2025–2026 heating season – stable biomass prices and key preparedness factors

The international biomass exchange Baltpool forecasts that biomass prices during the 2025–2026 heating season are expected to remain at a similar level to last year, with Lithuania continuing to see a moderate decline in raw wood prices. At present, the average forward biomass price in Lithuania for the upcoming season is around 4% lower compared to 2024–2025, at €20.15/MWh.

“Forward contracts show that raw biomass prices are currently at their lowest level in the past five years. The last two years have been marked by very similar and stable price levels, which allows us to cautiously anticipate a calm season without major surprises. We have never experienced such a narrow price difference between two consecutive seasons,” notes Vaidotas Jonutis, Head of Trading at Baltpool.

Currently, average forward biomass prices for the upcoming season are down by about 4% in Lithuania (€20.15/MWh), about 5% in Latvia (€20.6/MWh), while in Estonia prices are slightly higher, up by around 3% (€20.9/MWh).

Since biomass constitutes the largest share of heat production costs, its stability directly translates into heating prices. In October, the average heating price in Lithuania is expected to be 6.58 ct/kWh – 1.86% lower compared to the end of the last heating season. However, this year’s preparations for the heating season have been hampered by heavy summer rainfall, which disrupted forestry operations.

“Precipitation levels in the Baltic States exceeded long-term averages every month from May to August. Latvia saw the heaviest rainfall in May, Estonia in June, and Lithuania in July. Under such conditions, ensuring raw material supply is challenging, which creates obstacles in building up reserves for the coming winter season. Typically, 30–40% of Lithuania’s total biomass demand for the heating season is secured through long-term contracts during the summer. This year, less than 30% has been contracted. If this trend continues, the figure will reach only around 40% by mid-season at best,” adds Jonutis.

VAT changes to influence heating prices

In October, heating prices in Vilnius stand at 5.42 ct/kWh, in Kaunas – 7.25 ct/kWh, in Klaipėda – 5.90 ct/kWh, in Šiauliai – 6.10 ct/kWh, and in Panevėžys – 6.28 ct/kWh. Typically, the October price is 10–20% lower than the average price of the upcoming season. 

Nevertheless, despite stable and relatively low biomass feedstock prices in Lithuania, heating bills this season are likely to be affected primarily by taxation rather than market dynamics. From January 1, 2026, VAT on heating in Lithuania is set to increase from 9% to 21%.

At the same time, V. Jonutis points to lower-than-usual biomass stock levels among suppliers. This situation arose after two consecutive warm winters, when pre-season reserves proved unprofitable.

“This means that the market will have fewer safeguards to absorb sudden shocks. Under normal conditions this would not be a cause for concern, but in the event of prolonged cold spells and a sudden increase in biomass demand, short-term trading could face temporary supply shortages, leading to sensitive price reactions,” he explains.

Currently, biomass feedstock prices in Lithuania and Latvia are about 15–20% lower than a year ago, while in Estonia they have been edging upwards for three years in a row. However, overall price levels across the three countries remain very similar, so cross-border biomass trade is expected to remain limited and episodic, as it did last year.

Contract diversification helps mitigate risks

Experience from recent years shows that prices tend to remain almost unchanged throughout the heating season. In particular, the last two seasons have been calm, with minimal fluctuations. This suggests that the upcoming season should also remain stable.

According to experts, the key issue is not price volatility, but the choice of contract structure – long-term versus short-term. Last year, prices for both were practically identical, and the same trend is emerging this year. This creates more opportunities to apply balanced risk management strategies: long-term contracts provide stability and allow cost planning, while short-term contracts ensure flexibility in responding to market changes. Combining the two approaches makes it possible to adapt more effectively to potential market shifts and business growth needs.

“We have applied Nobel Prize winner Harry Markowitz’s portfolio theory – commonly used in investment risk and return analysis – to the biomass market. The analysis showed that the lowest risk is achieved when contracts are split evenly: 50% long-term and 50% short-term,” Jonutis emphasizes.

Market data indicates that biomass prices are unlikely to deliver major surprises, but the success of the heating season will depend not only on prices, but also on preparedness. Experts encourage heat producers to actively manage risks, diversify contracts, and make decisions based on data. A data-driven, strategically diversified contracting approach is the key to a smooth heating season.