Narva switches district heating from gas to shale oil: heat comes out a fifth cheaper than from gas

Enefit Power, the generation company of state-owned group Eesti Energia, is starting to heat the city of Narva, on the border with Russia, with shale oil instead of natural gas, ERR reported on 2 November. The company obtained permission from the Environmental Board and the climate ministry; the board's order of 21 October allows the preventive use of shale oil as long as there is a risk of gas supplies being interrupted or of district heating becoming unaffordable for residents.

How it works. While the Balti power plant's cogeneration unit is running, it burns a mix of oil shale and biomass, and the production price of heat is €60/MWh excluding VAT, according to ERR. When Unit 11 is not competitive on the electricity market or is out of order, the reserve boiler house takes over and will use shale oil. Heat from oil is half as expensive again as heat from the cogeneration unit, but a fifth cheaper than heat from gas.

Why. Enefit Power CEO Raine Pajo, in a letter to the Environmental Board and Climate Minister Erkki Keldo, cited lower-than-usual EU gas storage levels, the high gas price and winter supply risks, aggravated by the Middle East crisis, which pushed the European gas price to a four-year high in October. “Gas is enormously expensive, it is not affordable for residents,” Pajo told ERR.

Context. According to the city government, Narva households' annual income is a third below the Estonian average, while their spending on district heating is half as high again. Mayor Jaan Toots said a price above €80/MWh “squeezes the throat” of a city where 30% of residents are pensioners.

What next. The exemption is valid until the end of the heating season, and a more economical heating solution will only arrive at the end of 2028, according to ERR. Eesti Energia announced on Thursday that it has started building a 100 MW gas-fired plant on the Balti power plant site, under a contract worth about €100 million, which will be able to supply up to 85 MW of heat to Narva's network and is due to be completed in 2028.

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