Analysis of the Policy to Increase Connectivity to Gas Resources for the Residential Sector

Europe’s transformation into the first climate neutral continent by 2050 is the greatest challenge of our times. The Green Deal, recently presented by the European Commission, is the most ambitious package of measures that will make the transition towards a green and sustainable economy and which invites Member States to quickly redesign the strategies of energy systems.

The status of ‘transition fuel’ of natural gas begins to gradually dilute, while the role of the related infrastructure – as element facilitating the goals proposed by the European Green Deal – is subject to uncertainty. In Romania, a Member State characterized by an energy mix where natural gas holds a significant share in national consumption (around 30%) and a relatively complex gas infrastructure, the bet of relevant authorities is on heavy exploration/exploitation of this resource, respectively on significant investments in the related infrastructure, in order to increase consumption domestically.

In this context, the policy of the Romanian state for starting an intensive process of connection of the residential sector to gas distribution networks and, especially, the introduction of the possibility of ‘free connection’ of household customers to the distribution network, draws attention.

A recent analysis, conducted in October 2020 by the Intelligent Energy Association on Policies to increase connectivity to gas resources for the residential sector, highlights some of the most important implications and benefits that continuing to implement the mentioned strategy could generate and aims to provide a number of recommendations in terms of policies and regulations, likely to lead to a smart capitalization on natural gas on the Romanian market.

Besides benefits such as increasing the degree of comfort of the population and setting the prerequisites of a diminished carbon footprint by substituting the use of biomass with natural gas, especially in rural areas, ‘free connection’ to the gas distribution network poses a number of disadvantages and, even more so, even risks.

Socialization of costs with the connection of new consumers to the gas network through the distribution tariff, violation of the principle of economic efficiency stipulated in Law No. 123/2012, generation of prerequisites for increasing the pool of vulnerable customers and additional costs incurred by the customer in energy bills are some of the disadvantages of this initiative.

There is a false assumption that the process of connection to the gas distribution network is free of charge, as the costs related to this process will be dissipated in the bill of all customers in the respective distribution network, by increasing the gas distribution tariff. Moreover, many household customers, attracted by the charm of free connection, could request it, but free connection of household customers is not accompanied by assuming an obligation from them to also consume gas. This situation will generate additional costs for the end-customer, as the profitability of a distribution network decreases inversely with the volumes that are not conveyed through its pipelines.

Another negative effect of free connection to the gas network may be the increase in the number of vulnerable consumers. The capacity of vulnerable consumer involves, a priori, that it already benefits from a form of energy supply, but it cannot, for reasons purely material reasons, bear the cost with the energy bill. An intensive process of connection free of charge of willing customers does not support vulnerable customers, on the contrary, it creates the prerequisites for increasing this category of customers nationwide by increasing the gas distribution tariff, as explained above.

The discriminatory treatment between the household consumers already connected to the gas distribution system and those who want to connect free of charge may be another problem of free connection of new consumers. Let’s consider the paradoxical situation where a distribution pipeline fully built at the expense of a consumer, prior to the entry into force of the provisions of the new ANRE order, will be used free of charge by the new consumer. The old consumer will find itself in the situation of paying partially (through the tariff) the costs with the connection used by the newly connected customers.

It is mandatory to consider the possibility of reduced safety of gas systems. Pressure exercised on the budget of distribution operators and/or transmission operator could bring gaps in the efficient management of the managed infrastructure amid the need to simultaneously manage applications for network extensions/new connections and maintenance operations and workovers respectively. The fast growth of the number of consumers that use gas for heating purposes brings the current transmission and distribution systems on the verge of ceasing gas delivery during consumption peaks, endangering gas supply to all consumers.

Moreover, the ‘free connection’ could generate in the long run a number of risks, such as depletion of domestic gas resources prior to the expiry of the normal lifespan of the distribution infrastructure, with the risk of reliance on gas imports, diminishing the safety in operation of existing gas networks as a result of sharing the resources of distribution operators or/and of the transmission operator between maintenance, workover activities and connection of new consumers, making investments that have no added value to the end-consumer in Romania and lack of correlation with the strategy of the European Commission on the development of H2 networks.

The mandatory prerequisite for the development of gas infrastructure in Romania is to recalibrate/reconsider the strategy of development of the gas infrastructure in Romania, so that new investments are correlated with a real benefit for the population of Romania, a lifespan calculated well enough allowing their efficient operation, and the degree of utilization be maximum and the objective of reaching climate neutrality by 2050.

The recommendations of the Intelligent Energy Association for Romania’s energy policies towards 2050 are the following.

• An intensive strategy of connection of the residential sector should be implemented only in areas where there is no proven energy alternative from an economic point of view.
• The better use of natural gas by correlating the current policy of development of the transmission and distribution networks with a strategy for the relaunch of the industry using this type of resource as raw material (especially the chemical and petrochemical industries).
• The development of gas-fired power production capacities, in regime of cogeneration and trigeneration.
• State involvement in the development of Greenfield projects in the chemical and/or petrochemical sector.
• Ensuring a legal and fiscal framework favouring the development of this type of industry in Romania, thus ensuring the prerequisites for the smart use of natural gas.
• Redesigning investments targeting the gas infrastructure, so that the new investment objectives can also be used for hydrogen transmission.