Following Russia's invasion of Ukraine, the Latvian government sought ways to reduce its dependence on Russian gas. One of the directions is to give up gas in centralized heating.
On March 8, or two weeks after the invasion, the government amended the rules of the European Union's fund program, directing nearly €70 million to heating companies so that they could replace gas with woodchips or other renewables.
At the government meeting, then-Minister of Economics Jānis Vitenbergs (National Alliance) said that the aim is to get some of the new boiler houses to work in this heating season: “There are 39 such projects that are high-readiness and can be executed already during this heating season. This is really important, and these are big municipalities – Liepāja, Sigulda, Cesis, Valmiera, Jūrmala, Rīga.”
However, the Central Financial Contracts Agency (CFLA) now says that of the 62 projects supported in the selection only five showed high readiness: “These projects had to have obtained a construction permit, where it is necessary to comply with the design and construction rules laid down in the construction permit, had to have been purchased, selected a procurement winner and had to have a clear understanding of how this project will be financed. These were apparently companies that had long been preparing and planning to carry out these types of projects,” said Gundega Šulca, deputy director of CFLA.
The government also eased a variety of requirements to build woodchip boiler houses as soon as possible. For example, boiler houses were allowed to be built once the documents were submitted to the CFLA. The companies did not take advantage of this option. The agency's spokeswoman Šulca said that for almost all projects the deadline is the end of next year. In the coming months, only certain small projects with no significant impact on tariffs could be completed.
Major projects in gas-dependent cities like Daugavpils and Rēzekne are unlikely to be ready at the beginning of the next heating season. Oļesja Duškeviča, executive director of Daugavpils Heat Networks, hopes that the deadline could be extended further: “There is great concern about deadlines, however, because things can happen both in the construction works and in the current geopolitical situation with the supply of equipment. For the time being, the builder promises us that it should be done by the deadline, but in fact, it would be very keen if it were possible to extend it."
One of the projects already contracted with the CFLA is the construction of a new boiler house in Kauguri, Jūrmala, adjacent to the already existing chip boiler house. This will lead to a reduction in the gas share of Jūrmala's energy balance from around 50% to 30%. Due to high gas prices in Jūrmala this year, the city has one of the highest heat rates between cities – €225 per megawatt hour before state aid. The board chair of the Jūrmala heating supplier Valdis Vītoliņš said that it was not possible to build the new boiler house before the end of next year.
In other places in Latvia, however, heating companies do not plan to give up gas despite high prices this year and uncertainty in the future. For example, in the village of Skulte in Mārupe, the second highest price in Latvia is paid – the tariff before state aid is €312 per megawatt hour. Here, heat is produced only from gas. The boiler house was only built in 2018 with an investment of €270 thousand, and the village is planning to stick to gas since it does not have a place for a new boiler house.
“It would be a very big burden for the village. It would be dust, it's noise. It's a very sophisticated logistics chain, and it's a change of location entirely certainly. This applies to Mārupe in principle to all three boiler houses, which are very close to the residential buildings," said Dace Šveide, board member of the Mārupe district heating company.
In order to reduce the tariff, however, Mārupe will seek to replace natural gas with propane. In the meantime, Deputy State Secretary of the Ministry of Economics Edijs Šaicāns pointed out that the State's objective is energy independence, so municipalities should refuse gas in favor of the local resource.
"The local government must also review its priorities at this point and look at how to encourage these projects to move forward. It's always such an easy answer: we won't be able to do it. I suppose they should look at it the other way around. How can we do something more so we manage until [the end of 2023],” Šaicāns said.
He also added that European funds will be provided for heating companies to switch to chips or other renewable energy sources in the next period, so there will be more opportunities for municipalities to opt out of gas.
