The General Manager of EDA THESS, Mr. Leonidas Bakouras, answers  whether the energy crisis marks the end of Natural Gas.

 Interview of the General Manager, Mr. Leonidas Bakouras, to energypress.gr 

Recent geopolitical developments do not affect the role of natural gas, since in all the realistic scenarios that have been put on the table, gas will continue to be the fuel delivering reliability to the energy system of Greece and Europe for the coming years. This is what the General Manager of EDA THESS, Mr. Leonidas Bakouras pointed out in his interview, adding that the role of natural gas will therefore be sustained and will not be relegated by the RePowerEU plan for reducing energy dependence on Russia.

According to Mr. Bakouras, an important reason is that – taking into account the increasing penetration of RES in the power generation mix  – natural gas is the most efficient solution for power adequacy,  while at the same time it is a reliable source of energy for industries, providing multiple advantages. As a result, along with its increasing use in the residential sector, it will continue to catalyze the achievement of targets set for climate change mitigation (fit-for-55).

In this context and given that Greece has received gas late compared to the rest of Europe, there is an urgent need to increase its penetration throughout the country, through the investments for the development of new distribution networks that are in progress. Moreover, he added, the same distribution networks that are currently accommodating natural gas, will in the future act as multipliers for the penetration of renewable gases into the final energy mix, accelerating its decarbonization.

The General Manager of EDA THESS also pointed out that along with the investments in new networks, there should be incentives in order for the citizens in the new areas to switch to the use of natural gas. Also, energy saving programs for existing consumers (such as household condensing boilers that reduce consumption by 25-30%), could partially offset high prices. 

1. After three months of warfare in Ukraine and following the “response” of the EU through the REPowerEU plan, is the role of gas relegated in your opinion?

 The transitional role of gas will be sustained and will not be relegated by the RePowerEU. On the contrary, in all the realistic scenarios that have been put on the table, natural gas will be the fuel that will offer reliability to the energy system of Greece and Europe for the coming years.

The REPowerEU plan provides for a number of actions to diversify gas supply sources, save energy and further develop renewable energy sources. Natural gas is the cleanest fossil fuel, its CO2 emissions amounting to only half of the emissions from coal combustion. Replacing coal with natural gas reduces total emissions by hundreds of millions of tonnes annually in Europe.

There is no question of relegating the role of gas but it is necessary to replace polluting fuels such as lignite and coal. Νatural gas will support the country’s power generation with alternative supply sources (LNG), covering peak loads and helping to meet the demand that RES are unable to address due to intermittent production and the lack of large-scale storage.

Especially for industry, gas is a reliable form of energy that is always available as it is continuously supplied through the grid, without need for storage tanks and without supply outages. It thus allows industries to plan and manage their productive activity in the optimal way. At the same time, the supply and combustion of natural gas can be regulated with high precision, which makes it an ideal solution for immediate adaptation to the various operational needs of the production process.

The transitional role of natural gas in our country is reflected on the total consumption, which has increased by 10% from 2020 to 2021 and by 6.18% in the first quarter in 2022 compared to the corresponding period last year.

The critical importance of natural gas is reinforced by the large infrastructure projects currently implemented in the country, securing and diversifying energy supply. Projects such as the upgrade of the Revythousa Terminal, the construction of floating LNG storage and regasification units (FSRU), the underground gas storage facility in South Kavala and the cross-border pipelines that have been put into operation (TAP) or will be put into operation soon (IGB), safeguard the adequacy of supply and at the same time, turn Greece into a Liquefied Natural Gas Hub for the Balkans (as supplies are already directed to Bulgaria and Romania) but also for the whole of Europe.

 Emissions reduced by 50% in cities supplied by gas 

2. Do you believe that the recent geopolitical developments will negatively affect the deployment of new distribution networks in Greece? 

To achieve RePowerEU’s energy goals and aspirations, one must consider the different starting point and maturity of each EU Member State.

Greece, unlike other European countries, welcomed natural gas late. At the moment, a large investment program in new distribution networks is underway, in order to supply natural gas to 70% of the territory, which to date does not have access to gas. It is worth noting that with the distribution network covering the rest of the country, the number of gas delivery points (meters) – which today exceeds 500 thousand – is expected to double, reaching 1 million by 2030.

The same networks, being widely dispersed, will in the future act as multipliers for the penetration of renewable gases into the final energy mix, accommodating and circulating renewable gases (biomethane, hydrogen, synthetic methane) to end consumers currently connected.

If our country really wants to drastically reduce greenhouse gas emissions and achieve the NECP targets, natural gas must first penetrate all areas and replace conventional fuels – namely fuel oil in industries and heating oil in households. This will lead to the immediate reduction of the carbon footprint and the improvement of the environment throughout the country. As I have pointed out in the past, in every new city where gas penetrates, greenhouse gas emissions are reduced by 50%.

The main transitional fuel in Greece for at least another 25 years 

3. In the context of revised National Plan for Energy and Climate, do you think that the geographical expansion of natural gas in our country will remain a priority?

Europe’s ambition to zero carbon emissions must ensure that the transition to climate neutrality is financially sustainable, socially just and that it safeguards the countries’ security of supply. Existing and planned energy infrastructure are important assets that policy makers must utilize to avoid huge investments that will disproportionately burden end consumers. In the same context, the EU financial tools should be used to the maximum, taking into account the know-how of the Operators, who are the connecting links between consumers and the energy market.

The revision of NECP, in addition to the frontloaded goals it will set for the increase of RES and the production of renewable gases, should strengthen the role of natural gas as the main transitional fuel of our country for at least the next 25 years. Both the NECP and the financial programs and tools should convey the appropriate signals to the market in order for the networks to be deployed throughout the territory, and on the other hand, for the infrastructure to enhance the adequacy of supply and the resilience of the country’s energy system, strengthening the role of Greece as a “gateway” of natural gas for the wider region.

In this regard, the quantified target set for the 50% increase of natural gas use in the end consumption sectors by 2030 compared to 2017 should be preserved in the revised NECP. Funding for the development of gas infrastructure should remain as the top priority; dual-benefit infrastructure, which on the one hand will contribute to achieving the goals of tackling climate change (fit-for-55) and on the other hand, will accelerate the transition to RES and the carbonization of the energy mix.

4. How do you assess the measures that the Commission has taken to diversify sources of supply and to strengthen security of supply and price competitiveness? Do you think that more drastic measures could be taken to decelerate prices? 

The diversification of the gas import routes achieved in our country through the infrastructure I mentioned, guarantees the resilience of the energy system and the adequacy of supply for all consumers.

In the same context, the obligation to fill gas storage facilities by 90% throughout the EU by next winter, will further enhance security of supply.

With regard to price formation, the voluntary joint procurement mechanism (EU Energy Platform) can enable Member States to jointly negotiate more competitive prices. However, the most drastic measure proposed by both the Greek State and several other European states is the price cap on the wholesale market at least until the end of the war. A measure that will decouple prices from the upstream reference markets (TTF), in order to reduce the effects of price pressures and to adjust the price charged to end consumers according to the fluctuation of supply and demand.

If this proposal is adopted by the European Commission, prices charged to end consumers are expected to gradually decelerate. Let us not forget that, despite the fact that we are in the middle of the summer season and household consumption is limited, energy-intensive industries are still faced with high energy prices affecting their sustainability, competitiveness and the implementation of planned investments.

Triple benefit from biomethane injection

5. Going back to the changes in the energy mix that are promoted for the coming years, what should be the role of biomethane in the NECP? In countries like Greece, what is the potential for creating a biomethane supply chain?

The injection of biomethane in the distribution networks is a challenge that will bring a triple benefit for our country. Initially, it will help achieve the 35 bcm biomethane target set under REpowerEU. Furthermore, it will contribute to the decarbonisation and greening of the distribution networks, while strengthening the country’s circular economy.

The biggest advantage of biomethane is its full compatibility with the existing distribution networks; networks which, due to their geographical dispersion in urban and interurban areas, will allow the cost-effective connection of production and injection facilities. Therefore, biomethane is a “key” asset for the country, as it will directly help reduce over-reliance by replacing part of Russian gas, while also making distribution networks sustainable.

Today in our country there are about 40 biogas production units which – due to the lack of regulatory framework – are used exclusively for power generation. However, injecting biomethane into the grid is more energy efficient than using biogas to generate power. About 90% of energy is preserved when injected into the grid, compared to only 65-70% when biogas is burned to generate electricity. The first step is to submit proposals for the introduction of the appropriate legal and regulatory framework in line with the European directives, to support appropriate incentives for business initiatives to thrive. In particular, the NECP targets on the production of renewable gases in line with the REpowerEU plan should be made binding. In this regard, it is advisable to apply Feed-in Tariff / Premium mechanisms for producers as well as to establish a framework for Guarantees of Origin.

Energy saving as a “counterweight” to cost

6. 6. As a measure to reduce reliance from Russian gas imports, REPowerEU also includes energy savings to reduce consumption. What measures could be implemented? 

Together with the REPowerEU plan, the Commission presented the EU communication to promote immediate energy saving by citizens and businesses through changes in consumer behavior and strengthening medium- to long-term structural energy efficiency measures.

The key strategic question for Europeans is what we should do to stop wasting energy. Especially for heating, solid and coordinated efforts by all involved bodies are required in order to take full advantage of the benefits delivered by natural gas as well as the various technological solutions available.

In this context, the State should continue to provide incentives for potential consumers to switch to natural gas, by introducing subsidy schemes for replacing oil heating systems with natural gas systems. These schemes should be granted in all Regions throughout the territory.

For existing residential consumers using Natural Gas, funding should be provided for the replacement of the old burner – which in many cases dates back to 2000 – with modern natural gas condensing boilers; a measure that will directly contribute to energy savings by at least 25-30% while improving the environmental footprint of consumers.

In the same context, the competent bodies that manage the municipal and public buildings should raise their awareness, so that saving programs such as “Electra”, include actions to modernize the installations and the boilers that have been used for more than 20 years and are now considered obsolete, their energy efficiency being lower than 60%. Modern gas boilers with compensation control systems can achieve an efficiency of up to 100%.

Similar programs should be introduced for the upgrading of industrial facilities with technologically advanced equipment that will result in higher energy efficiency and the rationalization of resource management while ultimately promoting their competitiveness and environmental sustainability. It is therefore obvious that energy savings can offset some of the high energy prices.

Distribution networks are also key for the decentralized production of “green” hydrogen

                         It is said that the final answer for the decarbonization of hard-to-electrify activities will be given through the development of a “green” hydrogen economy. What is your opinion? 

Greece has recognized the role of hydrogen in the green transition, highlighting the strategic position of our country as a future producer of green hydrogen for European markets. Moreover, Greece’s potential in RES energy production paves the way for the development of large green hydrogen production projects such as the White Dragon that is expected to be completed in 2029 with a planned production amounting to 250,000 tons of hydrogen / year.

Despite the promising potential, there is currently no production of “green” hydrogen in Greece. The main challenges concern the development of hydrogen demand both for existing uses (heavy industry, refineries) and for new uses (electricity, residential heating). The development of a hydrogen value chain will also depend on the successful completion and connection of production, transmission, distribution, storage and end-use infrastructure. This requires coordinated investment by all actors along the value chain.

As evidenced by other European projects (Ready4H2) that have been piloted, gas distribution networks – with appropriate modifications – will be able to accommodate quantities of hydrogen mixed with natural gas and biomethane in the future. This means that hydrogen will be incorporated in the mixture supplied to the end consumer, utilizing the existing infrastructure and the already implemented investments.

In the future, the biomethane production model I mentioned can be replicated for “green” hydrogen, where Gas Distribution Network Operators will collect and circulate the decentralized production of hydrogen from “small-scale” electrolytes to their networks, utilizing local RES power surplus; a surplus that, in fact, if not converted to hydrogen and introduced into the gas distribution system, will not be exploited. This is a cost that Europe cannot bear if it wants to meet its target of 20 million tonnes of hydrogen annually by 2030 to regain its energy independence and achieve its environmental ambitions.

In this context, we plan long-term investments for the upgrading, repurposing and digitization of infrastructure with new technologies and automatic control systems, so that the networks are ready for the future injection and accommodation of renewable gases.

Realistic goals for a just and smooth energy transition 

8. What do you think should be done to promote your proposals at National and Community level?

It is easily understood that distribution networks and Operators now play a pivotal role in accelerating the achievement of the RepowerEU goals for energy independence, diversification of resources and the protection of the right of consumers to access affordable energy, which is now one of the key challenges to address.

In this context, we, the Operators, should be able to participate in the Energy Committee – as is the case in the rest of Europe – as through our experience and familiarity with market conditions, we can highly contribute to the drafting of policies and plans that will link the theoretical objectives with realistic and readily applicable solutions for the benefit of end consumers, of the society and the environment.

One of the key issues for energy transition is the revision of the 3rd energy gas package. In this context, the Gas Distributors for Sustainability GD4S – of which EDA THESS is a member -, actively participate in the consultations for the shaping of a framework on the biomethane, hydrogen and decarbonated gases market (Gas Decarbonization Package). To this end, it is appropriate to incorporate the binding objectives of REpowerEU into the Community Directive under consultation and to set the horizontal and vertical separation rules for Operators, to enable them to operate renewable gas networks, supplying initially biomethane and in the distant future, hydrogen.

By raising its voice at Community level, GD4S rightly advocates the creation of a separate EU Gas DSO Entity for natural gas, biomethane and later hydrogen, in order to achieve the objectives I mentioned, utilizing existing Natural gas infrastructure. Thus, the role of Distribution Network Operators is taking hold in the context of European planning.

In a transitional period with intense ambiguity, where on the one hand the gas market tends to stabilize, while on the other, the long-term goal at Community level is to reduce and finally eliminate the use of fossil fuels, it is obvious that realistic objectives for a just and smooth energy transition should be set at both European and national level. In this sense, not only has the end of Natural Gas not come but now its momentum is at its highest, as the role of Natural Gas is being upgraded and acting as a catalyst, it can be the bridging fuel for the achievement of Community goals.

 

 

 

The beginning of the new year for EDA THESS is laced with the achievements of 2021 that verify the Company’s primary role in the natural gas distribution sector, as well as its strategic contribution to energy transition and the recovery of national economy. Going through a period marked by the impact of the pandemic and the surge of prices in the energy market, the Company safeguarded the uninterrupted continuation of its activities, recording robust results that will serve as compass for a new year of growth.

As the General Manager of EDA THESS, Mr. Leonidas Bakouras, pointed out, EDA THESS abided by the approved Development Program for the year 2021, fully implementing its €36 million investment plan, in compliance with the legal and regulatory framework and its Licenses. Thanks to its impeccable organization, strict planning and its commitment to goals, the Company concluded the construction of high-standard infrastructure and supplied all the new areas included in its planning.

The company continued the development of the natural gas market in the areas of its License with the same momentum, observing the principles of transparency and equal treatment of the Distribution Users and the End Consumers to promote fair competition. The year 2021 was a landmark for EDA THESS, as new Connection

Contracts reached a record high exceeding 26.000, increased by ~14% compared to last year, while natural gas penetration surpassed 65% of the population in the Licensed Areas. A proportional increase of 9% was also recorded in terms of the construction of new delivery points (Natural Gas Meters) that reached 24,877 in 2021. Equally remarkable was the increase in distributed volumes of natural gas, that amounted to 532.9 million Nm3, increased by 18.8% compared to 2020.

The Company continues with consistency to develop modern infrastructure based on technical-financial parameters, guaranteeing the sustainability of the distribution network. The targeted development planning of the Company is depicted on the high efficiency indicators of the network, as it currently distributes more than 216,000 cubic meters per kilometer of low-pressure network, while there is one activated consumer every 6.19 meters of network.

An integrated strategy ensuring a reasonable return on investments for the shareholders and resulting in low regulated charges and the reduction of the energy cost for all consumers. Through the extended use of natural gas, EDA THESS promotes energy saving for consumers, optimizes resource allocation and offers competitive advantages to enterprises and industries.

The operational readiness of EDA THESS remained high, thus shielding the smooth and uninterrupted operation of the distribution network. Along the 21-year history of natural gas in Greece, the Company has been ensuring the safety of natural gas infrastructure under any circumstances. At the same time, it maintains open channels of communication to provide information to consumers and stakeholders, establishing a culture of safe use of natural gas and thus, enhancing everyone’s trust to the Operator.

The multifaceted development program consistently implemented by EDA THESS, leverages investments in its areas of License and supports employment by creating thousands of indirect jobs along the value chain of natural gas. The Company pursues its strategy and redirects its targets, incorporating sustainable growth conditions to ensure a sustainable future. With a view to continuously deliver added value, the Company develops strategic alliances with all stakeholders, delivering multiple benefits to the society and the environment.

Corporate Responsibility stems from the principles and the values of the Company, emphasizing the active involvement of its people to the accomplishment of its strategic objectives. Through its sound corporate governance, the robust structure and the implementation of best management practices, EDA THESS safeguards a healthy working environment and a high level of know-how by constantly investing in its human capital.

According to the Manager of Natural Gas Market Development, Mr. M. Stergiopoulos, the natural gas network of EDA THESS currently covers all 14 Municipalities of the Regional Unit of Thessaloniki.

In 2021, new connection contracts in the Licensed area of Thessaloniki reached 17,194, showing an increase of 9.5% compared to last year. Total connections progressively reached 288,017. At the same time, the constructed delivery points in the Regional Unit of Thessaloniki currently amount to 284,254. Distributed volumes in 2021 were 330.5 million cubic meters, increased by 20% compared to 2020. More specifically, in terms of use, distributed quantities for domestic consumption amounted to 229.4 million m3, increased by 20.7%, while for commercial and industrial use, they reached 101.1 million m3, increased by 18.7%, compared to the same period last year.

At the same time, the average distribution tariff of EDA THESS in Thessaloniki was further reduced by 14.8%, compared to the previous regulatory period, while particularly for industrial consumers, the regulated charge was reduced by 45%.

According to the Manager of Natural Gas Market Development for Thessaly, Mrs. E. Kalogirou, the consistent implementation of the Development Program of EDA THESS results in the increasing use of natural gas in the Region of Thessaly. The distribution network of the Company covers 17 Municipalities of the Region of Thessaly.

New connection contracts of consumers in the Licensed area of Thessaly reached 8,823 recording an impressive increase of 24% compared to 2020 and progressively exceeded 123,934. This increase was supported by the Project for the replacement of oil heating systems with natural gas systems in Thessaly, that is implemented in the framework of the NSRF 2014-2020 for the Region of Thessaly and the executive NSRF structure of the Ministry for the Environment and Energy, with a budget of 6,12 million € – EDA THESS being in charge of receiving and evaluating applications as well of granting the certification and paying the subsidy.

Respectively, distributed volumes in the Licensed area of Thessaly amounted to 202.4 million m3 in 2021, recording an increase of 17% compared to 2020. More specifically, distributed quantities for domestic consumption amounted to 112.4 million m3, increased by 13.4%, while for commercial and industrial use, they reached 90.0 million m3, increased by 21.5%.

With regard to industries, there is strong interest in the construction of High Efficiency Combined Heat & Power plants (CHP) as well as greenhouse plants. The average distribution tariff of EDA THESS in Thessaly was further reduced in 2021 by 21.9% compared to the previous regulatory period, while there was a radical decrease of 56% for industrial consumers.

In concluding, the General Manager, Mr. Leonidas Bakouras, states that “Despite the volatile environment prevailing due to the pandemic as well as to the energy crisis, we have come to the end of a successful year with 26.000 new connection contracts. It is a historic achievement that, on the one hand, verifies the sustained trust of consumers to natural gas and on the other hand, certifies the strategic potential of EDA THESS and its ability to identify and turn challenges into opportunities. We continue to implement our investment program with consistency to develop sustainable networks and to provide safe access to natural gas, the main transitional fuel in the following years”.

 

The volatility of the natural gas wholesale market around the world is unprecedented, as prices reached an all-time high. The current situation is due to a multifactorial equation with contextual factors acting simultaneously, leading to extended price surge. However, the General Manager of EDA THESS, Mr. Leonidas Bakouras endorses the forecasts of analysts talking about a transient increase in prices.

The final price charged to the End Consumer is normally shaped by the sum of the Transmission Tariff, the Distribution Tariff and the Competitive Supply Charge, directly linked to the prices of the International Natural Gas trade and imports. Contrary to the natural gas supply prices, the distribution and transmission prices are regulated and invariant during each year of the regulatory period.

In its 21-year history, natural gas has been proven to be the safest, most user- and environmentally friendly conventional fuel offering multiple benefits to the society, the economy and the environment.  Similar circumstances in the past had led to a significant increase in the prices of natural gas due to the large-scale transient surges of winter 2008-2009. However, natural gas maintains, over time, the trust of consumers who enjoy the benefits stemming from its use, as the price of natural gas was and still is significantly lower and more competitive than the rest of the conventional fuels.

Consumer’s trust is depicted on the high penetration of natural gas, as more than 385.000 families and households are supplied by the Distribution Network in the License areas of EDA THESS. Despite the current energy crisis, the interest of consumers for their transition to the use of natural gas continues since, only in October, more than 170 new connection contracts are signed daily.

The General Manager stated to this effect: “Despite circumstantial changes in prices, natural gas remains the only sustainable and prompt solution. As the cleanest fuel, it is clearly the main instrument for the transition to the decarbonization of the country. At the same time, it will continue contributing to the energy security of the country and of the EU member-states.

I am certain that the measures taken at the European and national level will partially absorb the impact of the price surge in the upstream market to the benefit of the consumers. Pursuant to the recent statements of the State, the heating allowance rises, and the inclusion criteria are expanded, covering – among others – part of the natural gas consumption cost.” 

In this context and in view of the upcoming winter season, EDA THESS encourages consumers to:

• Ensure a rational management of natural gas consumption.
• Proceed to the timely regular maintenance of their natural gas installations by licensed and certified technicians, to ensure the efficient operation of their equipment and thus, uninterrupted use, higher saving, and higher safety.
• To receive regular updates by the 17 natural gas suppliers active in the License areas.

Summarizing, the General Manager stated that the measures announced by the state in conjunction with the contribution of consumers through prudent consumption management will create a safety net of constant value against transient price surges.

The Board of Directors of EDA THESS approved the results of the first half of 2021.

In particular, natural gas penetration continued in the first half of 2021, exceeding 64% of the population in the Licensed areas, as a dynamic growth of the market was recorded with the signing of 9,970 new connection contracts, increased by 20.2% compared to the corresponding period of 2020. The increase in the natural gas distributed volumes was significant, as it amounted to 313.2 million Nm3, increased by 12.7% compared to the first half of 2020, driven by the expansion of the consumer base and the connection of large consumers and energy-intensive industries.

The Company’s rapid growth rates are the result of its targeted development planning based on the continuous optimization of the provided services to end consumers and distribution users as well as the rapid decline of the network usage tariffs, which for 2021 reached 21% in domestic use and 56% in industrial offering multiple economic advantages to consumers. Equally important were the environmental benefits from the use of natural gas in the areas of the License, as only for the first half of 2021 more than 365.5 thousand tons of carbon dioxide and more than 2.1 thousand tons of sulfur dioxide were saved. The increasing penetration of natural gas in a transitional period for the national economy, energy and the environment, plays a decisive role in the effort for the recovery and achievement of the State’s environmental objectives.

The Company continues the implementation of its investment planning, respecting the legal, regulatory framework and the decisions of the Authority, with consistent and thorough implementation of an integrated strategy based on the efficient management of the available resources. During the first semester of the year, EDA THESS observed the approved Development Program, constructing high standard networks, based on safety and technical integrity. At the same time, the Company achieved the streamlining of costs, always in accordance with the approved expenses by RAE without burdening the distribution tariff for the end consumers. The operational preparedness of EDA THESS, which guarantees the safe and uninterrupted operation of the distribution network has also been maintained at a high level.

The investments of the first semester of the year were implemented according to the annual planning, exceeding € 14.5 million, increased by 15.7% compared to the corresponding period of the previous year, while by the end of the year, the full implementation of the investment program is expected. The Company continues to invest in the development of modern natural gas infrastructure and innovative technologies, while supporting the ongoing process towards its digital transformation. A process inextricably linked to the energy transition, as in addition to increasing efficiency, the digitization – automation of operations and the flexibility of gas infrastructure and network will enable the future integration of renewable gases. Thus, the crucial role of distribution networks is emerging, paving the way for the decarbonization of the final energy mix while contributing to the achievement of national and European Energy and Climate Sustainability goals.

The strong performance of EDA THESS is also reflected in its financial results, as the Company’s total revenue amounted to € 36.8 million, exceeding the budget by 7.9% while earnings before interest, taxes, depreciation and amortization (EBITDA) for the first half of the year reached € 26.6 million, showing an increase of 14.3% compared to the budget. Finally, the Company’s earnings after taxes amounted to € 13.8 million, increased by 21.9% in comparison with the budget levels.

Concluding the Meeting, the convening of the Ordinary General Assembly Meeting for the approval of distribution of dividends for the fiscal year 2020 to the shareholders was scheduled.

Interview of Leonidas Bakouras on energypress: Access to natural gas even in the most remote areas – CNG technology and the “model” of EDA THESS

The General Manager of the company, Leonidas Bakouras, talks to energypress about the ways through which EDA THESS managed to achieve a penetration rate of 64% in its Licensed Areas.

In this context he explains how the compressed natural gas (CNG) technology was utilized, emphasizes on the technoeconomic criteria for the development of  EDA THESS’ distribution network and virtual pipelines and highlights the formation of attractive distribution tariffs to the consumers.

Mr. Bakouras, EDA THESS is the Distribution Company that has achieved a very high penetration ratio of natural gas – amounting to 64% of the population in its License Areas -, providing access to low – cost and environmentally-friendly form of energy even in the most remote areas. How did you manage to do that?

The Company’s strategy from its establishment until today, has as its primary goal the further penetration of natural gas in the areas of the License in the safest and most cost-effective way. For several years, numerous requests for connection with the distribution network and  supply of consumers in areas far from the active network have been submitted.

EDA THESS, as a pioneer in the introduction of innovative technologies and actions, took the initiative to develop the Virtual Pipeline utilizing CNG technology in Greece and supplied the remote – off – grid – areas with natural gas where it is difficult to construct a natural gas pipeline for technical and financial reasons.

The Virtual Pipeline, is not only a continuation of the physical network – in the context of the willingness and goal of the distribution network operator to undertake every effort to achieve maximum natural gas penetration – but also decisively contributes to meeting the needs of more and more consumers, protecting the environment, achieving energy efficiency and promoting the overall fulfillment of National and Community objectives.

We have installed the first CNG stations in the country already since 2018 Today there are 15 CNG stations and they are model stations in terms of innovation and installation according to the highest safety standards.

This development was considered particularly important for the Greek province as it took remote areas out of the energy isolation and boosted the further penetration of natural gas, covering an increasing range of areas in Thessaloniki and Thessaly.

At the same time, in areas connected to the active natural gas network, the rapid but well-considered development and expansion of the distribution network, increases the connections of new consumers, and at the same time creates the conditions for further reductions in the distribution tariffs.

Thus, within 20 years we managed to achieve a penetration rate of 64% in the population of the Licensed Areas, while in other European countries it took 25 years to reach 50%.

Was it difficult to introduce a technology unprecedented for the Greek standards? What were the most important challenges you were called up to manage and overcome through such a daring endeavor?

The big challenge for EDA THESS was to increase the penetration of natural gas, especially in areas with increased geographical dispersion and a large distance both between them and the existing distribution network.

It is important to mention that at the time when the Company introduced the technology of Compressed Natural Gas (CNG) in the Greek market, there was a complete absence of regulatory – legislative framework, technical regulations and a developed business sector.

Utilizing our many years of experience and our know – how, we have highly contributed to the development of the regulatory framework and the technical regulations that govern the distribution activity in our country.

In addition, the issues that could arise from the geographical dispersion of the Licensed areas were not an obstacle, on the contrary, it was a challenge that we managed to successfully overcome.

Therefore, what was the Company’s contribution in shaping the legal and regulatory framework and the technical regulation in order to supply the remote areas through the Virtual Pipeline?

As the use of CNG technology was unknown to the Greek market, and given the lack of regulatory and legislative framework, EDA THESS in cooperation with the competent authorities made the greatest contribution to the institutional and technical processes in order to develop the Natural Gas market.

In order to launch the procedures for the preparation of the regulatory framework, EDA THESS participated in the Committee set up by the Ministry of Energy in the context of issuing the Technical Regulation, at all stages from drafting to its issuance in May 2018.

The Technical Regulation sets out the requirements for the design, construction, testing, activation, operation, maintenance, and fire protection of the decompression stations of compressed natural gas (CNG), to ensure the supply of distribution networks as well as individual final consumers.

Furthermore, the issuance of the regulatory framework in August 2018 by the Regulatory Authority for Energy was crucial for the development of remote networks through a virtual pipeline, and EDA THESS contributed to the procedure by submitting its proposals to the Authority.

What are the key factors that are taken into consideration when developing the distribution network of EDA THESS?

The Distribution Network of EDA THESS, is developed based on technical and economic criteria taking into account the following parameters:

Factors that shape the demand and capacity of the area, such as:

• applications, number of apartments, consumption
• population
• number of Municipal – Public buildings
• commercial & industrial consumers

Technical criteria:

• technical feasibility of construction
• project safety
• technical characteristics (materials, routing, soil morphology)

Capacity management criteria:

• Distribution Network pressure design
• diameter of the Distribution Network pipeline

During the planning of all the network development projects, the Company assesses  the impact of the implementation of each new project on the Average Charge of Use of the distribution network in accordance with the Tariff Regulation. In plain words, the economic effectiveness of a development project is evaluated. The economic effectiveness of a new project depends on the projected demand of natural gas, which is calculated as a function of the number of projected network connections as well as the natural gas volumes that these connections are expected to consume – in comparison with the construction cost of the project.

How are the distribution tariffs established? Is there a difference for the consumers of the Remote Networks (supplied through Virtual Pipeline) and those of the interconnected areas?

As I mentioned above, the investments implemented by EDA THESS for the development of the network, are implemented based on the economic effectiveness.

Ensuring the existence of new connections and respectively the increase in the distributed volumes of natural gas in the areas where it expands its Network, EDA THESS manages not only to prevent any increase in the distribution tariff but to achieve significant reductions, such as those noted for the year 2021.

As the construction of a distribution network presupposes economic sustainability and efficiency, if the above conditions for the interconnection of areas with a natural pipeline are not met, the development of Virtual Pipelines is able, under certain conditions, to cover the supply for a transitional period in a specific area, until the final expansion of the gas network.

In other words, the Virtual Pipeline replaces the natural gas network in cases where the expansion of the last would disproportionately burden the network usage tariff, due to the initially low distributed quantities of natural gas, compared to the cost of the investment.

The cost-benefit analysis for the supply of these areas must take into account the same technical and economic criteria and the return on investment and ensure reasonable distribution tariffs.

The operating expenses of the Virtual Pipeline service is part of the Required Revenue  of the Basic Distribution Activity of the respective Distribution Network according to the Tariff Regulation, and by this way all the Final Consumers of the Distribution Network are charged with the same tariff. There is no difference between Consumers supplied by Remote Distribution Networks and those on the existing network. 

What are the criteria set by EDA THESS for the development of the Virtual Pipeline?

EDA THESS, in order to include new areas in the Development Programs that it implements with the construction of a Remote Distribution Network, conducts a cost-benefit analysis that reflects:

• The projected consumption (number of connections per final customer category and Natural Gas volumes).
• The estimated cost of the Remote Distribution Network construction.
• The way of supplying the Remote Natural Gas Distribution Network.
• The estimated cost of connecting the Remote Distribution Network to an existing Transmission System or Distribution Network, if it is about to be connected through a pipeline in case it is technically possible.
• The evaluation results of the criterion of article 12 of the Tariff Regulation, and specifically the impact on the Average Distribution Charge: a) in case of the construction as a Remote Network and b) in case of its connection to a pipeline.

In light of the above, the investments for further development of the network are implemented based on technical criteria regarding the possibility of construction, quality and safety of the project and according to economic criteria based on the demand and capacity of each area, in order to ensure the efficiency and economic effectiveness of investments.

What are the benefits of using compressed natural gas (CNG)?

It is understood that, without the use of compressed natural gas, the residents of remote areas would not have access to natural gas and let alone with the same distribution tariff. In terms of the use of natural gas-the dominant fuel for the post-lignite era – consumers are reducing their environmental footprint and at the same time take advantage of  economic benefits from reducing the energy cost.

At the same time, CNG technology catalytically contributes to the safe and uninterrupted distribution of natural gas, which for EDA THESS is a priority of its business operation.

Therefore, the use of compressed natural gas technology safeguards the uninterrupted distribution of natural gas. Please tell us in plain words how this is done, so that everybody understands

The Company leverages the compressed natural gas technology in cases of planned or emergency needs for the supply of Natural Gas. This is achieved through portable storage units and portable Decompression Stations, in order to ensure the uninterrupted distribution of natural gas to distribution networks or installations, which under normal conditions are supplied though pipelines.

It is worth noting that we carry out preparedness drills every year to evaluate the completeness of emergency and crisis management plans.

In 2021, the transitional framework for the development of Remote Distribution Networks using Compressed / Liquefied Natural Gas expires. As far as I know, Mr. Bakouras, RAE is investigating the feasibility of establishing a new framework that will govern the development – on a national basis – of Remote Distribution Networks, supplied with CNG or LNG Virtual Pipeline, similarly to what happens with public service obligations.  What is the position of the Company and what are the conditions in order to continue the supply of existing and new areas in this way?

Indeed, the current regulatory framework for remote distribution networks, according to dec. RAE 643/2018, is in force until the end of 2021.

EDA THESS is waiting to be informed from the Regulatory Authority for Energy regarding possible changes in the framework for Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG), and it will participate in the relevant consultation, so as in cooperation with the Authority, to formulate the updated framework for the supply of the remote areas.

Specifically, for liquefied natural gas, the Company participates in the Technical Committee set up by the Ministry of Environment and Energy for the establishment of the Technical Regulation, while it has internally set up a working group to participate in the drafting of both relevant technical and regulatory framework, while at the same time, utilizing its know-how and in collaboration with foreign operators, who have extensive experience in liquified natural gas issues, it will examine the potential of pilot application in a remote distribution network in the areas of EDA THESS.

EDA THESS’ development strategy relies on investments in advanced infrastructure and natural gas technologies that render distribution networks  crucial for decarbonization.

The transition to cleaner forms of energy lies at the heart of developments and natural gas is the bridging fuel for electricity generation covering both base load in the short run and peak loads in the long run and filling the power gap created by the rapid withdrawal of carbon and the accelerated introduction of RES.

At the same time and in line with National and European targets, new requirements are emerging to further support and integrate RES into a new, integrated and sustainable energy model to tackle climate change. Gas distribution networks can optimally support the dispersed production and injection of renewable gases (hydrogen and biomethane), directly contributing to the reduction of greenhouse gas emissions of the final mixture. At the same time, with the integration and utilization of renewable gases as alternative energy carriers, mitigation of voltage fluctuations in the electricity network is achieved and flexibility is provided through the conversion, storage and reuse of energy.

In light of the above, the General Manager of EDA THESS, Mr. Bakouras highlights the correlation that has been developed between gas and electricity sectors which will be further strengthened in the future by the implementation of methanation and Power-to- Gas technologies. In the same context, he stressed that in order to achieve climate neutrality, all forms of “green” energy should be supported and all available infrastructure should be fully utilized. To this end, the coordinated actions of all stakeholders in the energy sector are required to establish a greener, decentralized and digitized energy network.

EDA THESS, heading towards energy transformation, continues to implement large investments for the construction of sustainable infrastructure aiming to increase the penetration of natural gas. At the same time, it invests in technological innovations and the digitalization of the distribution networks that will enable the integration and distribution of increasing quantities of renewable gases in the future. The Company’s investment strategy focuses on best business practices aligned with environmental responsibility. EDA THESS is fully in line with the goals set by the State, in the framework of the national policy for Energy and Climate.

With the implementation of the Development Plan 2021 – 2025 amounting to 155.6 € million and the further penetration of natural gas, EDA THESS is expected to significantly contribute to the improvement of the quality of the environment, as in 2025 the distribution of natural gas is expected to reach ~ 580 million Nm3 in the areas of the License and respectively, the reduction of the environmental footprint from the use of natural gas for the period 2021 – 2025 is estimated at:

– 3.1 million tonnes of carbon dioxide

– 19.2 thousand tons of sulfur dioxide

– 7.2 thousand tons of nitric oxide

With a view to the future, EDA THESS, being a member of the pan-European sustainability association GD4S along with the Union’s leading distribution companies, contributes in:

• Developing policies for the sustainability of Distribution Networks and securing the financing of future investments in natural gas infrastructure
• Shaping of the legislative and regulatory framework for the integration of renewable gases (biomethane, hydrogen) in the Distribution Networks
• Sharing best sustainability practices among European Operators
• Planning of sustainable green investments

The future of the natural gas market and the strategic importance of energy infrastructure, according to the General Manager, leave a lot of room for the development of the sector that will lead to the completion of a fair energy transition.

(The article is included in the volume GREEK ENERGY 2021 published for the 10th consecutive year by the staff of Energypress)