher than it is now. Currently, the fixed component is the lowest in a 10-year period. This was mainly due to the rationalization of repairs and maintenance, salaries, administrative costs and long-term asset management, ”says M. Mečkovskis.

Other heat providers take a slightly more cautious stance, but admit that it hasn’t been as cheap as it is now.

“As for the entire heating season, no one will tell. There are various transactions, both short-term and long-term. And besides, who knows what the air temperature will be. If it’s purely the price of heat, then yes, it is. It will probably be lower. But, on the other hand, no one knows how the price of biofuels will change, if it will be necessary to turn on the gas capacity, if the climate suddenly cools down, then the price of heat would naturally increase “, explains the representative of Kauno Energija.

Arūnas Liubinavičius, representative of Klaipėdos Energija, also assesses that at the moment the price is “quite low due to the fact that biofuels are burning at the moment”.

“70-80 percent. The need for the City of Klaipeda consists of heat purchased from independent heat producers and heat produced from biofuels,” he says.

Biofuel and gas prices are low

Heating prices are followed by biofuels, the price of which has dropped to multi-year lows. In August, heat providers had bought 58 percent. Biofuel needed for the entire heating season, announced the Baltpool Energy Resource Exchange.

“Compared to the price of the Lithuanian heating season last year (12.54 Eur / MWh), the resulting price of the future heating season is 15.8% lower,” the stock exchange said in a review.

V. Lukoševičius explains that cheap imports from Belarus reduced the price of biofuel.

“In Belarus, Ukraine and other southern countries, wood is heavily attacked by insects, the so-called typographer. As a result, the volume of felling is high and many high-quality raw materials are formed. This is not good news for farmers. Lithuanian biofuel suppliers and producers, as they have taken measures to restrict imports. Amendments to the Heat Economy Law have already been registered in the Seimas to restrict the import of biofuels. If they were adopted, of course, it could raise the level general biofuel prices about one and a half times from January, which would also have an immediate impact on heating prices, ”says V. Lukoševičius.

According to him, the import restrictions would distort the market and lead not only to higher prices, but also to higher crossings in Lithuania.

“We can better support biofuel producers directly, but take this opportunity to preserve our forests for the future and burn unnecessary wood from neighboring countries. It is better to leave the potential of our forests for the future, it will not disappear,” he is surprised. V. Lukoševičius.

And the natural gas imported in August cost 7.63 euros per megawatt; Prices have not been so low since at least 2015, according to VERT data. Pipeline transport is not included in this price.

“Gas is also very cheap, this is another very good stabilizing factor. Gas is usually needed during the coldest period if it suddenly cools to -20 degrees or below. The cost of that period depends on the price of gas. Even if it is a very cold winter, the price of gas will probably not rise very significantly. This means that we would go through even the coldest period with relatively low heating prices, ”says V. Lukoševičius.

Waste power plants beat prices

Another factor that will reduce heating prices in large cities is the start-up of waste power plants.

The Vilnius Cogeneration Power Plant (VKJ) won the district heating auction announced in November, offering the lowest price: 2.18 cents per kilowatt hour. This year the Kaunas cogeneration plant also came into operation.

“Clearly they will try to compete with biofuels and this will further reduce heating prices. Both Kaunas and Vilnius submitted a bid for waste heat for November; this is a factor that is already decreasing and will further reduce the price of heat in Vilnius and Kaunas until cold ”, says V. Lukoševičius.

He explains that in colder periods, price competition between individual producers in metropolitan areas is less: the quantities ordered in cities are sufficient for all private boiler rooms, which increases prices.