BiogasAction – New developments in Latvia

During the first 1 year and a half of BiogasAction, the engineering consulting company Ekodoma worked on different tasks in order to promote and fulfil the targets in BiogasAction and the different challenges in Latvia.

BiogasAction – New developments in Latvia

The history of biogas production in Latvia started in the early 1980’s in several dairy plants and pig farms with experimental studies on new methods for wastewater treatment and production of natural fertilizer. After a period of silence, over the past decade, the biogas sector has started to develop again. The development of the Latvian biogas market was initiated by the introduction of new RES support policy – electricity feed-in tariff, guaranteed payment for installed capacity and investment grants. The installed biogas capacity has increased from around 7 MWel in 2005 to 56.52 MWel in 2014. However, the construction of biogas is still unused for 33 licenses with a total installed capacity of 49.098 MWel.

Biogas legislation in Latvia

In 2013 the Ministry of Economics had set temporary limits within which additional subsidies for electricity producers were no longer submitted, it was planned that restrictions will be in force until the end of 2015. Most of the biogas stations are supported with feed-in tariff. All support for new biogas stations temporarily was stopped (no new licenses are available), but support for existing biogas stations didn’t change and interest for new investments in existing biogas stations remained fairly high. In April 2015 the ministry of Economics started preparation of the technical standards for injection of gas into national grid.

By approving the amendments on Energy Law at February 11, 2016, government of Latvia stated that on April 3, 2017 natural Gas market opening will take effect. At this point opening process just begins starting with legal entities and afterword’s households.

At 7th October 2016 came in to force The Cabinet Rules Nr.650, 4 October 2016 “Requirements for injection and transportation of bio-methane and liquefied natural gas in the natural gas transmission and distribution system”. However, there is still debate on the requirements imposed. Chairmen of the board of Latvian Biogas Association Andis Karklins, posit that biomethane quality requirements mentioned at this Cabinet Regulation No.650 is too high, and almost impossible to guarantee. So, from one side it is made possible for biogas actors to upgrade and sell Biogas in national natural gas grid, but in the same time quality requirements are so high and financial support are not at all, so the biogas operators are not interested in upgrading for biomethane production. Also, existing natural gas grid infrastructure are not widely available for biogas stations, so without significant financial investments in natural gas grid infrastructure, it is impossible to connect to it.

The use of biomethane in transport is also difficult because no compressed natural gas (CNG) stations are operating in Latvia and all infrastructure needs to be built from scratch. Due to the lack of infrastructure, there is no demand for CNG cars in the market and therefore also supply of cars supporting CNG or compressed biomethane gas (CBG) use is very limited at the moment. However, farmers have shown interest in biomethane and its possibilities, but there is not much expertise in Latvia on the biogas and even more – on biomethane business models and support schemes. No projections regarding use of biomethane in transport sector or for substitution of natural gas in heating sector are made.

1st May 2017 has come in to force the amendments adopted at 5th July 2016 on Cabinet Regulation No. 221 Adopted 10 March 2009 “Regulations Regarding Electricity Production and Price Determination upon Production of Electricity in Cogeneration” and Cabinet Regulation No. 262 Adopted 16 March 2010 “Regulations Regarding the Production of Electricity Using Renewable Energy Sources and the Procedures for the Determination of the Price”.

Amendments in regulations determine the limits of internal rate of return (IRR) – 9% for those enterprises that produce electricity from renewable energy sources or high-efficiency cogeneration. If power plant has an IRR above 9%, then ministry will reduce the amount of mandatory procurement according to price correction factor. And in order to ensure that mandatory procurement price of electricity doesn’t drop under the price necessary to provide operation of supported power stations in case of natural gas tariff decrements, and to adapt to regulations about natural gas market opening, Cabinet regulations intend to fix natural gas price at 234,77 euro/thousand n.m3. level, which is average price in period from august of 2007 until September of 2012 (natural gas price is used to calculate mandatory procurement price of electricity).

At 2015, there was a rule that from 26 May 2011 until 1 January 2016 the Ministry of Economics shall not organize tenders for the acquisition of the right to sell electricity produced in biomass, biogas, solar or wind power plants within the scope of mandatory procurement, and the producer may not qualify for selling electricity within the scope of mandatory procurement and for acquisition of the right to receive a guaranteed payment for the installed electric capacity. But at the beginning of 2016 Ministry of Economics extended the moratorium until 2020. RES producers were strictly against this moratorium, pointing out the mechanism for reducing overcompensation should be done without moratorium.

Also, regarding both Cabinet amendments industry has 2 main objections: to determine IRR 12% instead of 9%, to fix natural gas price at 256 euro/thousand n.m3 instead of 234,77 euro/thousand n.m3. Taking into account reduced support according to the market players at the moment it is hard to expect new investment in biogas market. Chairmen of the board of Latvian Biogas Association, Andis Karklins, at government meeting argued: “We haven’t seen any researches or calculations on which 9% are based. And mandatory procurement price of electricity according to this regulation is too low, it is at cost price level”.

At the moment policy makers in Latvia lacks strategy regarding biogas (green technologies in general) development in the future and it is hard to tell if the further actions will be in the direction to support the use of biogas to produce electricity or to promote its use in transport and entering in the natural gas network. Additionally, cooperation between different ministries according to policy on renewable resources, including biogas, is lacking. Also commercial banks are reluctant to give any loans for biogas projects as well.

Summarizing, situation at market is complicated, because many biogas stations in Latvia were created by taking into account that was going to be support from government for 10 years. For some biogas stations changes in regulations are critical. But for those biogas operators which built the stations at existing agricultural enterprises, situation is not that critical. After the opening of natural gas market, it should be possible to inject biomethane in natural gas grid, but still it will take time to develop all technical specifications and arrangements to make it possible.

Most biogas plants operating in Latvia are using biogas in CHP units thus generating both – electricity and heat. Since only electricity is supported by the feed-in tariff, heat is considered as a by-product. Usually part of the heat is used on site to heat the digesters and to provide heating for farms and local buildings.

First attempts to use excess heat in district heating systems have been made. However, the cooperation between biogas plant owners and district heating system operators is difficult. DH system operators are not motivated to purchase cheaper heat from biogas plant because they are not allowed to increase their profit over 9%. Moreover, the existing regulation does not allow them to purchase the third-party heat at the price that is below the price of resources that is needed to produce this amount of heat energy. In fact, biogas operators cannot sell their heat at low price even if it is a waste heat.

New biogas plants could be a solution for a several challenges which are related with environment, climate, employment, agriculture and resource management. The rapid development of the Latvian biogas market has brought more competition amongst biogas producers for the feedstock and has increased plant operation costs. More and more biogas plant owners realize that additional income from heat use would help to improve the economic performance of their plant. Only few biogas plants have found a solution for useful heat utilization, e.g. greenhouse heating or using heat in drying facilities.

Furthermore, in 2016 was developed the first car which is powered by biomethane. Biogas upgrading until fuel quality is carried out in facility which has been developed in cooperation with Latvian and Swedish scientists.

Progress in the region

During the first 1 year and a half of BiogasAction, the engineering consulting company Ekodoma worked on different tasks in order to promote and fulfil the targets in BiogasAction and the different challenges in Latvia.

Regarding the institutions, several individual discussions have happened between Ekodoma and Biogas association of Latvia, Transportation association and Ministry of Regional Development and Environmental Protection. Due to the changes in legislations, different stakeholders had different issues.

In order to raise the public acceptance the consulting company and the Latvian Biogas Association,  in cooperation with Riga Technical University, organized the seminar “Heating systems today and tomorrow” for heating companies, municipalities, students and enterprises. In addition, another workshop took place at Madona, Latvia, the aim of the workshop from the biogas perspective was to inform Short Rotation Woody Crop (SRC) operators about biogas industry itself and possibilities to them to take part in this industry. Taking into account lack of financial support and issues with legislation it was necessary to rise public acceptance, more importantly to inform about environmental benefits of biogas production.

In cooperation with local municipalities Ekodoma started to work with feasibility studies of Biogas in 5 local municipalities. Due to regulatory issues new business plans were not expected, so it was important to support local municipalities in their decisions about renewable energy.

The consultancy firm also cooperated with Riga Technical University to create regular training system for biogas professionals and public, but separately from academic bachelor or masters’ programs. The trainings will be adapted to existing situation in industry, for example, in recent years there has been some issues with safety in some biogas plants, so some of training contents will be about safety management in biogas plant.

Recently, Ekodoma, helped ‘Agrofirma Tervete” Ltd. with decision making according energy efficiency and did calculations for heat recovery from digestate to preheat feedstock. They are discussing with other Biogas plants about potential help they could offer. During the BiogasAction project, Ekodoma is sharing their knowledge and experience through publishing information.

Further information

For further information you can contact EKODOMA. They are an engineering consulting company, whose main activities are related to energy-efficient solutions and sustainable energy sources. Their aim is to achieve economic growth without causing harm to the environment which, according to them, can be achieved in every phase of project planning, taking into account both sustainable climate and energy planning concepts as well as providing our advice on the most appropriate technical solutions.