Energy resource price hike that started already last fall, and received another push after Russia’s attack on Ukraine, has made many Latvian heating companies revise their tariffs, and the situation is expected to deteriorate in fall. In April, the state support measure expires that restricted heating tariffs for households at EUR 68 per MWh. Normunds Talcis, the board chairman of Latvia’s largest heating utility Rigas Siltums, in an interview with LETA voiced hopes that the tariff in Riga may be kept within borders of EUR 100. His advice, however, to every household is to accumulate savings for future heating bills.

How has the size of debts changed this season? Has the number of people with heating debts increased?

Early this season we had huge concerns about the number of debtors and payment discipline We increased the tariff in September because of Latvenergo tariffs, and this was the highest tariff so far. However, housing managers worked with apartment owners. The aggregate debt by March 2022 is EUR 16 million. Compared to last year, the level of debt is at the same level as last year. Of course, the state support that covers the tariff hike in household bills plays a huge role.

Considering that heating tariffs in the next season possibly will increase more, what are the concerns now?

There is no place for speculations because it is clear for everybody that prices will grow next heating season. As in Riga we purchase 70% of heating energy from independent producers, including from Latvenergo who generates heating from natural gas, prices will grow. Natural gas is not purchased from Russia any more, but prices from the liquefied natural gas terminal (LNG) are high. Therefore, I believe, we will not see low prices.

Latvenergo has submitted new heating tariffs that will come into force as of September 1. It means that until September 1 the prices will not change, but we will see significant changes afterwards.

Speaking about state support, then, in order to remove burden from the state budget, we should apply energy poverty principle as stated in the Energy Law. A mechanism should be developed on how to support those who are not able to pay, while those who can pay should think how to save.

This is related with one of the largest problems in Riga - energy efficiency. The high heating prices had been a stimulus in Valmiera and Liepaja to introduce energy efficiency measures. Riga, meanwhile, has had among lowest heating prices. The population in Riga also differs from population in smaller cities where neighbours see that one house has implemented a successful energy efficiency project, and others follow. In Riga, even neighbours of one house often do not communicate.

Energy poverty is the most important issue the governments should work on. It is clear that the state should support residents also in the future. It is awful if heating tariffs in Rezekne reach EUR 190 per MWh. We already thought that EUR 40, EUR 50, EUR 60 per MWh was a high tariff. Latvenergo has submitted a tariff of up to EUR 211 per MWh, and after adding our part it might reach even EUR 230 per MWh. I hope this does not go that far though.

Savings should be made…

Yes, save up money. I would advise every house to make up savings that will help to pay for heating. Also, I would advise to start rapid energy efficiency measures, rebuilding heating systems, installing thermo-regulation systems. Thus, up to 20% heating can be economized, and residents can pay only for the heating they actually consume. The spring is the time when these projects can be started.

Returning to the past heating season - how was winter? Was more heating sold?

Speaking about the past 210 heating days, the average temperature was +2.6 degrees C. The legislation states that the heating season is 192 days on average with an average temperature of +1.1 degrees C. It means that, in fact, the winter was warmer. We had a cool November and December which were followed by warmer weather. Therefore, we cannot say that winter had been cold, even though the heating season was longer.

The European Commission has proposed reduction of heating temperature as one of the ways to reduce gas consumption. The prime minister also advised to wear another sweater to keep warm. What do you say about it?

Each lowered degree allows to save 5% of energy. The statement is correct, but the decision should be made by consumers - apartment owners or tenants. Rigas Siltums may not make such a decision. Heating consumption is regulated by the house. If residents want a comfortable temperature, they have to pay for it. If they can agree on reducing heating by two degrees, they may save 10%.

Rigas Namu Parvaldnieks housing manager objects to a system that the housing managers should take up responsibility for heating debts, proposing that these debts should be divided among heating producers. What is the opinion of Rigas Siltums?

Everybody should do their jobs - they have to do their job and we have to do ours. Why should I, a person who pays all bills, who lives in a residential house with a good housing manager, see an increase in my bill because somebody else is not paying the bills? I think it is a problem of multi-apartment houses, it is a co-responsibility. The housing managers should solve these problems.

How was the company affected by increase of prices this heating season? How did the situation change after Russia’s invasion in Ukraine on March 24?

We already had purchased natural gas and woodchips earlier, prices started to grow in November 2021. Thus, nothing has changed in this respect, except for a ban to import woodchips from Belarus that was reflected in prices. This ban was in force already last summer.

This year will be difficult because we also have to make repairs. This is a matter we are very concerned about. Steal has become more expensive, also other supplies have become more expensive, wages have risen. Our budget is as large as it is.

Does it mean that less important repairs can be postponed?

Yes, we will definitely assess which repairs are important, which are not so much.

You mentioned imports of Belarusian woodchips. Have you managed to find alternatives and what are the prices in the market?

There are woodchips in the market, prices are significantly higher. If last year we paid 17-18 per MWh, then now we buy woodchips for about EUR 33 per MWh. We have changed the purchase strategy - earlier we purchased woodchips for a whole year because we could predict the price, then now we are buying just enough for a month. Woodchips are more expensive, but we diversify the suppliers to minimize risks.

How will Rigas Siltums be affected by Latvia’s decision to give up Russia’s natural gas?

Costs is the most important aspect. Speaking about availability of gas, we will have to return to this in November or December, when the situation, hopefully, will stabilize. I understand the current decisions, statements, wishes, I understand the stance, but I do not understand how this will work in real life. Now we are cooperating with Latvenergo on a joint LNG procurement. If we succeed, the prices will be as they will be. I think that Riga will not remain without heating.

Have you not had separate negotiations with Klaipeda terminal, only through Latvenergo?

No, we are a small consumer, while Latvenergo is a big consumer. Latvenergo is also our shareholder, thus, we are using its contacts and competence.

We have enough natural gas until October, but now we have to start thinking about the next heating season. If a decision is made to build a gas terminal in Latvia, it would be of great benefit. We would have a terminal, a storage that would ensure the necessary synergy.

In relation to the Green Course, has it been estimated how fast Latvia could drop use of fossil fuels?

We have no such goal. Before February 24, we had a goal to develop the green energy in ten years. As the Riga city made a decision to become climate neutral by 2030, we included in our long-term financial plan that at least 90-91% of heating could be generated from the green energy by 2029. And the rest from natural gas. Because there are peak capacities, there are emergency capacities, and it would be irrational to ensure that all heating is generated from green energy. This is what we say today, but this might change in three years. Considering February 24, we plan to produce 90% of heating from green energy already in 2025/20026 heating season. But this is what we are generating ourselves. We generate some 30-32% of the necessary heating, and we purchase the remaining 70%. It is a challenge we have started working on. We hope that the EU funds will help us to implement the large projects, such as construction of a cogeneration plant. Then we will be able to achieve our goal.

In addition, we are also considering generation of green hydrogen and its use in central heating. The current estimates suggest that hydrogen could be competitive in the market as transport fuel and as fuel. We will look for cooperation with Rigas Satiksme public transport company and other companies that might use it.

Another aspect is the sun. We already have solar panels for our own consumption. During sunny days, the solar panels produce all necessary energy for operations of the administrative offices, but it is not enough for cloudy days. We have a plan on a bigger solar park in our territory.

Getlini EKO mentioned that it might build a waste incineration plant that also might generate heating.

The goal in waste management is to reduce the waste that is deposited, and incineration is one of the solutions. European funds are not supporting such projects any more as they have been into operation in Europe for a longer period of time already, but it is new for Latvia. One of the segments to use heating generated in the process is in centralized heating system.

Would Rigas Siltums be ready to cooperate with Getlini Eco in the wate incineration project?

Why not. We are ready. We are specialists in generating heating, we can combine forces. We have no such business plans or strategic directions yet, but, if we are addressed, we are ready to engage in such a project.

What is the technical condition of the heating energy infrastructure in Riga? Have there been improvements in the past five years?

Definitely, there have been improvements. We have replaced more than 65% of heating network infrastructure, we manage about 700 kilometres of heating network. The technical condition has improved.

What are the current largest investment projects for Rigas Siltums?

There are two woodchip plants in Bauskas and Nautrenu Streets that will reduce natural gas consumption, and I hope that these projects will be completed by the start of the next heating season. We will expand use of woodchip in Vecmilgravis, which would further reduce natural gas consumption by 20%. We want to build a cogeneration plant in Imanta, and also in Ziepniekkalns - either a cogeneration plant or a water boiler. We are eyeing EU funding for that. We plan to expand use of heat pumps, which is zero-emissions technology. Two such projects are already in operation, a third one is being built in Zasulauks. We also plan large-capacity heat pumps in Ziepniekkalns and Imanta new boiler plants.

Do you see development for Rigas Siltums during these uncertain and unpredictable times?

I am positive about the future, and I see that the company will be able to provide the services. Not only we need natural gas, but also Largenergo needs it for power generation Thus, natural gas supply system will be stable and serious. In relation to woodchips, we understand that we have to focus on lower-quality woodchips and we are building the new plants accordingly. We are also thinking about hydrogen and solar energy which will help to change the current vision and would be a good development for the company. The only serious challenge is costs, but I see no difficulties in availability of fuel.