Blog Posts Kaija Hakala Agriculture, Forestry

Building regulations in Finland promote local monopolies of district heating plants, which yield profits for few, while the consumers pay the price for the reductions of greenhouse gas emissions. Wild prices can stall change from conventional heating systems to district heating, or may even promote transfer to heating systems using fossil fuels. This would mean a drastic draw-back in mitigation of climate change.

The first district heating (DH) plant in Finland was taken into use in 1953 in Espoo (near Helsinki). After this the number of plants has increased. During the last 10 years only (from 2005 to 2015), the number of DH plants has increased from 133 to 213. At present about 50% of all buildings are heated with DH, especially blocks of flats, but gradually more and more detached houses are joining the DH network as well.

District heating is energy efficient, and many of the DH plants use renewable biomasses (municipal waste, wood chips, etc.) for energy production. Coal, oil and peat are also used, often combined with renewable energy sources. At present 37% of all DH energy is produced with biomasses, mostly side streams of forestry and wood industry. The biggest DH plant of Vapo is situated in Forssa. It uses about 50% peat and 50% wood chips in its CHP plant. The biggest DH company in Finland, Helsingin Energia, again, uses only fossil fuels for energy production, although plans are on the way to start using bioenergy sources as well.

Because of the evident benefits for climate and environment, the building law (57 a §) in Finland states that any house built within the DH network has to join it, unless it has another climate neutral heating system. The result of this law has been the development of a factual monopoly, where DH has become a more and more important system in heating houses, with a seemingly uncontrolled increase in the energy prices. During the last 10 years the DH energy prices have increased significantly more than the general consumer price index (Fig. 1).

Price of DH energy has increased relatively more than consumer price index (1.1.1981 = 100). Purple: consumer price index, orange: price of district heating. From: Energiateollisuus http://energia.fi/tilastot/kaukolammon-hinnat-tyyppitaloissa-eri-paikkakunnilla.
Price of DH energy has increased relatively more than consumer price index (1.1.1981 = 100). Purple: consumer price index, orange: price of district heating. From: Energiateollisuus http://energia.fi/tilastot/kaukolammon-hinnat-tyyppitaloissa-eri-paikkakunnilla.

 

The lowest DH energy price (average selling price) is at present 47 €/MWh (Haapajärven lämpö OY), and the highest 155 €/MWh (Pori Energia Kristiinankaupunki Oy). There can thus be a 100 € difference in prices/MWh between municipalities. Vapo Forssa DH plant had rather low energy price still in 2005, when it was the 19th least expensive provider of energy (out of 143 companies). In 2015 Vapo Forssa had increased the energy price 2.4 fold, and was in the place 155 out of 213 (Fig. 2).

Development of DH energy price in Forssa €/MWh from 2005 to 2015.
Development of DH energy price in Forssa €/MWh from 2005 to 2015.

One significant reason for the price increase in Forssa was the agreement between Forssa town and Vapo of stalling prices for a period of 10 years after the ownership of the DH energy plant was transferred from the town to Vapo. This led to a pressure to increase the price at a high tempo after the 10 year period had elapsed. Residents that joined the DH network during the low price period have seen a huge increase in living expenses during the last 10 years. In the meantime also the DH network has enlarged and more and more houses are now obliged to join it. Although the DH price in Forssa is at present just a little above the average selling price (84-85€/MWh), many Forssa citizens (myself included) feel cheated.

The general increase in the price of DH in Finland could perhaps partly be explained by increase in the price of the renewable biomasses used in the energy production. However, according to the statistics of the Energy industry, energy source has no effect on the energy price. The only thing affecting energy price is the production volume. There is a slight tendency of DH energy being the cheaper the higher the production (Fig. 3).

DH energy price is lower when production volumes are higher. The relationship is however not straight-forward.
DH energy price is lower when production volumes are higher. The relationship is however not straight-forward.

The relationship is, however by no means linear. In the eyes of the little consumer, such as myself, it seems that the energy plants are abusing the factual monopoly situation, where larger and larger districts are joined in the network and increasing number of houses are forced to take this form of heating and become dependent on the energy produced by one big plant.

When oil and coal prices have plummeted down during the last years, it seems unfair that people who have chosen DH, often for ecological reasons, or were forced by municipalities to join the DH network, have to suffer losses compared to people who have decided to continue using fossil fuels for heating. At present the price difference in favor of fossil fuels may stall investments in renewable bioenergy or joining the DH in new building projects, whenever possible.

In the Netherlands there is at present in force a “heat law”, which states that heating with renewable energy sources (as used in DH) should not be more expensive than heating with fossil fuels. Something like this would be very welcome in Finland as well. Or, could we at least develop a transparent surveillance system that would help the consumers to understand the DH energy price formation?

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