TALLINN, 9 March 2011 - The heating supply audit conducted by the National Audit Office has revealed that many district heating areas in the country have been established without consideration and that the heating producers that operate in them are unable to provide consumers with heating energy at a reasonable cost. Moreover, consumers in many district heating areas are not confident that the heating will be available at all times. Only one type of fuel is used in these areas to produce heat, and in the event of supply problems they do not have an alternative fuel at their disposal.

In 36 of the 164 district heating areas audited by the National Audit Office, district heating was more expensive than electric heating in 2009. The causes of the high cost of heating are the rise in the price of fuel, aging boilers and heating losses caused by the poor state of heat networks. On average, between 10% and 30% of all heat is lost in pipelines before it even reaches consumers. In the heat networks of 28 local governments, the proportion of heat loss exceeded 25%. According to the assessment of the National Audit Office, consumers paid more than 44 million euros (689 million kroons) covering heat network losses in 2009.

The high cost of heating is also due to the fact that local governments have established district heating areas without verifying whether such heating is the most economical and effective method of providing heat to residents. The audit showed that in 89% of cases the local governments had not investigated the condition of boiler plants and heat networks or determined whether there were a sufficient number of consumers in the area and how much needed to be invested in production and networks when establishing the district heating areas. Nor was consideration given to whether it would be more economical in these areas to obtain heating from, for example, a local boiler plant or through the use of heating pumps. As such, a number of areas have been established in places where district heating is neither the most economical nor the most environmentally friendly means of providing heat.

The audit revealed that although the national energy sector development plan states that no one fuel may comprise more than 30% of all fuel used to produce heat by 2020, the proportion of natural gas used to do so in 2009 was 44%. Compared to other fuels, natural gas has been widely used because the cost of constructing gas boiler plants has been between five and 13 times cheaper than boiler plants fuelled by wood or peat. However, the rapid rise in the cost of gas has led to a situation where the heat produced using it has generally become the most expensive kind for consumers. The high proportion of natural gas also reduces energy security, since supply problems would see many gas boiler plants unable to adopt alternative fuel sources, and they lack the fuel reserves needed to ensure stable heat production.

Despite the fact that 60% of the population obtain heat via district heating and that the national energy sector development plan sets a well-functioning heat supply as a national priority, it is the view of the National Audit Office that the Ministry of Economic Affairs and Communications has not turned sufficient attention to the problems in and development of the field. The ministry has not conducted a comprehensive, in-depth analysis of the problems related to the heating supply, including district heating. The majority of the heating sector studies which were meant to be completed by the end of 2010 have not been, and the drafting of a national heating sector development plan has fallen behind schedule.

The National Audit has proposed to the Ministry of Economic Affairs and Communications that in order to assess the sustainability of district heating areas it develop clear criteria with which to analyse, in cooperation with local governments, the expediency of district heating areas. A legal basis should be created which allows district heating areas that are unsustainable and unable to effectively manage themselves to be declared invalid. In settlements where district heating is sustainable, the state could consider the provision of grants in order to reduce heat losses and render the district heating area more efficient. In settlements where the prospects for the use of district heating are poor or non-existent, other heating alternatives should be contemplated.

Although the Ministry of Economic Affairs and Communications was critical of a number of the conclusions drawn and assessments made by the National Audit Office in its audit, it nevertheless agreed with the majority of the recommendations made.

Background
In 2009, around 8 TWh of heating energy was consumed in Estonia. 60% of the population use district heating, which is generated in boiler plants or power stations and distributed to consumers via heat networks. The use of district heating is compulsory in places where local governments have established district heating areas. However, it does not have to be used if a building is fuelled using renewable sources.

In its audit the National Audit Office assessed the actions of the Ministry of Economic Affairs and Communications in planning the development of the heating supply and guaranteeing the supply; the actions of the Estonian Competition Authority and local governments in approving heating prices and supervising the fulfilment of the District Heating Act; and the actions of the Ministry of the Environment and the Environmental Investment Centre in their development of support measures for the field of the heating supply and their evaluation of applications for this support.

Toomas Mattson
Head of Communication Service
National Audit Office
Telephone: +372 640 0777
Mobile: +372 51 34 900
E-mail: [email protected]
 

• Posted: 3/9/2011 9:01 AM
• Last Update: 11/10/2015 5:53 PM
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