Price-based mechanisms (Priority purchase of heat produced from RES)

Updated: 26.09.2017

Author: Jurga Tallat-Kelpšaitė

The production and purchase of heat produced from renewable sources is a public service obligation. The state promotes the purchase of heat produced from all renewable energy sources. Utilities have a priority purchase obligation for renewable heat generated by independent producers. Heat suppliers are obliged to purchase all RES heat generated by independent heat producers that is cheaper than the heat produced by the heat supplier himself and which satisfies environmental and quality requirements as well as standards for the security of supply. This obligation does not apply when the supply of renewable heat by independent heat producers exceeds the demand of heat by the heat consumers (Chapter IV Art. 25 Law on Energy from Renewable Sources; Chapter II Art. 4; Chapter IV Art. 10 Par. 1 Law on Heat Sector).

The procedure and the conditions for the purchase of heat from independent heat producers are defined by the NCC (Chapter II Art. 4 Item 2, Chapter IV Art. 10 Item 1 Law on Heat Sector).

Eligible technologies

The state promotes the purchase of heat produced from renewable energy sources (Chapter I Art. 2 Par. 2, Chapter IV Art. 25 Item 1 Law on Energy from Renewable Sources; Chapter II Art. 4 Item 3 Law on Heat Sector).

Aerothermal energy

Eligible

Hydrothermal energy

Eligible

Biogas

Eligible

Biomass

Eligible

Geothermal energy

Eligible

Solar thermal energy

Eligible

Amount

Independent heat producers may freely define the price for their heat if the NCC has taken the reasoned decision not to impose legal restrictions on the heat pricing. If the NCC has not taken such a decision, the independent heat producer must sell his heat at the regulated price. In case of regulated pricing, prices shall be in line with the rules established by the NCC. The heat price offered by an independent producer cannot be higher than the comparative heat production costs for the heat supplier (Chapter III Item 9 Resolution No. O3-74/2013). These ‘comparative heat production costs’ for the heat supplier are calculated in accordance with the Heat Pricing Methodology (Resolution No. O3-96/2009) adopted by the NCC and depend on the capacity of the heat production facilities available to the heat supplier (Chapter III Item 10 Resolution No. O3-74/2013). Where renewable heat is produced by two or more independent producers, the priority purchase obligation applies to the producer whose selling price is lowest (Chapter IV Art. 25 Par. 3 Law on Energy from Renewable Sources). 

Addressees

Independent producers of renewable heat (Chapter IV Art. 25 Item 2 Law on Energy from Renewable Sources).

Procedure

Process flow

Procedure for unregulated heat prices:

 

  • Request to the NCC. The independent heat producer submits a reasoned request to the NCC, providing the reasons why the price of his heat should not be subject to the mandatory regulation (Chapter II Items 8, 9 Resolution No. O3-437/2013).
  • Investigation by the NCC. Upon receipt of the request submitted by the independent heat producer, the NCC launches an investigation in order to establish how the quantity of the heat produced and supplied to the district heating network by the independent producer may impact the final price of the centrally supplied heat (Chapter II Item 8 Resolution No. O3-437/2013).
  • Decision. If the NCC determines that the quantity of the heat produced and supplied to the district heating network by the independent producer has no significant impact on the final price of the centrally supplied heat, it adopts a written decision that the heat prices of the respective independent heat producer shall not be subjected to the mandatory regulation (Chapter VI Item 21 Resolution No. O3-437/2013).

Regulated heat prices. If, during investigation, the NCC determines that the quantity of the heat produced and supplied to the district heating network by the independent producer would significantly impact the final price of the centrally supplied heat, heat prices by the respective independent heat producer shall be subjected to the mandatory regulation and comply with the rules established by the NCC (Chapter VI Item 21 Resolution No. O3-437/2013). 

Competent authority

The NCC determines the procedure and the conditions for the purchase of heat generated by independent heat producers, establishes standard contract conditions for the purchase of renewable heat, and is responsible for the resolution of disputes between the supplier and independent producers (Chapter IV Article 25 Item 5 Law on Energy from Renewable Sources; Chapter II Art. 4 Item 2, Chapter IV Art. 10 Items 1, 2 Law on Heat Sector).

Distribution of costs

Consumers

Production and purchase of renewable heat is considered to be a public service obligation and thus the costs are passed on to the heat consumers via the heat price (Chapter II Art. 4 Items 1, 3 Law on Heat Sector).

Lithuania

Further information