Assessment of heat production savings resulting from replacement of gas with biofuels

Abstract

A fast progress in the technology sector as well as clear intentions by the Lithuanian government to reduce pollution create advantageous circumstances for starting to utilise biofuel widely. A clear difference between biofuel and natural gas should help to reduce the price of heating noticeably. However, even though biofuel is 2-3 times cheaper than natural gas, the heat that was produced by utilising biofuel is only slightly cheaper than the one produced using natural gas. The object of this research is district heating sector. The research aims at investigating the savings that could be achieved after replacing natural gas with biofuel in heat production. The methods of research: the analysis of scientific and technical literature, articles, and statistical data. The results of research: the study showed that regulation is an integral part of the heating sector. The analysis of scientific and technical literature showed that the most widely analysed cost-cutting measure of heat production is the use of biofuels. The main part of the cost of heat produced by gas consists of fuel cost, i.e. natural gas. Scientists justify the shift to biofuel technology by the price of biofuels as they are more than two times cheaper than gas. On the other hand, biofuels are local raw materials, which do not have to be imported so the money can be kept in their economies. The measures on heat savings analysed by the researchers are related to the introduction of new technologies. Introduction of new technologies requires investment. As technology that enables heat production from biofuels is complex and very expensive, it is necessary to assess whether the investment in heat preparation with biofuels is cost-effective. It was found that the scientists use net present value method in investment assessment to calculate the discount rate and the cash flow generated by the investment.