Transition to Renewable Energy Sources as the Basis of Increasing the Resilience of District Heating in the Conditions of Market Regulation

Introduction. Despite significant efforts to reduce the use of fossil fuels, a sharp limitation in the supply of key resources still leads to significant price fluctuations and energy challenges. The transition to alternative energy sources makes it possible to partially eliminate these threats and accelerate the introduction of the latest technologies in the conditions of market regulation. Materials and methods. The study employed various methods, including, system analysis, economic-statistical analysis, correlation, and regression techniques. The statistical base of the study is obtained from open resources, in particular, the National Energy Regulatory Council of Lithuania (NERC). Results and discussion. Implementing market regulation into district heating (DH) in Lithuania contributed to a gradual decrease in heating end-prices. However, the limited supply of natural gas in the EU market and high dependence on the key global supplier caused an energy crisis and significant fluctuations in the prices of fossil and renewable fuels, e.g., solid biomass. District heating systems, which managed to minimize dependence on natural gas before the beginning of the crisis, turned out to be more resistant to shock fluctuations in the energy markets, but it was not possible to avoid the negative impact. This is due to the high dependence of solid biofuel prices on price fluctuations on fossil fuel markets. At the peak of the energy crisis, when the natural gas price was the highest (heating season 2021-2022), the heating tariff (variable costs) increased by 2.2 times in the system based mainly on solid biofuel (Kaunas), while in the system dependent on natural gas (Vilnius) a similar increase was 3.5 times compared to the 2020-2021 season. However, in the post-crisis heating season, tariff increases in both compared systems were similar (2.5 versus 2.4 times), and the difference in tariffs returned to pre-crisis levels ​​( in Kaunas, the tariff is more than 30% lower). The relative stability of the DH system in Kaunas is due to the developed market of solid biofuels in Lithuania (functioning of the biofuel exchange) and high competition among heat producers. However, smaller DH systems are characterized by low competition among heat producers. Conclusions. The strengthening of price competition in the heat market contributes to the reduction of tariffs and accelerates the transition to RES. However, fossil fuel price fluctuation affects the formation of relevant trends in the RES market, particularly solid biomass. Despite this, district heating systems with a high share of biomass use are more resistant to crisis, smoothing out price shocks in the energy market. The further increase in the share of RES within the diversification of green energy sources in the production of heat energy can contribute to increasing the resistance of DH systems to market fluctuations.