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
- number of Municipal – Public buildings
- commercial & industrial consumers
- 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.