Analysis of the policy of increasing the degree of connectivity to natural gas resources for the residential sector

Mihai Cristea 06/11/2020 | 14:04

Transforming Europe into the first climate-neutral continent by 2050 is the biggest challenge of our time. The “Green Deal” recently presented by the European Commission is the most ambitious package of measures that will make the transition to a green and sustainable economy and calls on Member States to rethink energy system strategies quickly.

 

The status of “transitional fuel” of natural gas is gradually beginning to dilute, while the role of associated infrastructure – as a facilitator of the desideratum proposed by the European Green Deal – is placed under the auspices of uncertainty. In Romania, a Member State characterized by an energy mix in which natural gas has a significant share in national consumption (approximately 30%) and a relatively complex gas infrastructure, the bet of the relevant authorities is the intensive exploration / exploitation of this resource, respectively significant investments in the associated infrastructure, in order to increase consumption locally.

In this context, we notice the Romanian state’s policy for starting an intensive process of connecting the residential sector to the gas distribution networks and, in particular, the introduction of the possibility of “free connection” of household customers to the distribution network.

A recent analysis conducted in October 2020 by the Intelligent Energy Association on Policies to increase the connectivity to natural gas resources for the residential sector highlights some of the most important implications and benefits that could be generated if the state continue to implement the stated strategy and aims to provide a series of recommendations on policies and regulations, likely to lead to the intelligent use of natural gas on the Romanian market.

In addition to advantages such as increasing the comfort of the population and establishing the premises for a reduced carbon footprint by replacing the use of biomass with natural gas, especially in rural areas, there are disadvantages and, moreover, risks.

Socializing the costs of connecting new consumers to the natural gas network through the distribution tariff, violating the principle of economic efficiency stipulated in Law 123/2012, generating the premises for increasing the number of vulnerable customers and additional costs for the customer in the energy bill are some of the disadvantages of this initiative .

There is a false premise that the process of connecting to the natural gas distribution network is free because the costs associated with this process will be dissipated in the bill of all customers in the respective distribution network, by increasing the natural gas distribution tariff. In addition, it is possible that many household customers, stolen by the “mirage” of free connection, request this, but the free connection of household customers is not accompanied by an obligation on their part to consume gas. This situation will generate additional costs for the customer, as the profitability of a distribution network decreases in inverse proportion to the volumes that are not conveyed through its pipelines.

Another negative effect of free connection to the gas network may be an increase in the number of vulnerable consumers. The quality of vulnerable customer presupposes the fact that he already benefits from a form of energy supply, but it cannot, for material reasons, to bear the costs of the energy bill. An intensive process of free connection of new customers does not support vulnerable customers, but on the contrary, creates the premises for increasing this category of customers nationwide by increasing the natural gas distribution tariff, explained above.

Discriminatory treatment between domestic consumers already connected to the natural gas distribution system and those wishing to connect free of charge can be another problem of free connection of new consumers. Let’s take into consideration the paradoxical situation in which a distribution pipeline made entirely on a consumer’s money, prior to the entry into force of the new ANRE order, will be used free of charge by the new consumer. The old consumer will find himself in the position of partially paying (by tariff) the costs with the connection used by the new connected customers.

It is imperative to consider the possibility of reducing the safety of gas systems. Pressure on the budget of distribution operators and / or transmission operators could lead to syncopes in the efficient management of the managed infrastructure amid the need to simultaneously manage requests for network extensions / new connections and maintenance and repair operations. The rapid increase in the number of consumers using natural gas for heating purposes brings the current distribution systems in the situation of ceasing the gas supply, endangering the gas distribution to all consumers.

Moreover, “free connection” could generate a long-term risk such as depletion of domestic natural gas resources before the expiration of the normal life of the distribution infrastructure, with the risk of dependence on gas imports, diminished safety in the operation of existing gas infrastructure as a result of the sharing of resources of distribution operators and / or transmission operators between maintenance activities, capital repairs and connection of new consumers, making investments that do not add value for the final consumer in Romania and lack of correlation with the European Commission’s strategy on development of H2 networks.

The obligatory premise regarding the development of the Romanian natural gas infrastructure is the recalibration / reconsideration of the Romanian natural gas infrastructure development strategy, so that the new investments are correlated with a real benefit of the Romanian population, a sufficiently well calculated lifespan to allow their efficient exploitation and the goal of achieving climate neutrality by 2050.

The recommendations of the Intelligent Energy Association for Romania’s energy policies in the perspective of 2050 are:

  • an intensive strategy for connecting the residential sector should only be implemented in areas where there is no proven cost-effective energy alternative;
  • superior exploitation of natural gas by correlating the current policy of development of the transmission and distribution network with a strategy of relaunching the industry that uses this type of resource as a raw material (especially the chemical and petrochemical industry);
  • development of electricity production capacities based on natural gas, in cogeneration and trigeneration regime;
  • state involvement in the development of “green field” projects in the chemical and / or petrochemical sector;
  • ensuring a favorable legal and fiscal framework for the development of this type of industry in Romania, thus ensuring the premises for the intelligent use of natural gas;
  • rethinking investments in natural gas infrastructure, so that the new investment objectives can also be used for hydrogen transport.

“Analysis of the Policy to increase the degree of connectivity to natural gas resources for the residential sector” was elaborated by Dumitru Chisăliță, founder and President of the Intelligent Energy Association, with over 26 years of professional experience in the energy, natural gas and efficiency sector energy and Georgian-Florentin Albu specialist in public policies and strategy in the natural gas sector, with an experience of 8 years in the public and private sector, member of the Intelligent Energy Association.

“Analysis of the Policy for increasing the degree of connectivity to natural gas resources for the residential sector” will be presented for the first time at the online event Natural Gas Forum organized by Financial Intelligence together with the Intelligent Energy Association on Thursday, November 5, 2020.

The study was also submitted to state authorities in the field of energy, institutions and organizations: Presidential Administration, Prime Minister of Romania, Ministry of Economy, Energy and Business Environment, Economic Commission of Industries and Services of the Senate and Chamber of Deputies, ANRE, ANRM, Competition Council, ANPC, political parties, ACUE, AFFER, FPPG, Concordia Employers’ Confederation.

The analysis can be found in full here, only in Romanian language.

 

About the authors

Dumitru Chisăliţă is the founder and president of the Intelligent Energy Association, with a professional experience of over 26 years in the energy, natural gas and energy efficiency sectors, during which time he held coordination positions, both in governmental structures and at the level of important operators in the energy sector. Currently, he offers specialized consultancy in the field, being involved in multiple projects with strategic values ​​in relation to the Romanian state as well as to the business environment in the energy sector.

Georgian – Florentin Albu is a member of the Intelligent Energy Association, specialist in public policies and strategy in the natural gas sector, with an experience of 8 years in the public and private sector. He has a degree in Communication and Public Relations and a graduate of MBA-type master’s courses at the Academy of Economic Studies, specialization in Entrepreneurship and Business Administration in the field of Energy.

Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue