On the Issue of Sustainable Energy Development: The Economic

Aspect of Transferring Regional Heat Supply to Local Renewable

Fuels

Karolina Ketova

and Denis Nefedov

Kalashnikov Izhevsk State Technical University, Studencheskaya street, Izhevsk, Russia

Keywords: The Sustainable Energy Development, Regional Economic System, Heat Supply, Energy Security,

Renewable Fuels, Economic Efficiency.

Abstract: The paper considers the heat supply system of the regional socio-economic system as an important element

that ensures the stability of its existence in modern conditions. To ensure the stability and safety of its

functioning, the use of local renewable energy resources in the heat supply system of the region is considered,

for which it is necessary to transfer the heat supply system available in the region to other types of energy

resources. For this, a methodology for assessing the compliance of the planned and actual progress in the

implementation of measures to transfer the regional heat supply system to local types of fuel, based on a

system of indicators, is proposed. The methodology contains quantitative indicators of the effectiveness of

the implementation of measures. Various financial sources for the implementation of the planned activities

were considered: funds from budgets of all levels; consolidated funds based on public-private partnership;

budgetary and extrabudgetary grants for research and development work; borrowed funds of credit

institutions; own funds of enterprises. Numerical calculations were carried out for one of the regions of Russia

- the Udmurt Republic. For this region, the use of local energy resources, primarily wood waste and animal

waste, is one of the possible options for solving the problem of energy supply to remote areas in the face of a

shortage of fuel and energy resources and a steady rise in prices for traditional fuels and transport costs for

the delivery of raw materials to the region.

1 INTRODUCTION

In modern conditions of development of world

economies and increasing competition in this regard,

the risks associated with the functioning of all

elements of socio-economic systems are growing. An

important element of the sustainable existence of any

socio-economic system is its heat supply system.

The demand for energy resources in the modern

world is constantly present, while the reserves of

traditional fuels are being depleted, and new deposits

are being developed slowly. Identification of

emerging social trends that will affect future energy

demand are presented in (Brugger, Eichhammer,

Mikova and Dönitz, 2021) and (Zihao et al., 2021).

The depletion of traditional fuels leads to higher

prices for traditional fuels and, in parallel, to an

https://orcid.org/0000-0001-7143-1930

https://orcid.org/0000-0003-4569-3376

increase in tariffs for rail and road transport. In this

regard, the task of transferring regional heat supply

systems to local types of fuel becomes urgent.

Modern scientific research in the field of transition of

heat supply systems to new types of fuel is given in

(Ketova and Trushkova, 2012) and (Bogdanov et al,

2021).

The need to reconstruct the regional heat supply

system to increase the sustainability of its existence is

also due to a number of other reasons. Firstly, it is the

need to develop production capacities and new

industries based on innovations and the creation of

new technologies for processing fuel and energy

resources. These points are highlighted, in particular,

in the works (Weinberger and Moshfegh, 2018) and

(Rusyak et al, 2010). Secondly, it is ensuring the

energy security of the region, which is detailed in the

articles (Karatayev and Hallc, 2020) and (Pei et al.,

Ketova, K. and Nefedov, D.

On the Issue of Sustainable Energy Development: The Economic Aspect of Transferring Regional Heat Supply to Local Renewable Fuels.

DOI: 10.5220/0010664300003223

In Proceedings of the 1st International Scientiﬁc Forum on Sustainable Development of Socio-economic Systems (WFSDS 2021), pages 82-89

ISBN: 978-989-758-597-5

2021). Also, this problem is relevant from the point

of view of ensuring environmental safety. The

problem of environmental safety from the point of

view of the use of various types of fuel in the modern

world was studied in (Fang et al., 2021) and

(Proskuryakova, 2018).

The conceptual framework for the modern

definition and development of the regional energy

balance is formulated in the work (Mc Gookin et al.,

2021). The influence of energy factors on the

development of the socio-economic system is given

in (Ketova et al., 2020).

To carry out the reconstruction of the regional

heat supply system, it is necessary to assess the

economic feasibility of carrying out the necessary

technical measures. We will develop a methodology

for assessing the economic feasibility of transferring

the regional heat supply system to local types of fuel,

which will also be aimed at solving the problem of

efficient distribution of investments in the heat supply

system of the region.

The purpose of this work is to analyze sources of

funding, develop a business plan and a network

schedule for the reconstruction of the heat supply

system in the region. For example, consider the

regional system of one of the Russian regions - the

Udmurt Republic (UR).

2 RESEARCH METHOD

The main types of fuel consumed in the UR are gas,

oil products and coal supplied from other regions.

Local fuels are peat, firewood, logging and wood

processing waste. They make up a small part of the

region's fuel balance. The republic is dependent on

traditional fuel and energy resources imported from

other regions of Russia. The demand for fuel in boiler

houses that do not use gas as fuel is 81.4 thousand

tons of fuel equivalent (t f.e.).

According to estimates given in (Rusyak et al.,

2010), in most districts of the UR, the energy

potential of local energy carriers (wood waste, animal

waste) exceeds the total demand for energy resources.

However, this potential is not fully exploited. To

solve this problem, the concept “Supply of the

population, social facilities in remote settlements of

the UR with local fuels, alternative to natural gas”

was developed (Rusyak et al., 2010). Within the

framework of the concept, a cluster analysis was

carried out to solve the problem of optimal

distribution of fuel and energy resources (Rusyak, et

al., 2017) and the logistic problem of fuel supply to a

distributed regional heat supply system was solved

(Ketova and Trushkova, 2012). As a result, the

following list of activities necessary for the

implementation of the task was obtained, namely:

 construction of points for processing wood waste

into chips;

 creation of points for the accumulation of wood

waste;

 construction of pellet plants;

 creation of points for processing animal waste;

 construction of a gas pipeline;

 reconstruction of boiler houses converted to wood

chips;

 reconstruction of boiler houses converted to

pellets;

 reconstruction of boiler houses converted to

biogas.

In this regard, it is necessary to analyze the

economic feasibility of transferring the regional heat

supply system to local types of fuel and determine

possible financial sources for the implementation of

technical measures.

Sources of funds for the implementation of the

transfer are:

 funds from budgets of all levels and consolidated

budget funds;

 private capital based on public-private

partnership;

 borrowed funds from credit institutions;

 own funds of enterprises.

The funds of the consolidated fund should be

directed to the development of technical measures

and further monitoring of their implementation. The

diagram (figure 1) shows the financing of activities at

the expense of the consolidated budget funds. The

relevant ministries of the region (the Ministry of

Construction, Housing and Utilities and Energy of the

Udmurt Republic, the Ministry of Industry and Trade

of the Udmurt Republic), in cooperation with the

Republican Energy Commission, submit proposals on

the use of consolidated funds to the Government of

the Udmurt Republic, which forms the direction for

using the consolidated funds and approves the list of

measures to be implemented. Further, the

consolidating organization finances the list of

approved activities, concludes contracts with

contractors.

On the Issue of Sustainable Energy Development: The Economic Aspect of Transferring Regional Heat Supply to Local Renewable Fuels

Profile ministries of the UR,

Republican Energy

Commission

Contractors

Refund

Approved list

of activities

Contracts for the

implementation

of activities

Financing

of activities

Government of the UR

Proposals for the

use of consolidated

funds

Direction of use

of consolidated

funds

Consolidating

organization

Consolidated funds

Enterprises of housing and communal

services, Administrations

of Municipalities of the UR

Figure 1: Scheme for financing events from consolidated budget funds.

At the expense of consolidated funds, it is also

possible to provide subsidies to reimburse part of the

interest rate on loans and part of the cost of paying

lease payments. During the implementation of the

transfer of the regional heat supply system to local

types of fuel, it is possible to finance part of the costs

from consolidated funds (for example, design work),

as well as the provision of subsidies to reimburse part

of the interest rate on loans and part of the cost of

paying lease payments (for the purchase of

equipment).

It is possible to attract funds from budgets of all

levels, the use of which is regulated by documents. In

the regional budget, it is necessary to provide funds

for the provision of state guarantees in the direction

of credit institutions, as well as the provision of tax

incentives and subsidies to enterprises that finance

measures for the reconstruction of the regional heat

supply system. The scheme of financing events at the

expense of credit funds is shown in figure 2.

Evaluation of the effectiveness of the measures

implementation to transfer the regional heat supply

system to local types of fuel will be carried out on the

basis of the use of a system of indicators, which are

measurable quantitative indicators characterizing the

current change in the situation and the achievement

of the goal as a result of the measures

implementation.

The developed system of indicators reflects three

groups of indicators: energy group, economic and

environmental. These groups allow an objective

assessment of the effectiveness of the measures taken

at all stages of their implementation (table 1).

Consider the indicators shown in table 1. Energy

efficiency

shows how efficiently the generated

energy is consumed, what losses occur at the same

time at the heat source, in the utility networks when

delivering energy from the producer to the consumer.

The value of energy efficiency is determined by the

expression:





%100



TEPFER

VVE

)

where

FER

is the total consumption of fuel and

energy resources (FER), t f.e.;

TEP

is volume of

energy production for all boiler houses, t f.e.

The indicator “Percentage of local types of energy

carriers (wood chips, pellets, biogas) in the structure

of FER consumption” shows the energy

independence of the UR from external fuel and

energy resources.

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

Profile ministries of the UR,

Republican Energy

Commission

Contracts for the

implementation

of activities

Financing of

activities

Government of the UR

Proposals for the

use of consolidated

funds

Direction of use

of consolidated

funds

Provision of state

guarantees

Approved list of

activities

Enterprises of housing and communal

services, Administrations

of Municipalities of the UR

Refund

Credit

funds

Contractors

Credit

organisation

Figure 2: Scheme for financing events using credit funds.

Table 1: Indicators of the quality of the implementation of

measures to transfer the regional heat supply system to local

types of fuel, divided by groups.

№ Names of indicators Unit of

measurement

1 Ener

1.1 Ener

efficienc

1.2 Percentage of local types of

FER (wood chips, pellets,

biogas) in the total structure of

thei

consum

tion

1.3 Percentage of converted heat

sources fro

the

lanne

2 Economic

2.1 Specific heat consumption of

budgetary organizations

relative to 2020

2.2 Savin

et funds

2.3 Percentage of expenses for

FER in the cost of heat ener

3 Environmental

3.1 Percentage of recycled wood

waste

3.2 Percentage of recyclable

animal waste

4 Percentage of actual

com

letion of activities

5 Effectiveness of program

lementation

The main types of fuel and energy resources

consumed in the UR are gas, coal, oil products,

electricity, which are delivered from other regions.

Local fuels are peat and wood, and wood chips,

pellets and biogas produced on their basis. The

percentage of local types of energy



is calculated

using the formula:





%100





TFERLFER

)

where

LFER

is the volume of consumption of local

FER, t f.e.;

TFER

is total consumption of FER, t f.e.

In the republic, much attention is paid to

improving the energy security of heat supply to the

population of the UR. The problem of energy security

arises due to the aging of heat source equipment.

Therefore, as one of the indicators for assessing the

implementation of measures to transfer the regional

heat supply system to local types of fuel, we will

consider the percentage of converted heat sources







%100





TCT

)

where

is the number of converted heat sources,

pcs;

is the total number of heat sources planned

for re-equipment, pcs.

There are about 1.5 thousand heat sources in the

region that generate heat for municipal and industrial

On the Issue of Sustainable Energy Development: The Economic Aspect of Transferring Regional Heat Supply to Local Renewable Fuels

needs. Moreover, more than one thousand heat

sources are on the balance sheet of budgets of various

levels. A significant part of these heat sources is

equipped with equipment that currently has a service

life exceeding its useful life. Equipment failure leads

to a failure in heat supply.

Specific heat consumption of budgetary

organizations relative to the base year is calculated by

the formula:





%100

BFER

BOFER

VVV

)

where

BFER

is the specific heat consumption by

budgetary organizations, t f.e./ thousand m

;

specific heat consumption by budgetary

organizations in the base year, t f.e./ thousand m

Local renewable fuels (wood chips, pellets,

biogas) are more cost-effective compared to currently

used energy sources. The production of own types of

fuel will lead to a decrease in the unit costs for the

delivery of energy resources from other regions and

can be reflected in the indicator “Percentage of

expenses for FER in the cost of heat energy”. This

indicator is defined as the ratio of the cost of fuel and

energy resources to the total cost of heat production.

The budget savings resulting from the use of

economically more profitable types of fuel are

calculated using the following formulas:



iji

VCTE 



1





ЭЭ

)

where

is the saving of budgetary funds in the i

year;

is the tariff of heat energy in the i

year at

the j

heat source, rubles/t f.e.;

is cost of heat

energy in the i

year at the j

heat source when it is

transferred to a local type of fuel, rubles/t f.e.;

V is

volume of heat production in the i

year at the j

heat

source, t f.e.;

N is the number of heat sources, pcs;

is the number of years during which the re-

equipment of heat sources takes place.

The use of wood waste and animal waste as local

fuels has a positive effect on the environmental

situation in the region. The indicators “Percentage of

recycled wood waste” and “Percentage of recycled

animal waste” are calculated, respectively, according

to the following formulas:

%100%,100 

)

where

 ,

is the percentage of processed wood

waste and animal waste, respectively, of the total

amount of the corresponding waste, %;

VV ,

the volume of processed wood waste and animal

waste, respectively, t;

VV ,

is the total volume of

wood waste and animal waste, respectively, t.

The indicator “Percentage of actual

implementation of the program” is calculated as the

ratio of the cost of actually performed work to the

total planned volume of necessary investments for the

implementation of the full list of activities:





%100







)

where



is the share of actual program execution,%;

is the cost of the work performed, reduced to the

considered year, in prices of the current years,

thousand rubles;

is the total amount of investment

required for the implementation of activities,

thousand rubles.

An integral assessment of the effectiveness of the

implementation of the republican target program is

determined by the formula:







%100

пi

J 







)

where J is the effectiveness of the implementation

of measures, %;



is weighting coefficient of the i

indicator;

is the number of indicators on the basis

of which the effectiveness of the implementation of

measures is assessed;

J is the effectiveness of the

measures implementation progress, characterized by

the i

indicator, %;

is the actual value of the

indicator characterizing the implementation of

measures;

пi

Т is the planned value of the i

indicator.

3 RESEARCH RESULTS

Some calculated planned values of indicators for

assessing the effectiveness of program activities

implemented over 10 years are shown in figures 3-7.

For example, budget funds are considered as a source

of funding. The shorter the investment period of the

program, the faster the required values of target

indicators are achieved (the share of local types of

energy carriers in the structure of FER consumption

should be 30%).

Figure 3 shows a diagram of changes in the

“Energy efficiency” indicator for different periods of

budget investment. The fastest achievement of the

target value is achieved with a 5-year period of

budgetary investment in measures to transfer the

regional heat supply system to local types of FER.

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

RUR bln

year

Figure 3: Dynamics of the “Energy efficiency” indicator at

different investment periods.

The diagrams in figure 4 and figure 5 demonstrate

the change in the indicators “Percentage of local types

of FER” and “Percentage of converted heat sources”

at different periods of budget investment. The

transition to local types of energy resources and,

accordingly, the re-equipment of heat sources for

these purposes is likely to be carried out within a 5-

year period.

Thus, the fastest achievement of the target value

is achieved with a 5-year period of budgetary

investment in measures to transfer the regional heat

supply system to local types of FER. Targets are

slowest to take on target values over a 10-year

investment period.

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 4: Dynamics of the indicator “Percentage of local

types of FER” for different periods of investment.

100

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 5: Dynamics of the indicator “Percentage of

converted heat sources” at different investment periods.

Figures 6 and 7 show the dynamics of the planned

values of indicators reflecting the contribution of

measures to the economic sphere: “Specific heat

consumption of budgetary organizations relative to

the base year” and “Percentage of expenses for FER

in the cost of heat energy”. The first year of the

planning period is the basic one in the calculations,

therefore the considered indicators take the highest

value (100%). Then, for a 5-year period of investment

in measures to transfer the heat supply system of the

region to local types of FER, for subsequent years the

values of the indicators are set at 45% and 20%,

respectively.

For a 7-year investment period, the value of 65%

is taken by the indicator “Specific heat consumption

of budgetary organizations relative to the base year”

in 2025 and the value of 45% in 2030. Also, for a 7-

year investment period, the value of 25% is taken by

the indicator “Specific heat consumption of

budgetary organizations relative to the base year” in

2025 and the value of 20% in 2030.

For a 10-year investment period, the indicator

“Specific heat consumption of budgetary

organizations relative to the base year” takes a value

of 78% in 2025 and a value of 45% in 2030. Also, for

a 10-year investment period, the value of 35% is

taken by the indicator “Specific heat consumption of

budgetary organizations relative to the base year” in

2025 and the value of 20% in 2030.

Thus, in 2030, the values of indicators reflecting

the contribution of measures to the economic sphere

are set at the same level.

On the Issue of Sustainable Energy Development: The Economic Aspect of Transferring Regional Heat Supply to Local Renewable Fuels

100

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 6: Dynamics of the indicator “Specific heat

consumption of budgetary organizations” for different

periods of investment.

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 7: Dynamics of the indicator “Percentage of

expenses for FER in the cost of energy” for different

periods of investment.

Figure 8 shows the dynamics of the planned value

of the target indicator “Saving budget funds”,

reflecting the contribution of activities to the

budgetary sphere. It can be seen that the shorter the

investment period (the time of implementation of

measures to transfer the regional heat supply system

to local types of fuel), the greater the value of the

indicator.

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

RUR bln

year

Figure 8: Dynamics of the indicator “Saving budget funds”

for different periods of investment.

An additional product obtained in the production

of biogas is biofertilizer. Figures 9 and 10 show the

dynamics of the planned values of indicators

reflecting the contribution of measures to transfer the

regional heat supply system to local fuels into the

environmental sphere: “Percentage of recycled

animal waste” and “Percentage of recycled logging

waste”, respectively.

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 9: Dynamics of the indicator “Percentage of recycled

wood waste” at different investment periods.

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

2020 2025 2030

5-year investment period

7-year investment period

10-year investment period

year

Figure 10: Dynamics of the indicator “Percentage of

recyclable animal waste” at different investment periods.

Evaluation of the effectiveness of achieving the

target indicators of the program lies in the analysis of

the quality of the result of each individual project, the

compliance of the actually achieved values with the

planned ones.

The indicators “The percentage of actual program

implementation” and “Program implementation

efficiency” can be calculated as needed at any stage

of its implementation to monitor the current state of

the degree of program implementation.

4 CONCLUSIONS

Thus, a methodology has been developed for

assessing the compliance of the planned and actual

progress in the implementation of measures to

transfer the regional heat supply system to local types

of fuel, based on a system of indicators. The

methodology contains quantitative indicators of the

effectiveness of the measures implementation.

Various sources of financing for the transfer of the

regional heat supply system to local types of fuel are

considered: funds from budgets of all levels;

consolidated funds based on public-private

partnership; budgetary and extrabudgetary grants for

research and development work; borrowed funds of

credit institutions; own funds of enterprises.

Numerical calculations were carried out for one of

the regions of Russia - the Udmurt Republic. For this

region, the use of local energy resources, primarily

wood waste and animal waste, is one of the possible

options for solving the problem of energy supply in

remote areas in the face of a shortage of fuel and

energy resources and a steady rise in prices for

traditional fuels and transport costs for the delivery of

raw materials to the region..

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On the Issue of Sustainable Energy Development: The Economic Aspect of Transferring Regional Heat Supply to Local Renewable Fuels