Distribuție Oltenia continued its smart metering projects and approved with ANRE a smart metering plan for its operational area that includes the installation of another 244,000 meters by 2024. Distribuție Oltenia is currently preparing project proposals with possible funding from the EU of over 200 million euros in networks. Distribuție Oltenia’s investment plan included projects of over 73 million euros in 2021, says Ondrej Safar, executive director of CEZ Romania, in an exclusive interview with Energynomics.
What investments does DEO support in the field of smart metering implementation? Why did this process stagnate, what were the obstacles?
Distribuție Oltenia has reached its targets set in respect to smart metering, the only delays in implementation being caused by several procedures for the procurement of services and equipment necessary for the installation of smart meters that have exceeded the planned periods (due to lack of vendors/providers). However, we have updated the installation timeline and in 2021, DEO installed 90,000 meters in both urban (over 42,000) and rural (over 48,000) and integrated with the computer system over 400 transformation stations.
The introduction of free connection to customers will put even more pressure on distributors to ensure the necessary funds for smart metering. I am convinced, however, that this will not lead to a significant slowdown in the pace of network digitization. However, the impact of the semiconductor crisis, which also affects the production of smart meters, can make this process difficult.
Distribuție Oltenia will continue the process towards a smart grid, implementing additional technical solutions, necessary for our smart metering plans, as well as MDM + MDC (Meter Data Management System) projects that will process and transmit data from smart meters, allowing the exchange of data with other databases, including GIS and billing system. The system is implemented in co-financing, with European funds of 3 million euros and an own contribution of approximately 2 million euros (40%).
How does smart metering help define the segment of vulnerable consumers?
The development of smart metering is essential for accurately monitoring and processing consumer data. These projects are an essential link that together with the efficiency of investments and the digitization of operational processes will lead to a high quality of energy distributed to consumers in our area.
Defining the vulnerable consumer segment as concretely as possible is extremely important in developing effective support policies and strategies for them. From our perspective, a thorough understanding of their needs is needed to find the best solutions and reduce the difficulties faced by vulnerable consumers.
A first step would be to identify a minimum energy consumption requirement, set according to a clear set of parameters that may include the type of construction, urban/rural, specific needs, etc.
Measures to reduce energy poverty (renovation of buildings, replacement of high-consumption receivers, other measures to increase energy efficiency) could reduce the financial impact of aid to vulnerable consumers in the medium and long term.
At the level of the electricity and natural gas supplier CEZ Vânzare, we are committed to fighting against the energy poverty that vulnerable customers face and for three years we have been part of the European SocialWatt Project in which we promote energy efficiency.
What are the consequences of the law on price capping, on the increase of energy and gas prices on investments in the next period?
The capping law has already had a direct effect on energy and natural gas suppliers and may have indirect effects on distribution operators if energy suppliers do not receive on time the amounts related to the offset.
Any delay on the part of suppliers in the payment of the distribution tariff may lead to a lack of liquidity and the inability to pay for the energy purchased, the services provided and the investment works carried out by the distribution operators in the network.
The significant increase in electricity purchase prices has direct effects on the budgets of distribution operators in both the cost and cash areas.
According to the current regulations, they must purchase electricity directly from OPCOM, for the technological consumption necessary for energy distribution, at costs that far exceed the revenues from the distribution tariffs. In 2022 compared to 2021 we estimate an increase in the average purchase price of energy for our own technological consumption by 114%, while distribution tariffs increased by about 7% in real terms. This imbalance between costs and revenues will lead to the impossibility of Distribuție Oltenia to make payments for investment works, maintenance, materials and equipment, services or energy.
I think the regularization of the amounts that suppliers should receive from the Government is necessary to be done, by applying a correct compensation mechanism taking into account the real costs in the activity of energy/gas supply and customer management. I am thinking of the full coverage of the costs with the distribution tariffs which have different values depending on the distribution area and the supply costs which are not negligible at all.
Establishing a scheme to compensate distribution operators for the difference between the cost of purchasing energy for CPT recognized by ANRE and the actual purchasing cost of distribution operators could be another support measure implemented by the Government.
Distribuție Oltenia will continue to look for the best solutions to maintain a high level of network investment and the implementation/completion of its digitalization projects.
How prepared is the grid for demand-response, prosumers and distributed generation? What investments are needed in this area in the region where you operate?
At the level of Distribuție Oltenia, we managed to connect the largest number of prosumers in the country due to an extraordinary organization. The first step was to identify all the installers selected by the Administration of the Environment Fund (AFM) in our area and invite them to discussions, given the more than 3,000 applications that were to be registered. We have standardized the documents and information that they have to provide, we have phased the connection requests so that we can meet the deadlines and we have organized weekly status meetings, thus solving on time all the problems that have arisen along the way. For 2022, the challenge is even greater. We estimate over 7,000 prosumers connected to our network and we have already taken steps to secure the meters.
For the investments, we continue to make progress on the digitization projects already underway in SMART Transformation and are looking for new opportunities to access European and Norwegian funding.
In 2021, for example, the Distribuție Oltenia investment plan included projects of over 73 million euros with European funds and a positive impact on the modernization and development of the network (of which 21.4 million euros own contribution and about 29.3%, funds through axes 6.1 and 6.3.)
This year, we started the implementation of the modernization project of the distribution network and the increase of the distribution capacity of the 110/20 kV Caracal West substation for the evacuation of the electricity produced by the photovoltaic power plants (a project of 43 million lei worth, having as beneficiaries from the community 13,600 consumers from Caracal and the adjacent localities).
In addition, we started the project Advanced Distribution Management System (ADMS), for the development of a smart distribution network, for the benefit of over 1.4 million electricity consumers. The value of the project amounts to 76 million lei, it is co-financed from European funds and includes SCADA component for real-time data acquisition for distribution network control, DMS component for the part of analysis and optimization of the network operation through which the operator will be able to provide energy at the required quality and quantity, following its parameters in real-time, OMS component for power supply interruption management and reporting component for analysis and measuring information about the operation of the network.
Of course, we continue with the other projects under the SMART Transformation umbrella assumed by Distribuție Oltenia since 2016:
- MWM (over 2,350,000 euros invested from 2018 to 2021) with a direct impact on the repair time of electrical faults by almost 10% shorter in 2021, compared to 2019.
- GIS, which offers us better monitoring of the assets of Distribuție Oltenia, their planning for the optimal configuration of the network and the optimization of the activity of organizing/dispatching the work teams.
- Data Governance, which aims to standardize data processes, reduce IT risks and improve system security and control.
- Enterprise Architecture, which involves the integration of new systems with and/or within existing systems.
- Digital DEO, a project designed to improve both the experience of customers and users (in the processes of network connection, management of complaints, registration of disturbances) and that of employees by streamlining work and training processes.
- E-Analytics, aiming at a better hourly forecast for the OTC (short, medium and long term), the reduction of the costs of the energy traded on the Balancing Market to cover the OTC and the increase of the degree of identification of the suspicions of electricity theft.
- Assets Management System, through which we intend to implement a new asset management system in the investment processes with an impact on ensuring the income from the distribution tariff, maximizing the balance of cost/benefit recognition and more.
To this list, we add the specific projects that support local public authorities in the processes of connection and location of e-charging stations for electric means of transport or connection to various objectives of public interest (gyms, hospitals, airport extensions, etc).
How should networks and the market be changed to better integrate renewables (Fit for RES)?
Continuing investments in the network and accessing funds remain imperative to prepare the Distribuție Oltenia network for taking more renewable energy and improving consumer supply security; also for digitization and smart grid. European funds will stimulate the start of investments in 2022.
So far we have financing contracts completed or in execution as well as in contracting, amounting to over 50 million euros, value financed from European funds. Thus, we have reached the General Block Exemption Regulation (“GBER”) ceiling with the maximum amount that a company can access (50 million euros). As the GBER regulation was revised at the beginning of this year and the limit was raised from 50 to 70 million euros per company, but it was not clear how the new methodology is applied, we have requested clarifications and we are currently preparing 20 million euros worth projects. If the answer is that we can submit projects up to 70 million euros, we have all the documentation already prepared. Actually, Distribuție Oltenia has already prepared over 200 million euros worth of project proposals for possible European funding.
However, in the current context of the electricity market and the effects of rising prices, obtaining European funds no longer depends only on the quality of the projects we propose, but also on criteria over which we have no direct control. These are the profit indicators of companies, which are essential criteria for ensuring eligibility in attracting these funds and which have been affected by the events of recent months.
Under these conditions, there is a risk that the planned projects will not receive funding, not because of their quality or the expected results of implementation, but because of the financial results affected by the instability of the energy market.
Also, the issue of the partial transfer in the distribution tariffs of the real costs with the purchase of electricity to cover the Own Technological Consumption (OTC), on the electricity markets, in 2021 and 2022, leads to problems in securing the financing of investments and the impossibility of accessing European funds. The urgent recovery from the state budget of the differences, verified and confirmed by ANRE is a priority for us.
The alternative of recognizing in the Regulated asset base (RAB) the differences not transferred in tariffs is another solution proposed by CEZ that solves the problem of accessing European funds but does not solve the cash deficit for the development of the investment program. Of course, the most correct alternative would be to increase distribution tariffs accordingly, but with immediate effects on our customers.
Taking into account the two mentioned aspects, we will continue the investment plan, trying to solve, with the support of the authorities, the problem of ensuring their financing.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in March 2022.
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