Delgaz Grid has seen an increase in prosumer grid connection requests by almost 10 times in 2022. At the same time, the company has launched a pilot project to test the use of hydrogen for heating homes and is interested in becoming a hydrogen producer. ”Without massive investments in distribution networks, there can be no energy transition, that’s why we want to return to normal in terms of the mechanism for establishing distribution tariffs, which were frozen last year,” says Cristian Secoșan, general manager of Delgaz Grid, in an exclusive interview offered to Energynomics.
What was the evolution of network connections of prosumers in 2022? What are the trends for 2023? What is the perception of Romanian prosumers and the interest shown for such systems?
The evolution of applications to connect to the network was a lightning-fast one. If in 2021 we had 50-60 requests per month, last year we recorded around 600-700. Of course, we anticipated an increase in the number of prosumers, but not to such an extent.
At the end of last year, about 5,455 prosumers were connected to the Delgaz Grid network, three times more than at the beginning of the year. For this year we still expect significant increases, especially if the authorities unlock existing funding programs and introduce other tools to support those who want to become prosumers.
A study carried out last year at the level of the E.ON group of which we are a part shows that half (51%) of Romanians are interested in purchasing, this year, a system of photovoltaic panels from an energy supplier, marking an increase of 43% compared to 2021.
According to ANRE, on January 1 this year 40,171 prosumers were registered and for the end of this year a number of over 100,000 is forecast.
In parallel, we are working on the development of an intelligent platform for submitting requests and for users to track their status and an RPA (Robotic process automation) type application that will allow the automation of the process of connecting consumption and production sites, without exceeding the power approved.
What will the hydrogen use test system consist of? What are the next steps? When do you think we could have an efficient national hydrogen mix system working?
At the end of last year, Delgaz Grid started, for the first time for Romania, the pilot project 20HyGrid, through which we will test the compatibility and operation of the installations and devices and the components of the distribution system with a mixture of natural gas (NG) and 20% vol. hydrogen (H2).
We believe that green gases like hydrogen can be an integral part of a successful and sustainable energy transition. Therefore, with this project we want to demonstrate that distribution networks have a strategic value for a CO2-free energy supply to our customers in the medium and long term.
Gaseous hydrogen can be produced industrially through the electrolysis process of water, powered by renewable energy produced by wind, solar, etc. and then stored, ready for use. From there, through transport and distribution pipelines, it can be efficiently transported to GN and H2 mixing stations and subsequently to combustion points (neighborhood and area thermal plants, block plants, homes, etc.) to heat consumers’ homes. The transition is not a complicated one, since, depending on the technical condition and the fulfillment of the conversion conditions, the existing natural gas infrastructure can be used.
On the other hand, hydrogen could be the key to unlocking vast amounts of renewable energy. On particularly sunny and windy days, many wind and solar farms have to reduce and sometimes even suspend production so that the electricity grid does not become overloaded. Hydrogen production would make it possible for these production facilities to continue to operate and for the green energy produced to be transformed and used for industrial processes, mobility and heating. This would allow Romania to harness more of its renewable resources and also ensure its long-term energy independence.
Delgaz Grid has moved from words to deeds, and our project, which will take place between November 2022 and October 2024, is a necessary first step in this direction. We benefit from the support of E.ON experts in Germany, where many such projects have been carried out, so we are on a safe path.
We will make available to the competent institutions and other interested parties in Romania the results of the pilot project for the development of preliminary technical regulations, for the conversion of existing networks to GN-H2/pure H2 mixtures, respectively for the construction of new distribution networks – “H2 ready”, based on the results of the pilot projects and preliminary regulations from Europe and Romania.
We hope that in a relatively short time, we will have as many certifications as possible for «hydrogen-ready» network components from the manufacturers of materials and equipment (certifying that they are ready for 100% hydrogen by volume), so that the new grids can be designed and executed only on the “hydrogen ready” principle (even if, during the transition period, a mixture of NG and H2 will be transported on these networks, in different proportions). At the same time, we also intend to become hydrogen producers.
As regards production, the Ministry of Energy launched in June 2022 a state aid scheme, funded by the National Recovery and Resilience Plan (PNRR), to support investments in building capacity for green hydrogen production in electrolysis facilities. Through the PNRR, Romania has already contracted 100 MW of green hydrogen (minimum 10,000 tons), the minimum production target until the end of 2025. It is a start, but we believe that, in the future, we must produce much more. For this, it is necessary to have as soon as possible a national strategy for hydrogen, which is in an advanced phase of completion and is to be launched for public debate, which clearly outlines the directions to follow and the categories of hydrogen consumers (industry sectors, transport, heating, etc.).
Although in 2022, hydrogen has become somewhat secondary, due to the energy crisis, namely the high cost of electricity, we hope that in the short term, it will return to a reasonable price of electricity and thus hydrogen will gain momentum, as it was predicted.
What are Delgaz Grid’s main investments and KPIs achieved in 2022? What are the plans for 2023?
Last year, we invested a total of 673 million lei (136.5 million euros) in the grids. It is an achievement in itself that we managed to keep investments at a high level in a very difficult economic context, but this at the cost of considerable efforts.
On the natural gas side, we invested 390 million lei (79 million euros). We modernized pipelines and connections (through replacements and cathodic protection) over a length of 278 kilometers. At the same time, the natural gas distribution system was extended by over 600 km, with around 38,500 new consumers connected. In collaboration with the local authorities, eight new natural gas distributions were established in the counties of Iasi, Cluj, Maramureș, Botoșani, Neamț and Sibiu.
On the electricity side, we had investments of 283 million lei (57.5 million euros), of which 26 million lei (5.3 million euros) represent EU funds. The electrical network was modernized along a length of 1,129 km and about 270 remote-controlled equipment (separators and reclosers) were installed in the overhead medium voltage networks. Modernization works were carried out on equipment in 51 substations. Also, 58 new substations were built and more than 310 were modernized.
The network was extended by 566 km and more than 28,000 new consumers were connected. At the same time, at the end of 2022 we had installed SMART meters for around 300,000 consumers.
The results of the investments made year after year can be seen in the increase in the safety and quality of the distribution service. Thus, in 2021, the company recorded the shortest duration of unplanned interruptions in electricity supply in Romania, of 89 minutes, and last year this indicator decreased even more, reaching 76 minutes. It is a 24-fold improvement compared to the 1,800 minutes/year recorded before privatization in 2005. Progress was also recorded on the gas side, where the technological consumption of the network was reduced by 57% compared to 2012. For comparison, the reduction of technological consumption by 587 GWh (respectively 56 million cubic meters) is equivalent to the annual consumption of a city of about 100,000 inhabitants, such as, for example, Satu Mare.
For this year, we have budgeted investments of 915 million lei (over 180 million euros), 36% more than the previous year, these being the largest in the last 18 years, since entering the Romanian market, raising to around 1 .6 billion euros the total value of investments in networks.
On the natural gas side, investments worth 410 million lei (83 million euros) are planned. We want to modernize pipelines and natural gas connections over a length of over 250 kilometers. At the same time, to improve the quality of the service, 10 measurement adjustment stations will be modernized. In collaboration with the local authorities, 10 new natural gas distribution points will be established in the counties of Iași, Bacău, Cluj, Satu Mare, Botoșani and Suceava. A priority for this year is also the expansion of the natural gas distribution system and the connection of new consumers.
On the electricity side, we have planned investments worth 505 million lei (102 million euros), of which 95 million lei (19 million euros) represent EU funds. Our investments aim at the continuation of the implementation of SCADA and the automation of the distribution system, SMART metering, the modernization of overhead networks, substations and substations, the expansion of the distribution network for the connection of new consumers, as well as the fulfillment of the requirements of the performance standard.
Attracting European funds is one of our priorities. At this moment, we have six projects in various stages of implementation worth about 254.5 million lei without VAT (about 51.9 million euros), with the financing of 182.3 million lei (about 37.2 million euros).
Three of the projects aim at the modernization, in order to take over the electricity produced from renewable resources, of five transformation stations in Vaslui, Botoșani and Suceava counties. Three other projects aim at modernizing the distribution network and installing around 10,000 smart meters for consumers in the municipalities of Iași and Suceava, respectively in Neamț County.
Also this year we planned the modernization of about 1,800 km of network and the installation of 175 remote-controlled equipment (separators and reclosers).
We also prioritize smart metering, for the coming years (2023-2028) we plan to install another 425,000 meters, which means that 47% of customers will have smart meters installed by the end of 2028.
How do you see the issue of distribution tariffs solved?
Distribution networks in Romania, both natural gas and electricity, need investments of tens of billions of euros in the medium and long term for their performances to reach the level of those in the West.
For consumers, these investments mean better services, fewer disruptions and networks ready for a digital and green future.
We need to connect new energy sources to the grids, given the spectacular increase in the number of prosumers, and this brings the need to strengthen the infrastructure. Both prosumers and large producers from renewable sources need a network capable of taking their produced energy and ensuring the quality parameters required by industry and domestic customers. Without investments in the electricity network, consumers will not have cheap and quality energy!
Also, we not only have to replace the old networks from the 70s, but also the infrastructure from the 90s that was built, unfortunately, not always to the best quality. At the same time, we need to invest in the development of the gas network, in green hydrogen projects, in cyber security solutions, but also in technology, in IT solutions and so on. So there is a great need for investment.
Delgaz Grid’s activity, like all natural gas and electricity distributors, is regulated, and the costs are covered by the tariffs approved by ANRE. All investments are made from the distribution fee, whether it is recognized before the investment or recovered after the investment is completed.
At the same time, until now, companies have bought their energy for their own technological consumption (CPT), without which the networks cannot function, at the market price. Thus, the operators of electricity and natural gas distribution networks were among the most affected by the energy crisis!
Without an increase in rates distributors will have much greater financial problems than they currently have and we will not be able to make the much-needed investments. Without modern distribution networks, there can be no energy transition, but in order to have satisfied consumers, major investments are needed on all levels. Prosumers, but also the large solar and wind power plants that are under development will not be able to be connected to the grid, electric cars will not be able to be charged in several stations, and the quality of services for all consumers will suffer.
Also, companies have invested and must invest more and more in cyber resilience, given the extent of this phenomenon, costs that must also be recognized and covered.
Basically, we supported from our own resources this period, when energy prices doubled, even tripled, costs that we did not transfer to consumers. We are not asking for any favors! We just want to get back to normal.
If the distribution rates will be adjusted, as promised and written in the legislation, I think we can increase investments even more.
In this way we will be able to stabilize our financial situation so that we overcome the problem of cash deficit, pay our loans and continue to make these investments that are so important for Romania.
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This interview first appeared in the printed edition of Energynomics Magazine, issued in March 2023.
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