Overview of the heating season: the price of biofuel fell by 40 percent, heat by almost 20 percent. | Business

The average price of biofuel in Lithuania last season in 2023/24 compared to 2022/23. season, decreased by 40 percent. – from 38.9 euros per MWh to 23.58 euros per MWh. The decrease in the price of biofuel also led to a drop in the price of heat: the average price of heat decreased by 16 percent during the year. – from 86.83 euros per MWh to 72.83 euros per MWh.

“The biofuels market has been extremely volatile over the past two years and the recent 40% drop in prices has largely been driven by a 66% rise in 2022.” in season A year ago, in preparation for the heating season, biofuel sellers were optimistic and prepared a large amount of raw material in anticipation of good earnings.

Most of the market participants thought similarly, the interactivity of all participants, characteristic of all economic bubbles, appeared. As the market stabilized, it became apparent that the amount of prepared biofuel was too large, and prices began to drop significantly. The furniture industry also contributed to this, which slowed down, so biofuel market participants did not have to compete for raw material by increasing its prices,” says Vaidotas Jonutis, sales manager of Baltpool.

Under normal market conditions, the main factor determining the price of biofuel, according to V. Jonučis, is the price of firewood. In all three Baltic countries, the price of both it and biofuel decreased evenly during the last heating season.

The price of biofuel and heat on the market is usually correlated – the price of heat decreases by about half as much as the price of biofuel decreases. Heat prices returned to pre-war levels last heating season. This is a good example of how the market is able to recover from a supply shock when imports of biofuels from third countries stopped due to EU sanctions.

Last year, the average price of biofuel reached 23.58 euros per MWh, so, according to V. Jonučis, it is likely that long-term transactions on the stock exchange should begin to be formed at around this price this year. This is good news for the coming season as the price is about a third lower than last year.

In Latvia and Estonia, similar downward trends of biofuel prices have been recorded. The final heat price for consumers also decreased in both countries. Compared to 2022-2023 season, biofuel in Latvia became cheaper by 31 percent. (up to 26.34 euros per MWh), and in Estonia 26 percent. (up to 20.95 euros per MWh).

In Latvia, heat for end users became cheaper by about 30 percent. (up to 89 euros per MWh), in Estonia – 9 percent. (up to 87.09 euros per MWh). The different impact of a change in the price of biofuel on the final price of heat in different countries depends on various nuances, for example, the peculiarities of the market regulation of gas consumption in the production of heat.