Putin instructed to allocate 15 billion rubles for the conversion of boiler houses to pellets

In the next two years, the authorities will allocate 15 billion rubles. to transfer municipal boiler houses to the use of pellets (fuel pellets from wood waste). This was stated by Russian President Vladimir Putin on February 10 at a meeting on the development of the timber industry complex (LPK) at the Ustyansk timber industry complex (part of the ULC Group) in the Arkhangelsk region.

This measure should support pellet producers, who, before the imposition of sanctions in 2022, mainly exported their products to the European region.

“The source of allocation of these additional 15 billion [руб.] yes, the Ministry of Finance knows about it, we discussed these possibilities, and I ask you to use this source,” Putin addressed Finance Minister Anton Siluanov, who was present at the meeting held in the VKS mode.

Siluanov explained that the ministry proposed to use the resources of infrastructure budget loans that will be used to modernize housing and communal services. “100 billion rubles. out of 250 billion go to this goal, and this is a resource that can be used,” Siluanov explained.

According to Putin, the transition of boiler houses to pellets makes sense when it “is economically justified and expedient.” “Here it is important to fix the terms of supply on a long-term basis, as they say, which will enable housing and communal services companies to [получить] stable purchase prices, and will provide biofuel producers with sales volumes,” the president said.

He also suggested considering support for domestic manufacturers of boiler equipment, including the provision of subsidies for a discount on the sale of this equipment.

Boiler houses produce exclusively thermal energy for heating and hot water supply to consumers. For example, all boiler houses in Moscow burn gas as the main fuel, but coal, peat, fuel oil, sawdust and wood chips are also used as fuel in the regions.

The Russian timber industry faced a number of problems in 2022. At the beginning of the year, a de facto ban on the export of unprocessed timber from Russia came into force. And on April 8, the EU included in the fifth package of sanctions against Russia because of the SVO a ban on the supply of wood, plywood, boards and pellets. This restriction came into full effect on July 10, 2022.

Pellet production in Russia fell in 2022 by 19.6% compared to 2021 to 2.07 million tons (Vedomosti wrote about this on February 2). At the same time, according to the information of the Union of Timber Manufacturers and Exporters based on Rosstat data, the largest drop was observed in the North-Western Federal District – by 32% to 789,100 tons. % to about 1.8 million tons.

“In order to fully dampen losses from export restrictions, it is necessary to use all the possibilities of domestic demand,” said Deputy Prime Minister, Minister of Industry and Trade Denis Manturov at the meeting. He recalled that in Russia there is an excess of capacity for pellets, which were created mainly in the north-west of the country for European markets.

“Chips and sawdust are difficult to transport, they get wet, and when they are processed into pellets, they can be transported over long distances. Therefore, mainly pellet production was created in the North-West of Russia specifically for the European market – for longer distances, ”explains Andrey Frolov, vice president of the Union of Timber Manufacturers and Exporters.

According to Manturov, the Ministry of Industry and Trade has already worked out, together with the Ministry of Construction, the possibility of transferring municipal boiler houses to fuel pellets. “We produce the necessary equipment, and we see the potential for at least 60 boiler houses in the near future,” the Deputy Prime Minister noted.

When converting boiler houses to pellets, it is necessary to apply long-term tariffs for heat and conclude appropriate contracts for the supply of biofuel, Irek Fayzullin, Minister of Construction and Housing and Public Utilities, who was also present at the meeting, noted. In this case, in his opinion, “it is possible to regulate the cost of gigacalories to ensure stability in this direction.”

The representative of the Union of Timber Manufacturers and Exporters noted that in some cases it may be more efficient to use sawdust and wood chips in boilers, from which pellets are made. According to Frolov, now that there is no need to transport products to Europe, it would be more efficient not to switch a number of boiler houses to pellets, but to switch them to wood chips and sawdust. “This technology has already been tested: in Russia, even before the sanctions, a number of boiler houses worked on wood chips and sawdust, equipment for them is already being produced,” he explained.

At the same time, according to Frolov, it is expedient to transfer to wood chips and sawdust precisely those boiler houses that are located near the timber industry. “The energy content of wood chips and sawdust is higher than that of pellets,” he notes. “According to the experience of some boiler houses in the North-West, the cost of producing thermal energy from wood chips and sawdust is 1.5 times lower than from gas.”

At the same time, the use of pellets, according to Frolov, is expedient in private households, as well as for supplying boiler houses in the north, for example, in the Krasnoyarsk Territory, where a number of timber enterprises producing pellets are located. Now coal is supplied to these boiler houses through northern delivery, he noted.

According to the Union of Timber Manufacturers and Exporters, the leaders in the production of pellets in Russia are Segezha Group, ULK Group, Sawmill 25 (part of Titan Group), Yenisei woodworking company, Newforestpro, Lesresurs-Rusforest, Group of Companies “Vologda timber merchants” and RFP. Vedomosti sent inquiries to these companies, as well as to the press services of the Ministry of Industry and Trade and the Ministry of Construction.

“The initiative, supported by the president, will not only provide sales to pellet producers, but will also become a catalyst for the conversion of inefficient boiler houses operating on fuel oil and coal to more environmentally friendly and efficient biofuels,” says WhatWood consultant Igor Novoselov.