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Economic assessment of all the long-term costs and benefits for the market and the individual costumer
through application of smart metering systems in the Czech
Republic gas sector(Unofficial translation)
Contents
1. Executive summary...........................................................................................................6
2. Current Situation in the CR Gas Industry and Prediction of Future Development.............8
2.1. Regulatory and Legislative Framework......................................................................8
2.1.1. Legal Environment..............................................................................................8
2.1.2. Regulation...........................................................................................................9
2.2. Model of the Market....................................................................................................9
2.3. Gas System of the Czech republic and the Mode of Operation...............................10
2.3.1. CR Gas System.................................................................................................10
2.3.2. Balancing of Gas Demand Fluctuations............................................................12
2.3.3. Impact of the AMM Implementation on the CR Gas System.............................12
2.3.4. Losses in the Gas System.................................................................................13
2.4. Balance of Supply and Demand...............................................................................13
2.4.1. Gas Supply to the CR........................................................................................13
2.4.2. CR Gas Consumption.......................................................................................13
2.5. Summary..................................................................................................................17
3. Considered Variants and Schedule of the AMM Application in the CR Gas Industry......18
3.1. Phases of Project.....................................................................................................18
3.1.1. Preparatory Phase of the Smart Metering System Implementation..................18
3.1.2. Realisation Phase of the Smart Metering System Implementation...................19
3.2. Variants....................................................................................................................19
3.3. Time Schedule..........................................................................................................22
4. Qualitative Evaluation of the AMM Implementation in the CR gas sector.......................23
4.1. Basic Aspects of Qualitative Evaluation...................................................................23
4.2. Qualitative evaluation of Potential Benefits, Costs, and Risks.................................24
4.2.1. Operation of the Metering System....................................................................24
4.2.2. Reading of the Metering Equipment..................................................................24
4.2.3. Billing of Supplies (Invoicing)............................................................................25
4.2.4. Assistance Services to Customers....................................................................25
4.2.5. Operational Costs and Maintenance of Metering Equipment............................25
4.2.6. Postponed Investments into Distribution and Transmission Systems...............26
4.2.7. Technical and Non-Technical Losses...............................................................26
4.2.8. Consumption and the Peak Load......................................................................26
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4.2.9. Gas Supply Cuts...............................................................................................27
4.2.10. CO2 and Other Pollutants..............................................................................27
4.3. Investments and Costs of the AMM implementation................................................27
4.3.1. New Investments...............................................................................................27
4.3.2. Sunk Investments..............................................................................................28
4.3.3. Operating Costs................................................................................................28
5. Experiences from Pilot Projects of the AMM Implementation in the CR..........................29
5.1. Experiences of the Gas Group from the Pilot Project in the CR...............................29
5.2. Experiences of the Gas Group in European Countries............................................29
6. Economic Evaluation of the AMM Implementation in the CR Gas Industry.....................31
6.1. Model Methodology..................................................................................................31
6.1.1. Methodology of Discounted Cash Flows (DCF)................................................31
6.1.2. Principle of the Differential Setting between the Basic and Blanket Variants. . .31
6.1.3. Monitored Period...............................................................................................31
6.1.4. Representation of the Gas Market Participants................................................32
6.2. Input Model Parameters...........................................................................................33
6.2.1. List of Aggregated Expenditures.......................................................................33
6.2.2. List of Aggregated Items of Revenues..............................................................34
6.3. Comparison of Basic and Blanket Variants..............................................................35
6.3.1. NPV Value.........................................................................................................35
6.3.2. Sensitivity Analysis of the Most Important Parameters.....................................38
6.3.3. Conditions to Reach Positive NPV....................................................................39
6.4. Compliance Assessment with the EU Recommendations.......................................39
7. Recommendation for the Smart Metering Implementation in the CR Gas Industry.........40
7.1. Final Recommendations...........................................................................................40
7.2. Justification of the Recommendation.......................................................................40
7.3. Conditions for Reaching Profitability by the AMM Implementation in the CR Gas Industry................................................................................................................................41
Attachments............................................................................................................................42
Attachment 1 List of Inputs and Parameters Applied in the economic model.....................42
Attachment 2 Compliance of the Economic Model Inputs/Parameters with a Context of the EC Recommendation dated 9 March 2012 C (2012) 1342.................................................49
Attachment 3 Gas Storages in the CR and Their Role in the CR Gas System...................52
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List of Abbreviations
AMM Advanced Meter Management – automated remote metering and consumption management
CAPEX Capital Expenditure
CNG Compressed Natural Gas
CR Czech Republic
DCF Discounted Cash Flow
DN Nominal diameter (Diametre nominel)
DOM Consumption sector – final consumers - households
DSO Distribution system operator
EC European Commission
ERO Energy Regulatory Office
ES European Community
EU European Union
GPRS General Packet Radio Service – data transmission technologyat networks of mobile operators
ICT Information and communication technology
IS Information system
IT Information technology
LAN Local Area Network
LNG Liquefied Natural Gas
MO Consumption sector – final consumer – entrepreneurs
MZ Metering equipment
NET4GAS Gas transportation system operator in the Czech Republic
NPV Net Present Value
OM Consumer’s Point of Delivery
OPEX Operational Expenditure
OTE OTE, a.s. (market operator)
PLC Power Line Carrier – data communication using power lines
TSO Transmission system operator
SMS Short message service
SO Middle size consumers
TDD Typical load diagram
VO Wholesale customers
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WAN Wide Area Network
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1. Executive summaryThe objective of this document is an economic evaluation of all long-term benefits and costs for the market and individual customers through application of smart metering systems in the Czech Republic (CR) gas sector (further „the economic evaluation“). The evaluation is made in compliance with requirements of the Directive 2009/72/ES of the European Parliament and the Council and evaluates which form of smart metering is economically reasonable and cost effective and which timeframe is feasible for their implementation. The economic evaluation has been elaborated in compliance with the EC recommendation dated March 9, 2012.
The Czech gas market is fully liberalised. All customers have the right to choose their gas supplier. They apply this right even in the current system of gas consumption metering. The market sets up a commodity price (on the wholesale level). Further services of a monopolistic character, specifically gas transmission, distribution and the market operator´s services, are regulated by the independent Energy Regulatory Office. The CR has a legal entity in charge of central electricity and gas data management and measurement data processing - Market Operator (OTE, a.s.).
More detailed assessment of the Czech gas system infrastructure reveals its good condition from the view of management of all gas market needs in the CR and requirements of the system. The CR gas market connection to gas sources is sufficient and a higher diversification of potential gas suppliers is proceeding with regard to construction of the north-southern connection for the LNG transportation. Construction of new storage capacities is also in progress. These capacities contribute to compensation of differences between instantaneous demand and supply at the market.
The CR gas system features enough capacity to keep system balance, even without the smart metering system application for demand management. Both capacity of gas storages and accumulative capability of the gas system help to keep balance. Balance management through disconnection/limitation of consumption may have a consequence in technical, safety and legislative problems.
The economic evaluation reveals that the implementation of the AMM estimated for the CR features significant disadvantages under the current conditions. It creates risks and costs to distribution system operators. Moreover, customers might afterwards be made to bear these costs in full, although they cannot gain any resulting benefits, which would balance these large costs.
Major reasons for the negative outcome of the economic evaluation are, in particular:
High investment costs of the AMM technology. And beyond that, even a significant decrease in the AMM technology purchase price does not provide more satisfactory results closer to a positive net present value (NPV),
Mandatory costs related to the installation of the AMM at consumer’s points of delivery, and necessary technology adaptations at the existing OM,
High costs of changing of information and communication technologies (ICT) infrastructure (for distribution system operators, market operator, traders),
Interim results of pilot projects in the CR and other European countries have not proved expected benefits, specifically gas savings, through the AMM implementation.
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Identified risks include absence of norms and standards, danger of interference of data transmission and securing data safety and protection.
From the economic evaluation follows, that implementation of smart metering in the CR gas system cannot be recommended under current conditions. Implementation of AMM in the CR gas system would have an impact on increased costs of gas consumers, and consequently might lead to a decrease in competitiveness of gas in the CR energy market.
Current status of metering, data management and dissemination of information (reference variant „Basic“) feature continuous metering with remote data transmission in approx. 50 % of the whole annual consumption. Selected variant for the AMM implementation (the „Blanket“ variant) calculates with 100 % implementation of the smart metering equipment. From the total number of OM in the Czech Republic there is 1.17 million OM (cca 40 %) in the household segment with the lowest consumption. With connection to AMM implementation we do not expect any change in using of gas.
Total costs of the Basic and Blanket variants are calculated for the period of 27 years (7 years of preparation, 10 years of implementation, and 10 years of operation/termination). Net present value has been calculated to CZK -17.26 Billion (NPV discounted to January 1, 2013).
Under the existing CR legislation it is not possible to secure dispatch control of consumption, even in the case of the AMM implementation, because only closing of gas valve (in the case that it is a part of the AMM) can be done remotely. Valve opening is possible only at presence of a responsible technician. Limitation of the gas flow is not possible due to a risk of flame burn off (safety risk). Potential for influencing a process and imbalances of gas consumption is zero regarding the facts mentioned above.
Sufficient volume of pilot projects that would prove justifiability of the AMM implementation in the gas sector, and theoretical results of benefits and costs calculations, has not been performed so far. Existing pilot projects exhibit negative economic results and zero savings of gas.
Further, a very careful preparation is recommended, at the state level, and at the level of market participants; in a period before questions of technical standards for solution will be cleared up, decrease of equipment prices will occur and the existence of sufficient benefits for the state and final gas consumers will be proved.
It is therefore recommended to elaborate a new stage of economic evaluation by the end of 2017, at the latest. By that time, new technology for specific conditions in the CR will be tested and verified, new national communication standards will be developed, along with standards of metering devices and major system elements. In addition, conditions for eliminating specific risks will be treated and well defined.
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2. Current Situation in the CR Gas Industry and Prediction of Future Development
2.1. Regulatory and Legislative Framework
The objective of this chapter is to find out current situation in the CR gas sector in relation to a possible implementation of the AMM system. The chapter comprises also a description of the current status of implementation of the EU legislation into the CR legislation, situation and specifics of the gas industry infrastructure in the CR, supposed development of the gas sector, and also balance of gas supply and consumption.
2.1.1. Legal EnvironmentBasic legislative norm that sets up rules for undertaking in the CR energy sector is the Act No. 458/2000, Coll. on Business Conditions and Public Administration in the Energy Sectors and on Amendment Other Laws (Energy Act) as amended by later legislation. This Act is followed with well-developed and mutually linked regulatory system for the energy market in a form of complementary legislative norms – decrees, rules for systems operation (network codes), market operator business conditions and technical standards.
Energy Act has implemented into the CR legislation the Directive 2009/73/ES of the European Parliament and of the Council on common rules for internal gas market and Repealing Directive 2003/55/ES, dated July 13, 2009. Directive includes a request to member states to ensure implementation of the smart metering systems, which supports customer’s active participation on the gas market.
On the basis of Energy Act – according to § 16 letter k) the Ministry of Industry and Trade (MIT), as the central government authority for the energy industry, shall provide analyses for implementing of smart metering systems in the power and gas industry.
Transmission system operator and the respective distribution system operator have a duty of gas metering according to § 71 of the Energy Act. Detailed rules for metering are laid down by the Decree No. 108/2011 Coll. on gas metering and on laying down compensation of the loss incurred by illegal gas consumption, illegal supply, illegal storage, illegal transmission or illegal gas distribution, of March 17, 2011. Costs related to metering provisioning are included in the price of gas transmission and distribution. Among activities, related to gas metering, belong metering equipment installation, its operation and service, equipment checking and maintenance, meter readings, metered data transmission and archiving.
Gas meters installed in the network for gas metering and subsequent invoicing have to be of an approved type and with a valid certification. Validity of certification differs by the meter type (majority of gas-meters have the validity of certification 10 years).
Directive 2004/22/ES of the European Parliament and of the Council of on measuring instruments, March 31, 2004, have been implemented by the Government Order No. 464/2005 Coll. of 19 October 2005, which lays down technical requirements on measuring instruments. All gas-meters, which are procured in compliance with this Directive, are considered as certified, and it is not necessary to provide supplementary certification till the end of certification validity.
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Legislative amendments, due to a decision on preparation and implementation of smart metering systems (AMM), have an impact on more than 20 legal norms in the CR. Needed time for legal amendments may be estimated to approx. 18 months (for next steps see chapter 3.3).
2.1.2. RegulationFinal price of supplied gas for all customer categories consists of regulated and unregulated parts. Part, regulated by independent Energy Regulatory Office (ERO), includes activities of a natural monopoly character, and their prices. That includes gas transmission from the border handing point, or from the gas storage into the CR local point, price of following gas distribution to a consumer’s point of delivery, price of activities related to technical and business maintenance of stabile gas system (particularly billing services of imbalances performed by the market operator). Non-regulated part includes commodity gas price, storage charge, and fee for the trade and other services. Non-regulated price is set up by market principles and in compliance with a business strategy of gas suppliers. Price of gas supply has been laid down in the same manner for all consumer categories since January 1, 2007, when the CR gas market was fully liberalised.
Revenue-cap procedure of regulation applying methodology RPI-X is used for aforementioned regulated parts. Regulatory reporting of a respective system operator is used for setting up gas transmission and distribution fees. ERO calculates allowed revenues, which are included in the cumulative price of reserved capacity. Price for the gas grid comprises costs incurred by losses in the transmission system and distribution systems; norms for losses are applied for this procedure.
On principle, incurred eligible allowed costs are transferred by the regulatory system to the customer. It might be expected that regulated subjects will include all eligible costs related to the AMM implementation and operation into regulation parts of gas price, as far as the decision on the AMM implementing will be adopted.
2.2. Model of the MarketEnergy Act defines following gas market participants in the CR – gas producers, transmission system operator, distribution system operators, gas storage operators, gas traders, the market operator, customers.
Gas market has been fully liberalised since January 1, 2007. All customers have right to choose their gas supplier free of charge. The customers have possibility to influence part of total costs of the gas delivery by this way. Supplier´s switch, that substitutes a trader of a vertical integrated undertaking, which includes distribution system operator, have a consequence in a new registration of the consumer’s point of delivery in the market operator system. This way ensures recording of metered gas supplies and consumptions of individual suppliers and records assigning to subjects of settlements (subjects responsible for imbalances between real and contractual volumes of gas supply).
Number of supplier switches is approximately 13 % per year; most of changes belong to sites with non-continuous metering.
Market operator is responsible for acquisition of metered and businesslike data, for evaluation of imbalances, billing and settlement of imbalances, organization of the short-term
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gas market and some other services (e.g. provision of invoicing data to eligible subjects) related to the market functioning.
Imbalances between contractual and actual volumes of supplied gas are evaluated to each subject of settlement (subjects responsible for imbalances between real and contractual volumes of gas supply) every day. Operator of the respective system sends to the market operator measured daily volumes. Methodology of the load profile setting by typical supply diagrams (TDD) is used for customers with non-continuous metering; according to the character of consumption.
Rules for the gas market functioning are stipulated in the Decree No. 365/2009, Coll. of October 15, 2009, on Rules of gas market.
Trading unit is a gas day, which starts at 6.00 of the relevant calendar day and ends at 6.00 of the following calendar day. Gas trading is accomplished on following platforms in the market operator system:
Bilateral trading
Short-term markets, organised by the market operator
o Daily gas market
o Intra-day gas market
Legal and ownership unbundling of production, trade, gas transmission and distribution is exercised in the CR in compliance with the Directive 2009/73/ES. TSO and DSO are responsible for metering device installations and operation, metering and transfer of metering results to the market operator. Market operator is responsible for an administration of transmitted data. This arrangement guarantees a long-term stability of a solution during the AMM preparation, realisation and operation along the whole metering chain and provides non-discriminatory approach to all existing and new subjects. Administration of the whole metering and communication chain by a solicit subject (DSO) ensures high level of data security and reduces the risk of a potential abuse or loss of data due to a low number of necessary interfaces.
Transmission system operator, company NET4GAS, s.r.o., is responsible for balancing the gas system.
2.3. Gas System of the Czech Republic and the Mode of Operation The CR gas system consists of mutually linked system of facilities for production, transmission, distribution, and gas storage, including control and security systems, and data transmission equipment applied at computer technology and information systems that are used for operation of these facilities.
2.3.1. CR Gas SystemGas system in the Czech Republic consists of following major elements (Figure 1)
Transit gas pipelines of the transmission system
o Total length 2 480 km, pipeline DN 800 – DN 1 400, nominal pressures 6.1 MPa a 7.35 MPa)
Intra-state gas pipelines of the transmission system
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o Total length 1 183 km, pipeline DN 80 - DN 700, nominal pressures 4 MPa, 5.35 MPa, and 6.1 MPa.
Compressed station of the transmission system
o Břeclav, Hostim, Veselí nad Lužnicí, Kralice nad Oslavou, and Kouřim.
Border Transfer Stations of the transmission system
o Hora Svaté Kateřiny, Brandov, Waidhaus (DE), Lanžhot (SK) and Cieszyn (PL).
Transfer points between transit and intra-state transmission systems
o Hrušky, Uherčice, Olešná, Limuzy, Hospozín,and Veselí nad Lužnicí
System of distribution gas pipelines
o Nominal pressures 2.5 MPa – 4 MPa, with a total length of approx. 65 000 km
Underground storages
o RWE GasStorage – Háje, Tvrdonice, Dolní Dunajovice, Štramberk, Lobodice, Třanovice +
o MND GasStorage – Uhřice
o SPP Bohemia – Dolní Bojanovice (currently connected only to the system of the Slovak Republic)
Border handing stations of distribution systems
o Vejprty – Bärenstein, Aš – Selb, Alžbětín – Einsenstein, Hevlín – Laa an der Thaya, Úvalno – Branice, Hrádek nad Nisou – Zittau
Gas is handed over from the transmission system to distribution systems at handing stations. These stations are both at the transit system, and at the intra-state transmission system.
Gas infrastructure development proceeds continuously; it is supported at the European level and by the CR energy policy. Diversification of sources is a phenomenon in the European context; this option for gas supply in the Czech Republic has continuously improved. Simultaneously, the gas infrastructure is strengthened in the CR through realisation of reverse flows, construction of new gas storages, and by a gradual release of transit capacities. Coupling of business regions and connection of national markets should improve balancing regimes; these measures should provide stimulus for a liquidity development of gas markets in the near future.
Detailed assessment of the Czech gas infrastructure condition has revealed its good shape from the view of fulfilling gas market needs and for requirements of the gas system management. Connection of the CR gas system to gas sources is sufficient. Higher diversification of potential gas suppliers is proceeding with regard to construction of the north-southern connection for the LNG transportation. Option of a reverse gas flow also contributes to a security of gas supplies to the CR.
Condition of the Czech gas infrastructure is sufficient to ensure balance between supply and demand with a sufficient reserve. On the basis of results from analysed background information, it may be stated that the gas system should be passable, even in the case of a significantly higher demand.
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Figure 1 CR Gas System
2.3.2. Balancing of Gas Demand FluctuationsIt is necessary to balance a fluctuation of gas consumption, in relation to gas sources and their supplies, by operation of the gas system. With respect to relatively even gas imports throughout the year and a significant drop of consumption in summer months, the gas system needs a tool capable to balance these seasonal changes; partly daily changes too. This function fulfills gas storages (see more details in the Attachment 3). Disproportions between imports and consumptions are covered by gas withdrawal from storages in the winter period. Surplus of gas is stored in storages during the summer period.
Gas pipelines, in contrary to power networks, have an ability of the gas accumulation. Short-term differences between gas supply and demand may be balanced thanks to this feature. This is a significant element of gas system reliability. Instantaneous balance between supply and demand may be ensured by accumulations of high pressure and very high pressure gas pipelines.
2.3.3. Impact of the AMM Implementation on the CR Gas SystemRegarding the fact that:
the Czech Republic has a gas storage capacity for 30 % of annual gas consumption, and this figure should increase to 50 % in forthcoming years; these storages are able to balance fluctuations in the gas consumption,
feature of accumulation in the gas system contributes to balancing of instantaneous changes of the gas consumption,
gas infrastructure is able to transport needed volumes of gas to points of delivery,
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dispatch control of consumption through limitation of gas flows is not possible; it is possible to close a stop-valve (it has to be a part of installation); renewal of supply may only occur at presence of a relevant technician,
additional balancing of fluctuations by application of the AMM in the CR gas system may not be expected.
2.3.4. Losses in the Gas SystemLosses in the CR gas system reached 1.9 % in 2011. In principle, they are split into technical and non-technical losses.
Technical losses relate to technical means of the gas pipelines network, as are: gas pipelines, gas-meters, controllers, etc. For instance, these losses are caused by deviation of meters (each device meters with a certain error), or there are losses caused by gas leaks (erosion/age of equipment) at the gas facilities (owned by distribution system operator), or at consumption equipment in the ownership of an object keeper.
Non-technical losses are caused primarily by illegal consumptions.
2.4. Balance of Supply and Demand
2.4.1. Gas Supply to the CRGas supplies to the CR customers are covered by imports, withdrawal from storages, and by supplies from domestic sources. Production of domestic sources is practically negligible and covers about 1 % of domestic consumption. Outstanding 99 % of consumption is from imports. Total gas import to the CR reached 9 241 Million m3 in 2011. Gas was imported from the Russian Federation (5 863 Million m3), Norwegian Kingdom (273 Million m3), and the states of European Union (3 105 Million m3).
Currently, it is possible to observe a global excess of gas supply against demand. Among significant factors that influence supply side is the LNG development in Europe and in the world. Development of shelf gas in Europe is minimal in comparison to North America countries; quick and significant change may not be expected.
2.4.2. CR Gas ConsumptionGas consumption in the CR reached totally 8 086 Million m3 (85 646 GWh) in 2011.
Customers are divided into four categories in the gas system.
Wholesale consumer (VO). Category for physical/legal persons, whose consumption gas equipment is connected to the transmission/distribution system and the annual consumption exceeds 4 200 MWh (above 400 Thousand m3) at the consumer’s point of delivery.
Middle size consumer (SO). Category for physical/legal persons, whose consumption gas equipment is connected to the transmission/distribution system and the annual consumption exceeds 630 MWh (at least) and does not exceed 4 200 MWh (more than 60 Thousand m3 and less than 400 Thousand m3) at the consumer’s point of delivery.
Small size consumers (MO). Here are ranked customers, physical/legal persons; gas is supplied for their undertaking. Annual consumption should not exceed 630 MWh (60 Thousand m3).
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Household category (DOM) for physical persons; gas is supplied to cover their personal needs.
Overview of the number of OMs and natural gas annual consumption according to customer´s categories is displayed in the Table 1.
Table 1 Overview of Consumption and OM Number by Customer Categories (2011)
Category VO SO MO DOM
Gas consumption, 2011 (GWh)
37 546 8 290 12 283 25 889
Share on consumption, 2011* (%)
43.8 % 9.7 % 14.3 % 30.2 %
Number of OMs, 2011 (pieces)
1 707 7 033 200 496 2 659 787
Ratio on total number of OMs, 2011 (%)
0.1 % 0.2 % 7.0 % 92.7 %
* 2011 Balance difference is 1.9 %, it is adequate to losses.
Table 2 displays a consumption structure and a number of points of delivery of the MO and DOM categories, where the AMM implementation may be considered.
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Table 2 Consumption Structure and a Number of MO and DOM Points of delivery (average of the period 2008 – 2010)
Category MO DOM
Annual Gas consumption at MO
(MWh)
Share on the number of OMs (%)
Share on Gas Consumption
(%)
Share on the number of OMs (%)
Share on Gas Consumption
(%)
do 1.89 10 0.1 44 2.1
1.89 - 9.45 14 1.2 15 8.4
9.45 - 15 8 1.9 11 14.2
15 - 20 8 2 9 15.2
20 - 25 7 2.1 7 15.5
25 - 30 5 2.2 5 14.3
30 - 35 5 2.2 4 10.8
35 - 40 3 1.9 2 7.3
40 - 45 3 2 1 4.4
45 - 50 3 1.8 1 2.7
50 - 55 2 1.8 0 1.6
55 - 63 3 2.7 1 1.4
63 - 630 29 78.1 0 2.1
Gas consumption exhibits a downward trend nowadays. This is particularly caused by a gradual decrease of energy intensity, and by unfavourable economic development. Increase of the gas demand may be potentially expected in middle-term horizon; in relation to the implementation of the Directive 2012/75/EU on industrial emissions, and by forced transition of electricity generation fuelled by brown coal to gas.
The CR gas consumption had been in doldrums from 1997 to 2004, afterwards came a slight drop. There was a slight consumption growth in 2010, particularly due to a cold winter period with below-average temperature. Among causes of the demand stagnation belongs customers’ effort for financial savings through a reduction of energy intensity in the housing sector, as well as in industry / entrepreneurial sphere. Consumption in a period of 2007 – 2009 was negatively impacted by a higher than average annual temperature. Development
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of gas consumption in the Czech Republic in the period 1990 – 2011 is exhibited on the graph 1.
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Graph 1 Gas Consumption in 1990 - 2011
Gasification of towns and smaller municipalities might be considered as nearly terminated. Number of points of delivery has a significant impact on the total gas consumption. In spite of the fact, that an additional moderate increase of a number of points of delivery is expected in a long-term horizon, it is possible to anticipate a prevailing downward trend.
Energy savings measures in households include particularly insulation of dwellings, modernisation of boiler houses, more effective use of domestic warm water, and increased technological level of appliances. Measures taken on the basis of energy audits also contribute to energy savings. Because of these measures, consumption development per one point of delivery exhibits a downward trend.
Consumption in the industrial sector (except of power and heat generation) is related to the development of economics. There was a moderate recovery in 2010; however, it is complicated to estimate further development, when the European Union is confronted with debts and economic crises. Significant growth of consumption by industry has not been expected in any background information analysed in this evaluation.
Consumption growth might be expected in the central heating sector. This may be significantly influenced by requirements of the Directive 2010/75/EU. If the scenario of a degradation of central heating systems comes into reality, significant part of power and heating sources can change the type of fuel from coal to gas.
There is a potential for a gas consumption growth in the transportation sector. Gas is used in a form of CNG and LNG in transportation. Currently, the CNG is much more applied type of consumption. Technology of gas application in transportation is already well-developed and tested. Millions of vehicles use this technology in the world. CNG share on the annual gas consumption in the Czech Republic is low; it has reached approx. 12.1 Million m3.
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Table 3 shows an expected development of the CR gas consumption in a period of 2012 – 2021.
Table 3 Expected Development of the CR gas consumption in a period of 2012 – 2021
Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Annual gas consumption(Mil. m3)
8 320 8 660 9 010 9 060 9 290 9 400 9 500 9 750 9 970 10 300
2.5. SummaryCzech Republic depends entirely on gas imports. Gas consumption exhibits a downward trend nowadays. There is an excess of supply against demand. This is particularly caused by a gradual decrease of energy intensity, and by unfavourable economic development. Increase of the gas demand may be potentially expected in the heating sector, in relation to the implementation of the Directive 2010/75/EU, and in the transportation sector.
Gas infrastructure development proceeds continuously; it is supported at the European level and by the CR energy policy. Condition of the Czech gas infrastructure is sufficient to ensure balance between supply and demand with a sufficient reserve, in respect to future development too. Deviation between gas consumption and imports is compensated particularly by application of gas storages in the CR territory. At present, a gas storage capacity has reached 30 % of total annual consumption (approx. 2.7 Billion m3). Construction of other gas storages proceeds nowadays; their capacity should reach more than 50 % of annual gas consumption. Gas storages operation enables forming of gas supplies to customers according to the gas load curves; it is highly independent on imports.
The Czech gas system already disposes enough capacity to maintain balance in the system, even without application of smart metering systems and demand side management. Ability of accumulation of the gas system is an additional instrument. Management of gas consumption through disconnection/consumption limitation may imply technical, safety and legislative problems.
Benefits from the smart metering systems implementation in the field of management of gas consumption are insignificant in comparison to options described in the Chapter 2.3.
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3. Considered Variants and Schedule of the AMM Application in the CR Gas Industry
The objective of this chapter is a specification of the time schedule for the AMM implementing, including all preparatory steps, and to define relevant variants of a realisation.
3.1. Phases of ProjectProject for implementation of smart metering system might be split into two related phases:
Preparatory phase
Realisation phase
3.1.1. Preparatory Phase of the Smart Metering System ImplementationPreparatory phase for implementation of the smart metering system might be defined as a period, which includes activities as of: administration, project management, planning and strategic decision making of the way of implementation, testing in laboratory conditions, as well as service and control activities including realisation of necessary adaptations at points of delivery before realisation of new metering instruments.
According to the time schedule (Chapter 3.3), needed time of the preparatory phase for implementation of the smart metering in conditions of CR will last 7 years, at least.
Preparatory phase of the smart metering implementation may commence in the case that:
national (european) communication standards, standards of metering devices and major system component will be developed,
technology will be completely tested and verified for the CR conditions,
there will be treated/defined conditions for risks elimination.
Preparation of the AMM implementation may start after:
Pilot project evaluation
Decision (at the state level) on the way of financing of the AMM preparation, implementation, and operation
Decision (at the state level) on a start of the preparatory phase for the AMM implementation
Preparatory phase of the AMM implementation may be split into several steps (stages):
Legislation modification
Elaboration of feasibility studies at subjects affected by the AMM implementation
Competitive tendering execution in a form of public contracting
Conclusion of an agreements with suppliers
Preparation and verification of the test operation
Preparation of a production environment for the AMM implementation including a plan of checks and tests in sites determined for the AMM (OM and others)
Assembly of verification equipment
Evaluation of the ICT and metering technology, communication among the system elements
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Decision on the realisation phase commencement
Activities that have to be coordinated at the state level:
All above mentioned activities preceding the commencement of preparatory phase
Legislation modification
Decision on realisation phase commencement
For all residual activities in preparatory phase are responsible aforementioned subjects.
3.1.2. Realisation Phase of the Smart Metering System ImplementationImplementation of the AMM system includes a change of metering devices and accessories, implementation of the IT systems, which will form the AMM infrastructure. In some cases, there will be necessary to perform specific building adjustments, due to an exchange of relevant equipment. Realisation stages for the AMM implementation will be likely performed in following steps:
Elaboration of design documentation
Elaboration of testing documentation
Design of the AMM infrastructure and its implementation
Implementation of the smart metering system
Commercial operation
Time period necessary for the smart metering implementation depends on procurement of own and supplier capacities (supply of the hardware, software, designs, and assembly works) including a possible access to facilities at customer’s premises, facilities of the gas system operators, and possible shutdowns.
3.2. VariantsAccording to the Commission Recommendation of March 9, 2012 on preparations for the roll-out of smart metering systems, two prognostic scenarios should be considered (further “the variants”), at the least.
The first variant represents preserving the current situation. The second one complies with a request for the AMM implementation as specified by the Directive 2009/72/ES.
Following should be noted in specification of the AMM implementation
The AMM implementation means an installation of a new technology, based on completely different principles than the existing one, communication paths setting, two-way communication, and connection to a data centre, data processing and utilisation.
Development of the existing situation is based on preserving major principles of the metering organisation with a supplement of selected appliances, ensuring requested functions at relevant sites.
This economic evaluation was preceded in years 2009 - 2012 by detailed analyses of following variants of technological approaches for implementation and installation of points of delivery by the AMM technology:
Basic (preserving of the existing status)
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Upgrade (digital meter displaying consumption after pressing the knob + communication for mobile readings + stop-up valve + web pages)
Blanket (installation of the AMM technology at 100 % points of delivery)
Sub-variants of the Blanket variant:
o Selection 63 % (the AMM installation at 63 % of points of delivery; it includes 99.9 % of the MO gas consumption, and 97.9 % of the DOM gas consumption)
o Selection 45 % (the AMM installation at 45 % of points of delivery; it includes approx. 90 % of the MO and DOM gas consumption).
All aforementioned variants has been also analysed for the outsourcing of communication - the whole communication chain is covered by the network of a telecommunication operator.
Following variants have been selected for this economic evaluation:
Basic
Blanket (without communication outsourcing)
Basic Variant
Basic variant relies on preserving and maintaining of existing status in the field of the gas metering without any technical, process, legal, and regulatory upgrade. Basic variant represents a reference basis for costs comparison of options for the smart metering implementation. At present, this variant is not a contradictory one with the Directive 2009/73/ES, which has not defined mandatory terms and modes for the AMM implementation. It is necessary to note, that about 50 % of the annual consumption (in 2011) is covered by remote metering (metering types A and B).
Decree on gas metering defines following metering types:
Continuous metering with a conversion of values to temperature as of 15 °C and pressure 101.325 kPa, for a dry gas (gas does not contain water vapour, relative humidity equals to null), which continuously record value of gas quantity in a metering interval
o with daily data transmissions – meters of the A type (metering interval is one hour),
o with other than daily transmissions – meters of the B type (metering interval is one hour),
o continuous metering without a conversion of values, which continuously record value of gas quantity in a metering interval - meters of the S type (metering interval is one hour).
Metered data, measured by continuous meters, is always transmitted and evaluated for the trade unit – 1 gas day.
Non-continuous metering without a conversion of values:
o with monthly data readings – meters of the CM type (basic interval for processing of metered data is 1 month),
o with other than monthly data readings - meters of the C type (processing of data from the gas metering is standard performed once in 12 months, or in 18 months, in the latest).
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Basic variant may be considered if other variants of the AMM implementation are not feasible on the basis of economic evaluation. Basic variant does not imply an increase of costs/gas price at the DSO, OTE, and customers. This is a major and unique feature against other variants. This variant does not contradict the Directive 2009/73/ES, which has not defined mandatory terms and modes for the AMM implementation.
The Basic variant provides options for management of gas consumption through:
gas storages, that may store up to 30 % of the CR annual gas consumption (particularly seasonal changes in the gas consumption),
accumulation ability of the gas system (instantaneous changes of the gas consumption),
dispatch control.
Blanket Variant
The Blanket variant features the AMM installation at 100 % points of delivery (it is approximately 2.87 OM, nowadays). Practically, it is a theoretical variant from the viewpoint of covering 100 % OM. It is clear that there will be always OM, where a remote communication is not possible to be ensured from the technical reasons; solution has to be a supplementary one.
This variant features the AMM placement at all OMs without differences in the type and amount of consumption, i.e. smart metering is installed at all OM, where it is technically possible. It is supposed, that changes would occur in the technical, process, regulatory and legal fields of this variant.
The Blanket variant represents a substitution of 100 % meters by new types of the smart meters on the AMM approach, with forbidden orders in a direction to a customer, i.e. limited two-way communication.
The Blanket variant has been selected for the economic evaluation, particularly from reasons:
provision of 100 % readings at OM in regions, that leads to lower unit costs of communication with the OM ,
provision of a unified technology, from the execution of readings to the data integration in the system,
provision of the lowest unit costs per one OM.
Basic structural element of the Blanket variant is the smart metering equipment that comprise except of metering, functions for data transmission too. Following points describe the most important elements of the system, integrated in the gas-meter:
Metering element is predetermined for gas consumption metering (digital).
Data transmission from the advance metering devices will be performed through the GPRS technology, or perhaps by other technology.
Stop-up valve is a function of the smart metering equipment. It serves to a possible OM disconnection from the gas supply.
Other element is a concentrator. Concentrator collects continuously data from the smart metering devices, provides time recording and periodical data transferring to the data centre.
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Concentrator is capable, by the type and by options of the terminal element, to transfer orders for the valves closing, or displaying a message at the OM. Concentrator is capable to provide information, on request/automatically, about the status of individual tasks. It can provide management of tasks by a superior system.
Central position in the AMM system has one or more data centres. Data centre is a high powered gathering of great data volumes, collected in real time. It provides storing of metered values and serves as a data source for other connected modules. It stores thorough historical records of the relevant network metering. Management and reading of the OM and data validation/aggregation is performed through the data centre. Further, the data centre monitors, maintains network of the smart metering device and concentrators. It also transfers data to other IT systems of affected subjects.
Length of the billing period for the MO and DOM customers is usually 12 months. It means that the reading of meters for billing is performed once in a year. That is identical with the Basic variant.
Major disadvantage of this variant is a significant increase of costs at all affected subjects (particularly the DSO) and a substantial increase of gas price incurred by customers.
The Blanket variant does not provide other options for management of gas consumption above the Basic variant framework.
3.3. Time Schedule With respect to the CR specifics (particularly legislation), a length of the preparatory phase for the AMM implementation has been estimated to 7 years. Length of the realisation phase is 10 years. Time schedule of the AMM system preparation/realisation is shown at the following figure (Figure 2).
Figure 2 Time Schedule for the AMM System Preparation and Realisation – Preparation (7 years), Realisation (10 years)
ID Task Name
1 Preparatory phase2 The decision to initiate the preparatory phase of the implementation of AMM
3 Legislation4 Preparation and implementation of the legislation
5 Technical standardization
6 Elaboration of Feasibility studies by stakeholders7 Selection of processor of the Feasibility Studies
8 Elaboration of the Feasibility Studies
9 Evaluation of the Feasibility Studies
10 Technology supplier11 Processing demand documentation
12 Preparation of the offers
13 Evaluation of the offers
14 Contracts w ith suppliers
15 Conclusion of contracts w ith suppliers
16 Testing and verification of the systém operation17 Prepare the production environment for the implementation the AMM
18 Implementation of the ICT and DC for testing
19 Installation of testing series
20 Evaluation of the ICT test and measurement technology
21 The decision to launch the implementation phase of the AMM system22 Realization phase23 Elaboration of project documentation
24 Elaboration of test documentation
25 Creating infrastructure for AMM
26 Implementation of AMM system35 Operational Phase
1.1
4.3
19.4
23.7
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Activities highlighted in red of the schedule have to be co-ordinated and performed at the state level.
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4. Qualitative Evaluation of the AMM Implementation in the CR gas sector
4.1. Basic Aspects of Qualitative EvaluationDesign and technical status of the CR gas system, as well as the mode of its operation is at a high level. Favourable level of technical losses is an indicator of the gas system quality and of applied tools for quality management, as in absolute volumes, and in comparison with other EU countries, or rather with system operators in these countries.
Nowadays, about 50 % of the CR annual gas consumption (2011) is covered by remote readings (metering of the A and B types) - the Basic variant. It concerns the VO and SO customer categories, and a part of the MO customers.
Existing types of the metering equipment, installed at large gas consumers, enable not only remote reading of gas consumption, but it is a tool for monitoring of the course of consumption by the customer itself. This approach may lead to savings and optimal consumption/costs of energy. Beside of this, a possible illegal consumption is nearly completely excluded at installations of this metering equipment. This has a favourable impact on non-technical losses.
The AMM implementation in the Blanket variant represents a substitution of 100 % meters by new types of the smart meters (on the AMM base) with forbidden orders in a direction to a customer, i.e. a limited two-way communication.
Improved identification of metering problems and increased quality of reading might be expected by the smart metering implementation in the gas industry. Number of complaint may exhibit a significant increase immediately after installation. However, it is possible to expect stabilisation at lower level of complaints in a horizon of several years in comparison to present situation. Specifically, it concerns justified complaints.
From the general view, an increase of quality and availability of information for customers and traders should be accomplished. Traders may apply these new features into improvement of monthly allocations (lowering of imbalances – between predicted and real gas consumptions). Elimination of the TDD use for a consumption calculation may also occur (only in the case of daily data transmission to the OTE and 100 % implementation).
In the following text, there are described benefits of the AMM implementation that are relevant for CR, with respect to the EU documents on AMM implementation:
Operation of the metering system
Reading of metering devices
Billing of supplied gas (invoicing)
Assistance services for customers
Operational costs and maintenance of a metering equipment
Postponed investment into the distribution system, or perhaps into transmission system and production
Technical and non-technical losses
Consumption and the peak load
Disconnection of gas supplies
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CO2 and other polluting substances
4.2. Qualitative evaluation of Potential Benefits, Costs, and RisksThis evaluation is performed with awareness that the AMM implementation represents a demanding project from the view of investment, operation and economics. It may be advantageous for the whole community, final consumers and other market participants only in the case when real achievable total benefits will exceed expenditures. Evaluation is performed in details by categories of potential benefits, and follows the EC documentation for the AMM implementation.
4.2.1. Operation of the Metering SystemOperation of the metering system includes activities connected with installation of metering equipment, replacement for metrological certification or due to a failure, replacement due to consumption category changes, termination and renewal of a supply, etc.
It is expected that the AMM implementation will have an impact on some costs items reduction at the gas grid operator, specifically labour costs and transportation costs. Costs reduction relates to the assumption that the AMM system enables remote performance of some activities, without physical visit of the OM.
It must be taken into account that the AMM system is more complicated from the technical view; it brings into the grid new technical components, that will require care, maintenance, solving of equipment faults or data transmissions failures/faults.
Remote execution of operational activities requests qualified personnel of the ICT applications in the AMM management centre. These costs must be taken into account.
Risk for not reaching expected/maximum benefits in this field is caused by a technology, which is not advanced enough, that is not verified in real operation technology (meters, communication modules, PLC elements, concentrators, communication paths, etc.), that may generate higher volume of failures. Liquidation of these faults has an impact on supplemental costs for more qualified staff and obviously transportation costs. The risk is further given by non-existence of particular standards for intelligent metering in gas sector.
This benefit has been included in the cost comparison (OPEX and CAPEX) of the Basic/Blanket variants.
4.2.2. Reading of the Metering EquipmentIt is expected that the AMM implementation at system operators will decrease unit costs for execution of a reading, because the AMM system enables remote reading of the metering equipment. In the case of an error-free and quality data transmission to the data centre, there might occur savings of labour and transportation costs. Other savings may arise at irregular readings, which are required by switching of a supplier/customer at the OM. Total range of savings then depends on regular meter reading frequency. In the CR, there is the frequency set by legislation to 18 months, but a standard applied frequency is 12 months. It seems to be a good trade-off from the view of the system operator and a customer.
Range of savings depends on a technological level of the metering equipment and resulting productivity of work during reading. Reader´s productivity of work is significantly higher,
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considering digital metering devices with direct reading to mobile terminals, than at manual dial values logging into record.
At the cost side, there have to be taken into account that management and remote execution of readings, performed by the AMM system, request more qualified staff than at the profession of a reader. Further have to be included costs for operation of the IT applications, specifically the centre for readings, and costs of communication between the OM and the AMM management centre.
Risk for not reaching benefits is similar to the one in the Chapter 4.2.1.
This benefit has been included in the cost comparison (OPEX and CAPEX) of the Basic/Blanket variants.
4.2.3. Billing of Supplies (Invoicing)The AMM implementation does not have impact on procedures, activities and costs related to the billing at unchanged frequency of invoicing. There might be expected a reduction of faulty invoices and their corrections on the basis of customers complaints after final implementation and full command of the whole AMM system. Regarding the fact that a correction of invoices on the basis of customer complaints is very low, expected benefits seems to be negligible.
This benefit is not included in costs comparison (OPEX and CAPEX) of Basic and Blanket variants.
4.2.4. Assistance Services to CustomersBenefits might be correctly considered only after the AMM final stage of implementation and after full command of this system. Source of benefits may be a limitation of customer’s contacts requesting information about the OM for the purpose of complaints and ambiguous invoicing. These might be eliminated by the fact that customer will get corresponding information at the OM, or an intermediated information through Internet applications.
In the course of the AMM implementation, it might be justifiably supposed that a frequency and the scope of customers´ contacts with customer centres at the system operators/traders will significantly increase. This implies supplement costs on labour and technical equipment. It might be expected, after full system commissioning and customer’s adaptation to the new system, a slight decrease of a number of requirements in relation to customer services. Zero change of these costs against the existing variant is supposed for the period of evaluation.
Risk for not reaching this expectation is based in a customer behaviour and mentality, specifically households. Performed surveys have revealed that an interest for advanced communication paths with power suppliers is small and the next direction of development is not well predictable.
This benefit has not been included in the cost comparison (OPEX and CAPEX) of the Basic and Blanket variants.
4.2.5. Operational Costs and Maintenance of Metering EquipmentIn order to define rate of achievable benefits, it is necessary to consider a starting technical level of existing metering equipment. The MO and DOM customers are equipped with mechanical, overwhelmingly membrane gas-meters, featuring a high reliability.
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With respect to this situation, it is expected that the AMM meters operation and their peripheral devices (batteries, communication module, etc.) will have an impact on higher frequency of faults, and consequently on repair and maintenance costs. This represents a risk for reaching cost neutrality at operation and maintenance of metering equipment in relation to the existing situation.
Costs incurred by operation and maintenance of the metering equipment itself have been included in the cost comparison (OPEX and CAPEX) of the Basic and Blanket variants.
4.2.6. Postponed Investments into Distribution and Transmission SystemsThere is not a necessity to balance gas consumption diagram through the AMM in the CR conditions (see Chapter 2.3). Therefore, the AMM implementation will not impact this balancing. Investments reduction/postponing into the gas system through balancing of gas consumption, as well as local and broader optimisation of the gas system, might not be expected in the CR gas industry.
This benefit has not been included in the cost comparison (OPEX and CAPEX) of the Basic and Blanket variants.
4.2.7. Technical and Non-Technical LossesDrop of gas consumption in the CR gas industry is not expected in relation to the smart metering implementation. In this sense, there might not be expected a drop of technical losses.
Expectation of benefits from decrease of non-technical losses is reasonable, however only in a section of illegal consumptions, caused by illegible manipulation of metering devices, but not by illegal consumptions directly realised in the grid, or in non-metered parts of gas piping inside the buildings. In this field, the AMM system provides additional tools for localisation of significant illegal consumption.
On the other side, it is correct to consider, that alarms processing and validation, balance processing and analyses, request certain operational and labour costs for servicing of the IT applications (operational, labour costs).
Benefit from decrease of non-technical losses has been included in the cost comparison (OPEX and CAPEX) of the Basic/Blanket variants.
4.2.8. Consumption and the Peak LoadIt is expected, in the CR conditions, that the AMM implementation will not contribute to a reduction of absolute gas consumption by behaviour of consumers on the basis of the AMM information available “at home”, for instance through Home Display. Results of the pilot projects, exercised in the CR, have confirmed this expectation. However, it is necessary to note, that there is not available an adequate volume of pilot projects for a complex evaluation. Some of pilot projects are proceeding nowadays and results will be available in the course of 2013.
Rate of benefits, regarding gas consumption and a decrease of peak load, is considered as zero in the CR conditions. Verification of this parameter at pilot projects should continuously proceed in the CR. Economic evaluation has included this parameter in the sensitivity analysis.
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EC expects that the AMM implementation will enable consumption optimisation (balancing of the load diagram) in the gas system. This should have a consequence in savings at gas storing/withdrawal into/from storages to cover peak loads, savings in dimensioning system capacities, and last but not least savings in technical losses (see previous evaluation). Regarding the fact, that an optimisation of the gas consumption is not necessary in the CR conditions, as the gas system features own accumulation ability and storage capacity is sufficient, savings might not be expected in this field.
It is supposed, that the AMM implementation will enable remote disconnection of the gas supply to prevent/address an occurrence of emergency situation in the power system. This option may effectively protect a local/broader cut of the gas supply. This has a very positive value.
4.2.9. Gas Supply CutsExpectation that the AMM implementation will create conditions for reaching a significant improvement of the monitored parameter – average time of a cut, is not relevant in the CR conditions.
This benefit has not been calculated and included in the comparison of the Basic/Blanket variants.
4.2.10. CO2 and Other PollutantsLowering of gas consumption, through the AMM implementation in the CR, is not expected. Therefore, there may not be expected related decrease of CO2 production, as well as other pollutants in the air.
This benefit has not been calculated and included in the comparison of the Basic/Blanket variants.
4.3. Investments and Costs of the AMM implementationDue to implementation of AMM, system operators and other power market participants, e.g. the market operator, have to realise hereafter specified investment and include them into operating costs in the course of operation. Except of this, sunk costs and costs of liquidation of existing gas-meters must be taken into account.
4.3.1. New InvestmentsWhile the relevant metering equipment consists a significant part of the AMM system investment costs, a greater part of investment costs is incurred at the supporting infrastructure in the field of ICT, adaptation of the distribution system behind the OMs, and modernisation of OMs necessary for smart meters installations. Major investment items are
AMM preparation and implementation (of an investment character)
Procurement and installation of AMMs and their peripheral devices (self-standing modules). Valuation of this investment will be reduced for unrealised investments into the classical metering equipment. This equipment will not be procured in the course and completion of the AMM
Procurement of new applications and the ICT supporting systems for the AMM (data reading centre, data processing, data archiving, interface to billing systems and systems of the gas system operator, traders and the market operator)
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Procurement of communication systems for data and orders transmission, as far as are a part of the grid
Investments into adaptation/complete modernisation of OMs at customers, because they may not comply with needs of metering equipment installation and other AMM components, needed for the AMM implementation
Investment into adaptation of regulation stations necessary for metering equipment, concentrators, or remotely controlled elements installations
4.3.2. Sunk InvestmentsAs sunk investments are not considered as cash expenditure, they are not included into the economic evaluation. Economic evaluation considers only liquidation expenditures of metering equipment. These include a selection and liquidation of classical metering equipment before their lifetime in the course/finalisation of the implementation.
4.3.3. Operating CostsRemote reading technology brings savings of labour costs, related to reading and OMs services. At the same time, it requires a higher number of qualified personnel servicing modern technologies and related data processing. Major evaluated groups of operating costs are:
AMM preparatory and implementing costs of the operational character, specifically listing and recording of current components, obtaining background documents, which are essential for elaboration of design documentation of the AMM implementation
Costs for operation and maintenance of intelligent metering devices
Operating and maintenance costs of relevant IT systems and applications, supporting the AMM at affected gas market participants (system operators, traders with power and the market operator)
Costs for operation and maintenance of telecommunication systems and their accessories, operated by the gas system operators, including rooms renting for placement of communication elements
Costs of telecommunication services purchased at the telecommunication market from the third parties
Costs of the gas system operators induced by operation and maintenance of grid components, which are installed for the AMM purposes
Costs for personnel training and requalification of gas market participants
Marketing costs for customers’ education and their motivation towards acceptance of a new technology and usage of new options for energy efficiency care.
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5. Experiences from Pilot Projects of the AMM Implementation in the CRThe most important distribution system operators in the CR and abroad are performing own pilot projects of the smart metering. Analysis of outputs and preliminary conclusions of these projects is an indispensable condition for a correct assessment of options for the AMM implementation in the CR. Data from the pilot projects of an energy group operating in the CR and other European countries have been acquired for the evaluation.
5.1. Experiences of the Gas Group from the Pilot Project in the CRPilot project scope:
Pilot project started in 2010.
Plan has included installation of 5000 smart gas-meters till 2012.
At presence, 2500 smart gas-meters have been installed.
Major objective of the pilot project is a verification of applied technologies.
Pilot project benefits:
There is a negative outcome of the pilot project economic evaluation.
There have not been identified any changes of the gas consumption.
Drop of non-technical losses has been identified at selected locations.
Applied communication type of the smart metering:
LAN/WAN, GPRS combination
PLC (multi-utility test)
Obtained experiences from the pilot project:
Identification of higher costs against existing conditions – that contradicts assumptions:
o CAPEX approx. 4x - 8x higher
o OPEX approx. 2x - 3x higher
Lifetime of the gas-meter, reflecting a validity of the calibration mark, may not be ensured at communication with the domestic display (battery).
5.2. Experiences of the Gas Group in European CountriesPilot projects scope:
First pilot project started in 2006 and the second one in 2008.
Plan of the first project has included installation of 100 000 smart meters for electricity/gas, under the second project, installation of 3 000 smart meters for electricity/gas was planned.
At presence, 30 000 smart meters have been installed (electricity/gas) in case of the first project. All AMM meters have been installed in the second one.
Pre-paid service has been tested in one pilot project.
Benefits of pilot project:
Outcome of the pilot project economic evaluation is negative.
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There have not been identified any changes of the gas consumption.
Applied communication type of the smart metering:
SMS and GPRS combination
PLC a GPRS combination
Data transmission to a domestic display is provided in one of the projects by help of RF/Wireless Mbus/Zeegbee.
Obtained experiences from the pilot projects:
Break-down rate has been identified at the smart meters (higher than 3 %).
Identified have been problems at the PLC and GPRS communications.
The biggest source of faults, subsequently following by service technician’s interventions, has been a use of domestic displays in a connection with a smart meter.
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6. Economic Evaluation of the AMM Implementation in the CR Gas Industry
6.1. Model MethodologyThe objective of an economic analysis is to answer a question, whether the implementation of the smart metering has got a positive effect for the society. In order to fulfil this goal, an economic model for the AMM implementation in the CR gas sector has been developed. Model compares selected Blanket variant with Basic variant, on the basis of findings of preceding works. Model takes into account relevant expenditure and revenue items of implementation, their accruals and deferrals, and stipulates sensitivity of result by changes of parameters.
6.1.1. Methodology of Discounted Cash Flows (DCF)Model is based on a method of discounted cash flows – DCF that is based on the project valuation using value of money in time. This method is based on returns, where future cash flows (outgoing and ingoing) are discounted, in order to calculate net present value – NPV. DCF method is extensively used for investment decision-making.
Model output is net present value of a differential of expenditures, between the Basic and Blanket variants, and revenues from benefits, which are gained against existing situation and presented like cash revenues.
6.1.2. Principle of the Differential Setting between the Basic and Blanket VariantsExpenditures of the Basic and Blanket variants are compared in individual years (investment and operational), and there are calculated revenues from benefits. Resulting NPV value is a sum of discounted benefits and of a discounted differential of expenditures in the monitored period.
6.1.3. Monitored PeriodExpenditures and revenues derived from the first wave of the AMM installation are included for comparison/evaluation of variants of the AMM implementation. In time of a substitution of the first AMM systems (after expiration of certificate validation, which is set to 10 years by legislation) by new equipment, included revenues and expenditures are adequately decreased in correlation with the speed of substitution. Ratio of a share of the AMM systems from the first wave of installations is then reflected in the calculation of expenditures/ revenues.
The whole period applied in the economic model calculation consists of parts:
Preparatory phase (7 years) – a period before commencing the metering equipment installation. Here proceeds preparation of a relevant legislation, preparation of a detailed plan for implementation, tender procedure for suppliers of technology, procurement of technology, personnel training, etc.
Realisation phase (10 years) – a period, when consumer’s points of delivery are equipped by a new technology up to time, when all points of delivery in the CR are equipped.
Operation phase (10 years according to a validity of certificate for metering equipment) – a period, when the technology is operated, before it is substituted. This
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phase contains running-out of the equipment, i.e. a period, when a gradual elimination of the smart meters takes place without any substitution; however, their related benefits are still drawn. It is a theoretical assumption, which enables performance of calculation in a certain enclosed period.
The monitored period in model is as follows:
Preparatory Phase Realisation Phase Operation / Running- Out
7 10 10
Following figure displays the course of the AMM preparation and implementation, and the course of expenditures and revenues:
Figure 3 Illustration of AMM Preparatory and Realisation CoursePhase and Relevant Course of Costs and Benefits
6.1.4. Representation of the Gas Market ParticipantsExpenditures and impacts on all relevant market participants, from generation, via distribution and trade up to customer alone, as well as impacts on the market through the market operator, have been considered during the model compilation.
Four major groups of expenditures and revenues (“recipients”) have been identified:
Distribution – distribution system operator is a recipient of a major part of costs incurred at the AMM implementation (specifically procurement, installation and operation of gas-meters, communications, data acquisition and processing, IT systems). The DSO is also major receiver of benefits that imply from the AMM implementation (in particular – savings against the operation of old gasmeter generation, readings, decrease of non-technical losses).
Market operator - whose IT systems must be prepared for the AMM operation, as it has a key role in a right functioning of the CR market.
Trade – trader, through a detailed metering data, will have a tool for a new range of customer segmentation and a more precise prediction of consumption.
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Customer – major potential benefit for a customer is a better accessibility of information about consumed gas. There are not assumed savings from the drop of consumption. Customer´s own costs have not been identified.
Other – here belongs the CR state itself, and the gas transmission operator.
Similarly, it would be necessary to take into account transmission within the gas valuation chain. However, direct costs and benefits have not been identified at the transmission system operator. Non-direct benefits have been applied at customer through the price of gas.
6.2. Input Model Parameters Parameters and their relations define the model. Model inputs are: all items of revenues and expenditures, related to the AMM technology preparation, realisation and operation in the CR, and parameters quantifying elements, activities, subjects, or they boundaries in the model.
Model outputs are aggregated into groups, according to fields (purpose), or subjects (distribution, trade, etc.). This aggregation serves for analyses of variants and their tabular evaluation. Aggregated items are consequently compared.
6.2.1. List of Aggregated Expenditures Table 4 contains a list of CAPEX and OPEX items that are applied in the model.
Table 4 List of Aggregated Expenditures
Description of an Expenditure Inputs Creating Item
MZ – installation expenditures
CAPEX Assembly of a new standardised MZ
CAPEX Assembly of a new AMM MZ
OPEXAssembly and disassembly of current MZ (forced operation, disassembly reasoned by the AMM installation)
OPEX MZ liquidation
OPEX OM adaptation
OPEXRepeated OM visits due to the implementation
MZ – procurement expenditures
CAPEX Procurement of standardised MZ
CAPEXProcurement of continuous MZ and communication units
CAPEX Procurement of AMM MZ
OPEX MZ repairs and certifications
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Description of an Expenditure Inputs Creating Item
Expenditures on MZ data acquisition and processing
OPEXAMM MZ data acquisition and processing (without DC and communications)
Communication expenditures
OPEXCommunication of standardised continuous meters
OPEX GPRS communication for AMM
OPEX Security
ICT expenditures – distributionCAPEX Data centre and communication
OPEX Data centre
ICT expenditures – market operatorCAPEX Expenditures on the IS
OPEX Expenditures on the IS
ICT expenditures – tradeCAPEX Expenditures on the IS
OPEX Expenditures on the IS
Other expendituresCAPEX Preparatory phase expenditures
OPEX Other operating expenditures
6.2.2. List of Aggregated Items of RevenuesTable 5 contains a list of benefits/revenues that are applied in the economic model.
Table 5 List of Aggregated Items of Revenues
Benefits Inputs Included in Revenues
MZ operation
OPEX Savings at the disconnection of gas supply
OPEX Saving of expenditures at gas supplier switch
OPEX Repairs
Non-technical losses OPEXSaving from a decrease of non-technical losses
Total savings at data acquisition and processing
OPEXSavings due to decreased expenditures on manual reading
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6.3. Comparison of Basic and Blanket Variants
6.3.1. NPV ValueComparison of the Blanket (100 % coverage of the AMM technology, time of installation- 10 years), and Basic variants shows, that the AMM implementation in the CR gas industry has a negative impact on the society/customer, under an existing situation. AMM implementation would lead to the growth of a regulated part of gas price, without enough compensation by benefits in other fields.
During the time horizon considered, there is a risk of unforeseen increase in the real price of money (over the value of the consideration). From the comparison of variants Basic and Blanket was calculated negative net present value of - 17.26 billion CZK (NPV discounted to January 1, 2013).
AMM implementation in the CR, at present and under existing conditions, is not economically effective. Major precondition for economic effectiveness is a significant drop of the price of technologies.
Graph 2 and Graph 3 exhibit expenditures of compared Basic and Blanket variants.
Graph 2 CAPEX Development, Comparison of Basic and Blanket Variants (scenario – 10 years implementation)
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039
ths. KčCAPEX Development
(Nominal value)
Blanket Basic
36
Graph 3 OPEX Development, Comparison of Basic and Blanket Variants (scenario – 10 years implementation)
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039
ths. KčOPEX Development
(Nominal value)
Blanket Basic
Graph 4, and
37
exhibit the total NPV of a differential between compared variants, or the NPV split among affected subjects that will share on the AMM implementation in the CR gas industry (distribution, trade, others).
Graph 4 Total NPV
17
-17 273 -17 256
Total NPV(present value - mil. CZK)
Revenues Costs NPV
38
Graph 5 NPV of Affected Subjects
17 0 0 0
-13 659
-1 480
0
-2 133
-13 642
-1 480
0
-2 133DSO Trade Customer Market operator + others
Total NPV of Groups(present value - mil. CZK)
Revenues Costs NPV
6.3.2. Sensitivity Analysis of the Most Important ParametersSensitivity analysis has been performed for three most important parameters and aggregated items. The objective was to determine sensitivity of the outcome (NPV) on input parameters. Analysis has shown which parameters are necessary to follow with a maximum awareness.
Hereafter graph describes an influence of major inputs/parameters on the NPV:
Graph 6 NPV Sensitivity on Major Inputs
-19,40
-19,09
-17,97
-15,38
-15,42
-16,54
-20,0 -19,0 -18,0 -17,0 -16,0 -15,0
WACC (6,1% -/+ 1%)
CAPEX on the AMM meters and their installation (100% +/- 20%)
CAPEX on the DSO's ICT infrastructure (100% +/- 20%)
NPV Sensitivity on Major Inputs(present value )
MIN MAX
- /+ 2,15 / 1,87 bil. CZK
+/- 1,83 / 1,83 bil. CZK
+/- 0,71 / 0,71 bil. CZK
Analysis shows the most important impact of a discount factor (WACC), and the AMM investments.
Price of gas-meters installations and price of the AMM technology are set on the basis of works preceding this economic evaluation. These prices have got a principle
39
impact on outcome of the economic evaluation. The AMM implementation is economically ineffective at their current level.
Reference value of the WACC has been considered as of 6.1 % in relation to the price of equity and debts (own and foreign capital).
Absolute gas saving has been considered at the reference value of 0 %; from following reasons:
Saving of gas consumption by the AMM implementation is not attainable in the CR conditions.
Practical experiences of pilot projects do not indicate an absolute saving of gas consumption.
Absolute saving of gas consumption does not directly relate to the AMM technology implementation.
6.3.3. Conditions to Reach Positive NPVWith regard to the fact that a prerequisite for the AMM implementation is an economic effectiveness, i.e. non-negative NPV, it is suitable to find threshold values of individual input parameters, when is this requirement fulfilled.
It has been found, on the basis of sensitivity analysis, there is not a parameter that may shift the NPV into a positive value.
Even a significant change (- 50 %) of the AMM technology purchase price does not provide a needed shift of a outcome closer to NPV = 0, as is indicated at the sensitivity analysis.
6.4. Compliance Assessment with the EU RecommendationsThe European Commission issued on March 9, 2012 recommendation for the field of a smart metering, named: „Commission recommendation of March 9, 2012 on preparation for the roll-out of smart metering systems“. This document in its attachment deals in details with the problem of the economic evaluation of long-term costs and benefits for the smart metering implementation in power and gas sectors.
Annex: „Guidelines on the methodology for the economic assessment of the long-term costs and benefits of the roll-out of smart metering in accordance with Annex I of the Directives 2009/72/ES and 2009/73/ES“
Recommendations of the European Commission have been taken into account at elaboration of the economic model and the whole economic evaluation. Basic concept of the evaluation complies with aforementioned recommendations:
List of variables and parameters of the model (see Attachment 1)
List of expenditures (items of expenditures)
List of benefits/revenues
Elaboration of the economic assessment has reflected local specifics of the CR. Detailed comparison of the economic evaluation for the AMM preparation and implementation with the EC recommendations has been performed in the Attachment No. 2.
Performed economic evaluation of the AMM preparation and implementation in the CR is made in compliance with the issued EC recommendations in its basic features, applied methodology, inputs, and preconditions. If some recommendations have not been relevant in
40
the specific situation, they are described in the Attachment 2, including commentary and justification.
41
7. Recommendation for the Smart Metering Implementation in the CR Gas Industry
7.1. Final RecommendationsRegarding conclusions of aforementioned chapters of this economic evaluation, it does not seem to be suitable to accept a decision on the AMM implementation in the CR gas industry. Principle findings might be stated as follows:
Design of standardisation of technical requirements for the smart metering system in the EU gas industry has not been finalised.
AMM preparation and implementation in the gas industry should be co-ordinated with the smart metering preparation and implementation in the power sector. Implementation of the AMM in the power sector has not reached a final stage of preparation. Implementation will be financially demanding, and the mode of financing is not clear. Generally lower benefits are expected in the gas industry; therefore it is appropriate to wait on next development in the power sector.
There has not been performed a sufficient testing of technology in the framework of pilot projects, which would prove justification of the AMM implementation in the gas industry, and to prove also theoretical calculations of revenues and expenditures. Pilot projects exhibit negative economic results so far.
Based on current knowledge it is not possible at the national level to take a final decision on the AMM implementation in CR gas industry. The current amendment to the Energy Act in § 16 provides that the Ministry of Industry and Trade will continue to process analyses of the smart metering systems implementation in electricity and gas industries.
Following recommendations reflects qualitative and economic evaluations of the plan for the smart metering implementation in the CR, existing results and experiences of on-going pilot projects in the CR, and of installations in foreign countries:
Blanket implementation of the AMM will not commence till the year 2018; it is necessary to continue an operation and technological development in the framework of pilot projects.
To follow continuously technological development in the field of smart networks and metering; in particular from the viewpoint of parameters development and prices of key components, which are important for a decision-making and commencing the AMM preparation and realisation.
To assess repeatedly an applicability and effectiveness of the smart metering in five years, i.e. till the year 2017.
7.2. Justification of the Recommendation There is a high level of gasification in the CR. There is approximately 1.17 million
delivery points (approx. 41%) in the household segment with an annual gas consumption of less than 1.89 MWh (use of gas "for cooking only").
Unlike in other countries, more than 50 % of annual gas consumption in the CR is continuously measured; a customer has got an option for obtaining information about its real consumption.
Principle problem with non-payers does not occur thanks to the system of advanced payments, non-technical losses are low. There is a fully functioning system of the market operator. Significant part of benefits, that may lead other countries to the
42
AMM implementation, is already available in the CR; market participants actively use these benefits.
Technology of production and applicability of components for the AMM implementation (meters and their peripheral devices, telecommunication) have not reached a level, which is a pre-requisite for effective, reliable and price acceptable application; only afterwards might be reached expected benefits.
Regarding the fact, that the CR gas industry applies other tools for balancing of instantaneous gas consumption changes (system of an accumulation, gas storages; see Chapter 2.3) is the AMM potential null in this field.
Services provided to customers, their adaptation to real needs and requirements, development of motivating tools for a broad AMM implementation will request enough time in the period of designing, and marketing preparation.
Potential AMM implementation in the CR is not economically effective, it would have an unfavourable impact on the system operators´ economy, and particularly on regulated prices for final consumers.
Benefits of gas savings gained through the AMM implementation might not be expected in reflect to analysed and available outcomes from the pilot projects in the CR and other European countries.
Potential blanket AMM implementation in the CR gas industry will require meeting of much stricter requirements especially in segments MO and DOM for handling sensitive data with regard to privacy and protection against their misuse in business, with the adverse impacts especially into regulated prices for final customers.
7.3. Conditions for Reaching Profitability by the AMM Implementation in the CRGas Industry
Economic evaluation has indicated that for technically, technologically and economically successful implementation of AMM in the CR gas sector is essential to achieve changes of multiple parameters and conditions compared to the state, which is known at the time of preparation of this economic evaluation.
Specifically it concerns:
Substantial drop of a price level of the AMM technical components, including the ICT infrastructure, on the basis of technological development. Concurrently, there have to be an increase of operational reliability, and a decrease of requirements on maintenance and own electricity consumption. Prioritised is metering equipment and its peripheral devices, or modules for all supposed functions.
Significant increase of security and reliability, of a transmission speed and capacity of communication services provided by telecommunication operators and a concurrent decrease of prices for provided data services.
Convergence and integrity of the Smart Grid and the AMM goals should be reached while spending minimum technical and financial means.
Reviewing of optimum frequency for regular readings of metering equipment from the view of all gas market participants, either from the view of market mechanism, or their costs.
43
Attachments
Attachment 1 List of Inputs and Parameters Applied in the economic modelINPUTS - Parameters of the Economic Model
Parameter Value Unit
Common parameters (basic setting)
Discount rate 6.1 %
Inflation coefficient 2.0 %
Average annual increase of gas consumption 2.0 %
Average annual increase of gas price 2.0 %
Number of invoices/annum 1 pieces
Nominal increase of salaries 4.0 %
Corporate tax 19.0 %
NPV calculation is performed to: 2013 year
Average increase of a number of OM 0.0 %
Absolute savings of gas 0 %
Average price of gas VO market (in 2013, increased by annual inflation) 669.12 CZK/MWh
Existing rate of losses (technical + non-technical) 1.9 %
Non-technical losses decrease from MO+DO consumption at 100 % blanket 0.01 %
INPUTS – Distribution costs (Nominal value in the whole period of assessment)
Parameter Basic Blanket Unit
CAPEX total 8 668 29 757 mil. CZK
Investment into standard meters 8 668 3 074 mil. CZK
Metering equipment at OM – standard MZ 4 538 1 631 mil. CZK
44
Gas-meter G1.6 - G6 standard 3 479 1 272 mil. CZK
Gas-meter G10 - G400 standard 1 059 359 mil. CZK
Assembly of standard MZ -new 4 131 1 443 mil. CZK
Investment into the smart metering systems 0 19 224 mil. CZK
Metering equipment at OM – AMM 0 11 768 mil. CZK
G1.6 - G6 SMART 0 9 267 mil. CZK
G10 - G400 SMART 0 2 501 mil. CZK
Assembly AMM MZ - new 0 7 457 mil. CZK
Investment into communications 0 6 848 mil. CZK
SM infrastructure except of DTS (signal repeater) 0 2 814 mil. CZK
DTS infrastructure (concentrator) 0 1 257 mil. CZK
Data centre 0 2 777 mil. CZK
Others 0 611 mil. CZK
Project preparation 0 184 mil. CZK
Marketing 0 0 mil. CZK
Security 0 426 mil. CZK
OPEX Total 15 665 27 326 mil. CZK
Operating costs of metering equipment 10 535 15 601 mil. CZK
Disconnection for non-payment, following renewal of supply 1 815 892 mil. CZK
OM visit due to a change at OM 648 319 mil. CZK
Assembly - std. and AMM - active MZ 5 325 5 315 mil. CZK
Disassembly – std. and AMM - MZ 1 153 1 367 mil. CZK
MZ liquidation 171 228 mil. CZK
45
Repairs 1 423 809 mil. CZK
OM periodical check 0 1 114 mil. CZK
Renting of office rooms for concentrator and repeater 0 3 474 mil. CZK
OM adaptation due to the AMM implementation 0 574 mil. CZK
Own consumption of concentrators and repeaters 0 249 mil. CZK
Service of concentrators and repeaters 0 1 033 mil. CZK
Repeated visits due to the AMM implementation 0 227 mil. CZK
Expenditures for reading metered values 3 219 4 735 mil. CZK
MZ data acquisition and processing std. 3 219 1 648 mil. CZK
MZ data acquisition and processing - AMM (without DC and communication) 0 3 087
mil. CZK
Communication 0 4 384 mil. CZK
Data centre 0 3 436 mil. CZK
Communication at the OM 0 592 mil. CZK
Communication at the concentrator 0 355 mil. CZK
Others 1 911 2 606 mil. CZK
Security 0 695 mil. CZK
Marketing 0 0 mil. CZK
Billing costs 1 911 1 911 mil. CZK
INPUTS – Costs of traders (Nominal value in the whole period of assessment)
Parameter Basic Blanket Unit
CAPEX total 0 1 447 mil. CZK
46
IT costs related to the AMM implementation 0 967 mil. CZK
Others 0 480 mil. CZK
OPEX total 0 1 840 mil. CZK
IT costs related to the AMM implementation 0 1 840 mil. CZK
47
INPUTS – Market operator costs (Nominal values in the whole period of assessment)
Parameter Basic Blanket Unit
CAPEX total 0 325 mil. CZK
IT costs related to the AMM implementation 0 325 mil. CZK
OPEX total 0 456 mil. CZK
IT costs related to the AMM implementation 0 456 mil. CZK
INPUTS – Society costs - state (Nominal values in the whole period of assessment)
Parameter Basic Blanket Unit
CAPEX total 0 45 mil. CZK
Legislative and other preparations for implementation 0 45 mil. CZK
PARAMETERS – Hereafter described parameters have been used for setting of costs inputs
CAPEX items and prices Value Unit
CAPEX
Gas-meter G1.6 - G6 Standard 1 072 CZK/piece
Gas-meter G10 - G400 Standard 10 058 CZK/piece
Gas-meter G1.6 - G6 SMART 3 190 CZK/piece
Gas-meter G10 - G400 SMART 43 787 CZK/piece
Concentrator, including assembly 34 500 CZK/piece
Repeater + infrastructure 7 500 CZK/piece
OPEX
G1.6 - G6 SMART – standard assembly 1 100 CZK/piece
G1.6 - G6 additional cost for assembly AMM MZ 700 CZK/piece
G10 - G400 - standard assembly 3 032 CZK/piece
48
G10 - G400 additional cost for assembly AMM MZ 1 000 CZK/piece
G1.6 - G6 standard disassembly 121 CZK/piece
G10 - G400 standard disassembly 750 CZK/piece
Disconnection for non-payment 2 771 CZK/piece
Renewal of a supply after non-payment 5 710 CZK/piece
Visit at OM related to OM´s change 728 CZK/piece
Visit at OM related to a supplier switch - total 306 CZK/piece
Visit at OM related to a supplier switch - reading 206 CZK/piece
Repairs of metering equipment 400 CZK/piece
MZ liquidation 48 CZK/piece
OM periodical inspection 455 CZK/piece
Power price 1 500 CZK/MWh
Price of one invoice 25 CZK/piece
Indexes
Index of labour costs 4 %
Product price index – metering and telecommunication equipment 2 %
Service price index - operation and installation 2 %
Other parameters Value Unit
Number of elements (assumed values to January 1, 2013)
Gas-meters G1.6 - G400 standard total 2 866 340 pieces/year
G1.6 - G6 standard 2 813 768 pieces/year
G10 - G400 standard 52 572 pieces/year
OM Visits: development after SMART MZ implementation
Disconnection due to non-payment 5 %
Supply renewal after non-payment 5 %
49
OM visit related to a change at OM 3 %
OM visit related to a supplier switch 5 %
Disconnection due to non-payment 22 743 pieces/year
OM visit related to a change at OM 73 556 pieces/year
MZ readings - standard 2 549 029 pieces/year
Repairs (assumed values to January 1, 2013)
Number of repaired G1.6 - G6 standard 106 819 pieces/year
Number of repaired G10 - G400 standard 2 623 pieces/year
Applicable MZ from operative control
G1.6 - G6 standard 50 %
G10 - G400 standard 50 %
Applicable equipment disassembled due to AMM implementation
G1.6 - G400 standard 50 %
Calibration mark (assumed values to January 1, 2013)
G1.6 - G6 standard 180 481 pieces/year
G10 - G400 standard 3 556 pieces/year
Ratio – SMART MZ operative control vs. standard MZ operative control
Ratio – SMART MZ operative control vs. standard MZ operative control 110 %
Operative control – assembly in pieces
G1.6 - G6 standard 66 314 pieces/year
G10 - G400 standard 3 380 pieces/year
Operative control – disassembly in pieces
G1.6 - G6 standard 66 314 pieces/year
G10 - G400 standard 3 380 pieces/year
50
Other parameters
Number of MZ per 1 signal repeater 10 pieces
Number of MZ per 1 concentrator 100 pieces
Own consumption
Own consumption - concentrator 38 kWh/year
Own consumption - repeater 38 kWh/year
Preparation
Number of FTE for the preparatory phase of the project (assumed values to January 1, 2013)
15 FTE/year
51
Attachment 2 Compliance of the Economic Model Inputs/Parameters with a Context of the EC Recommendation dated 9 March 2012 C (2012) 1342
52
53
54
Attachment 3 Gas Storages in the CR and Their Role in the CR Gas System Gas storages are particularly used to a balancing of seasonal changes in the gas consumption and to a security of the system against significant cut-offs in the supply. Czech gas system disposes relatively voluminous storages; there is still an effort for increase of storage volumes. Disadvantage is one-sided geographical localisation – they are situated in the east of the CR – in the south and north Moravia.
Natural gas supplies from producers fluctuate minimally throughout the year. On the other side, gas consumption mostly copies a course of an outside temperature throughout the year. Majority of gas is used for heating. Gas company, ensuring gas supply to the Czech Republic, has got two options – either to buy natural gas volumes according a relevant demand, with a danger that the price of gas is significantly higher, or to choose more stable variant – to ensure even gas supply in a yearlong through a long-term contract with a producer, and to store unused gas in storages during summer months. Storages are therefore an important part of the intra-state gas system. Storages may be split into two basic groups:
Seasonal storages
They are used for balancing differences of a summer and winter consumption. There is stored unused gas during summer months, afterwards – in months when supplies are not sufficient, gas is gradually mined (drawn) and delivered to the transmission system.; consequently to distribution systems. These storages feature a great storage capacity, but a lesser daily drawing capacity. Exhausted gas/oil fields or aquifer storages, constructed in porous seems, are used to store gas.
Peak storages
They are used to cover gas consumption in days of maximum consumption, or to balancing of fluctuations in a short time period. They feature a small storage capacity, but a greater daily drawing capacity, on the contrary to seasonal storages. Advantage of peak storages is a feature, that they may be replenished to a maximum capacity in the course of heating period, when demand is lower. Artificially made caverns in salt deposits are used for these needs throughout the world.
From the geological view, underground storages might be also split into two groups:
o Storages made in porous and crack environment (so called porous storages)
o Storages made in non-porous environment (so called cavern storages)
Prevailing in the CR are storages of the first type; i.e. storages made in porous and crack environment. We can meet storages of natural gas in a liquefied form (LNG - Liquefied Natural Gas) abroad. There are used for this purpose ground, underground, or partly in ground imbedded storages. Natural gas is there stored under atmospheric pressure, but at very low temperature as of -160°C. Possible constructions and use of these storages have been considered in the past years in the CR. They reached only a level of the feasibility studies that reveal high operational and economical demands. Therefore, this facility has not been applied in the CR.
Gas storages are usually constructed as underground objects using geological structures, or in artificially made facilities. The Czech Republic disposes a relatively great storage capacity. This is important for a right functioning of transmission and distribution systems in relation to year seasons, for a greater energy security of the state, and for economic decision making of
55
gas traders. Storage capacity that might be used by the Czech gas system is 3.4 Billion m3 (it includes a capacity of rented part at the Lab gas storage in Slovakia as of 0.5 Billion m3). This capacity is sufficient to cover one third of the yearly gas consumption in the CR, under normal climatic conditions.
Construction of New Underground Gas Storages
Construction of new and capacity extension of existing gas storages in the CR is planned. There is considered a capacity increase of approx. 1.1 – 1.3 Billion m3. RWE Gas Storage projects with a capacity of 335 Million m3 in Tvrdonice, Třanovice and Háje are in the stage of preparation and realisation. Other projects are in a planning phase.
Company Česká plynárenská a.s., which imports Norwegian gas in the CR, has got a plan to construct gas storages of the cavern type with a capacity of 400 - 500 Million m3 (Okrouhlá Radouň and uranium mines Rožná in Dolní Rožínka). Storage construction in Dolní Rožínka (up to 2 caverns) is more probable from the both localities. Assumed capacity 200 - 300 Million m3, in the first stage 180 Million m3 (assumed term of finalisation 2017 - 2018).
Company MND Gas Storage has a plan to build Dambořice underground gas storage with a capacity as of 448 Million m3 (Assumed term of completion is not known). Concurrently, capacity extension of the existing gas storage Uhřice is planned; from 180 to 215 Million m3
in 2012 and to 225 Million m3 in 2013.
Capacity increase of storages as of 0.8 – 0.9 Billion m3 to a total of 4.6 Billion m3 till 2020 seems to be a real plan. That means an increase to more than 50 % of consumption.
Major reasons for a usage of gas storages are following (Figure 1):
Seasonal balancing
o Balancing of increased gas consumption in the winter period by gas drawing from the storage. Gas is stored in storages in the summer period, when the demand is lower.
Effectiveness
o Gas purchase for lower prices, gas storing and subsequent withdrawal in the time of higher prices.
Peak consumption cover
o It is possible to react quickly to an unexpected increase of consumption by drawing gas from the storage.
Support of transmission flexibility
o Storages might be used for compensation of gas transmission fluctuations.
Safety stocks
o Maintaining reserve stocks for the case of limitation/cut offs of gas supplies from abroad.
Locations of gas storages in the CR are displayed at the Figure 5.
56
Figure 4 Gas Storage Functions
Figure 5 CR Gas System – Gas Storages
57
Gas storages owned by the RWE GasStorage s.r.o.:
Storages are at Háje, Třanovice, Štramberk, Lobodice, Dolní Dunajovice, Tvrdonice. Capacity of the Třanovice gas storage has been increased from 240 Million m3 to 530 Million m3 in a framework of the EEPR program.
Gas storage owned by the MND GasStorage, a.s.:
PZP Uhřice
Gas storages owned by the SPP Storage:
Dolní Bojanovice – connected only to a gas system of the Slovak Republic.
Table 6 exhibits a connection of gas storages to subsequent gas systems (transmission/distribution). Table 7 displays storage capacities, maximum daily drawing capacity, and maximum daily capacity of gas storing.
Table 6 Connection of Gas Storages to Subsequent Gas Systems
Gas Storage name Connection to a Gas System System. Operator
Dolní Dunajovice Transmission system (storing/withdrawal)
NET4GAS
Tvrdonice Transmission system (storing/withdrawal)
NET4GAS
Háje Transmission system (storing/withdrawal)
NET4GAS
Lobodice Transmission system (storing)Distribution system (withdrawal)
NET4GAS
SMP Net, JMP Net
Štramberk Transmission system (storing/withdrawal)Distribution system (withdrawal)
NET4GAS
SMP Net
Třanovice Transmission system (storing/withdrawal)Distribution system (withdrawal)
NET4GAS
SMP Net
Uhřice Transmission system (storing/withdrawal)
NET4GAS
58
59
Table 7 Storage Capacities of Gas Storages, Maximum Daily Drawing Output and Maximum Daily Storing Capacity
Gas storage / OwnerStorage capacity
(Million m3)
Maximum Daily Drawing Output (Million m3/day)
Maximum Daily Storing Capacity (Million m3/day)
Háje / RWE GasStorage 64 6 6
Dolní Dunajovice / dtto 900 16 12
Tvrdonice / dtto 510 7.77 7.5
Lobodice / dtto 177 3.6 2.5
Štramberk / dtto 480 7 7
Třanovice / dtto 530 8 6.5
These 6 storages are operated as one virtual storage
Total
2 601
Total
39.9
Total
29.9
Uhřice / MND GasStorage 180 6 (12 from 2017) 2.6
Dolní Bojanovice / SPP Storage
576 9 N/A
60
