Amendments to the Conditions of Trade in Biomass Products and the Typical Conditions of Supply are adopted

2023 07 10
Amendments to the Conditions of Trade in Biomass Products and the Typical Conditions of Supply are adopted

Considering the issues that arose during the last heating season in the execution of transactions on the exchange, as well as the comments and suggestions made by the biomass market participants regarding the improvement of the legal regulation, amendments to the Conditions of Trade in Biomass Products and the Typical Conditions of Supply of Biomass were adopted on 29-06-2023 and will enter into force on 10-07-2023.

The main changes are:

1. If a buyer reduces the volume of transactions for reasons beyond the buyer’s control (e.g. weather conditions), weekly transactions will be restricted for the relevant period.

If a participant publishes a Significant Information Notice stating that due to circumstances beyond the control of the buyer, a reduction in the demand for biomass (e.g. weather conditions, etc.) will reduce the quantity of biomass available for delivery in a given single delivery week by up to 20%, the buyer will not be able to enter into new weekly transactions on the exchange or weekly transactions under direct bilateral agreements registered on the exchange for this period. For example, if the buyer publishes a material information notice on Thursday that the quantity available for delivery for all monthly, quarterly, and semi-annual contracts is reduced by 20% next week, the buyer will not be able to place buy orders for weekly contracts in next week’s auction.

2. Possibility to reduce the volume of a transaction with the non-standard clause “Contract termination in case of losing a heat auction” in accordance with the dispatchable heat production control schedule (from 02-10-2023)

It is stipulated that the volume of a transaction with a non-standard clause “Contract termination in case of losing a heat auction” will be able to be reduced not only according to the results of the heat auction, but also according to the dispatching schedule of the control of heat production.

3. Major revision of the specification of conditions for the delivery of biomass by rail

Pursuant to the amendments to the rules on procurement of energy or fuels required for the production of electricity and heat, adopted by the Government of the Republic of Lithuania on 21-06-2023, the specification of the terms and conditions for the delivery of biomass by rail is being substantially revised by providing possibility for the buyer to register a single purchase order at several receipt points (creating the possibility for several biomass sellers to compete in different delivery locations).

4. Splitting auctions by country of buyers (from 02-10-2023)

To ensure the efficiency of auctions held in different countries, trading sessions are to be organised separately in each country as from 02-10-2023, i.e., if sellers reduce the price of their orders placed from the sites registered in the country concerned, the auction phase would be extended only in that country. For example, if a seller lowers the price to sell biomass in the Vilnius region, this will not extend the auctions for the purchase and sale of fuel in the Riga or Tallinn regions.

5. OTC transactions are introduced on the Energy Exchange

Transactions based on direct bilateral agreements will be able to be executed in accordance with the Typical Conditions of Supply of Biomass (delivery of the agreed quantity of biomass products of the specified quality, verification of the qualitative characteristics and quantity of the biomass, and settlement of the biomass in accordance with the procedures and conditions set out in the Regulation, etc.), with the registration of such transactions under the menu item “OTC Transactions”, prior to the start of the delivery period.

6. In the event of equipment failure, buyers will be obliged to provide a Significant Information Notification and of the rectification of the failure (from 02-10-2023)

In the event of a plant failure, the buyer will be required to provide two messages of significant information to stop the supply of biomass:

  • In the event of a failure (as before);
  • When the failure is rectified. This Significant Information Notice will need to include, amongst other things, the date on which the circumstance ceased to exist and the amount of biomass that has been reduced by the total amount of biomass consumed during the period that the circumstance has existed.

7. Clarification of the provisions on cases, when buyers fail to submit quality reports on time (from 02-10-2023)

In response to suggestions from market participants, the provisions on the consequences of late submission of quality reports by buyers are clarified:

  • It is stipulated that if a buyer is late to submit the report within 7 working days after the end of the delivery week, such buyer will not be able to apply discounts in case the quality indicators of the biomass are not in line with the product specifications;
  • If the buyer misses this deadline and fails to submit the quality indicator report even after 5 working days from the reminder from the seller, the biomass delivered by the seller will be considered to have been delivered at the highest possible biomass quality indicator;
  • If the seller disputes the quality test report of the delivered biomass, the seller shall also be given 7 working days to carry out a back-up sample test (from 10-07-2023).

8. Obliging certain buyers to provide delivery schedules in advance of anticipated delivery (only for Lithuania)

Buyers, who are obliged by the National energy regulatory council to declare the planned time of delivery (unloading) of biomass in accordance with the provisions of points 9 and 91 of the Procedure for the Control of the Quality Requirements of Solid Biomass Quality, will have to coordinate the relevant delivery schedules in the Electronic Trading System (hereinafter referred to as the “ETS”) at least 24 hours prior to the planned time of the delivery of biomass.

9. Duplication of information in ‘toe’ units is removed from the ETS

Given that trading from 1 September 2020 is in megawatt hours (MWh), duplication of information in the previously used ‘toe’ units is removed from the ETS. Participants will be given the option to switch to display in ‘toe’ units if required, as is currently the case for ‘GJ’ units.

10. Listing of new products – SM4 and RW2pc – to trade on the exchange

Additional products are being listed in response to the demand expressed by market participants for even lower quality products:

  • SM4, with an ash content of up to 7% and a small particle fraction of up to 30%;
  • Recycled wood product ‘RW2pc’ (pre-crushed) with a bigger fraction allowed.

11. For declarations of certified raw material and biomass under the RED BP scheme, to submit accounting document will be obliged only participants who are not certified under relevant certificate

To reduce the administrative burden of declaring certified raw material and biomass, only participants who are not certified under the relevant certificate will be required to submit an accounting document. Also, to avoid double counting of raw material or biomass, participants who are certified under the relevant certificate and have informed the exchange operator thereof will be obliged to declare immediately the raw material or biomass delivered under the relevant certificate by reconciling the report on the quantity and quality of biomass fuel delivered.

12. RED BP scheme removes the obligation for biomass sellers to inventory their storage biomass warehouses

To simplify accounting and to account only for sustainable delivered biomass on a mass balance basis, only biomass buyers participating in the REB BP scheme will be obliged to take inventory of their incoming biomass. Sellers will instead be required to declare that all declared raw materials or biomass have been physically delivered in Lithuania or other countries under RED BP transactions and that these raw materials or biomass have not been declared to any other international forest management certification schemes, voluntary international schemes, or national schemes of other countries.

International Biomass Exchange