The “new rules” impact on the Slovenian energy market in respect of district heating Dejan KOLETNIK, vice-president of SDDE MaTáSzSz - Autumn district

The “new rules” impact on the Slovenian energy market in respect of district heating

Dejan KOLETNIK, vice-president of SDDE

MaTáSzSz - Autumn district heating conference 14&15 November 2013, Visegrád

Short overview

• Short overview of DH in Slovenia,• The influence of natural gas prices in DH,• Significant changes in the Slovenian energy market in 2012,• The gas competition impact on DH prices,• Energy efficency impact on DH prices,• Energy Policy implementation& EE Directive.

14,15 November 2013MaTáSzSz –

Autumn district heating conference Visegrád2

Short overview of DH in Slovenia

DH is local optional public service, (opt. For a commercial activity of supply of end customers)The distribution of heat includes: -the supply of heat or cold from the distribution networks, -the operation of the system operator of the distribution network.

(Providers have to obtain, from NRA a licence to produce heat for the district heating or cooling if the total installed thermal power of their production units is above 1 MW)



Short overview of DH in Slovenia

• 79 (companys) licence holders are supplying heat in 55 municipalities and were involved in both heat distribution for district heating and heat production for district heating of above 1 MW; – 40.5% of produced heat is consumed by 123.838 household

customers (0,92 TWh);– 43.9%, of produced heat is consumed by 31.926 industrial and

other non-household customers (1,0 TWh);– 15.7% heat losses





Heat distribution networks in Slovenia

The big 5 distributors of heat to households





Length of heat distribution networks by municipality

Structure of the primary energy sources for the production of heat for district heating



The influence of natural gas prices in DH



End user gas prices for HOUSEHOLDS



End user gas prices for HOUSEHOLDS were up to 30 % higher from the average EU-271st half of 2012

+20%

(incl. Network charge, Commodity-Natural gas, VAT&Taxes) – I3 group

End user gas prices for INDUSTRY



End user gas prices for INDUSTRY were up to 40 % higher from the average EU-271st half of 2012

+40%

(incl. Network charge, Commodity-Natural gas, VAT&Taxes) – I3 group

…is Natural gas still a competitive source of energy…

Natural gas consumption in Slovenia



Average decrease of natural gas consumption in last years:

•for 13% in 2011, •and additional 4% for 2012.

Sm3/

year

-13%

-4%

Significant changes in the Slovenian energy market in 2012

• Decrease use of natural gas -> high end user prices;

• Natural Gas market still on paper – no additional supplier on energy market scene;

• Long term gas contracts have locked the consumers opportunity for better DH price;

• Falling of electricity prices at power exchanges -> reduced the use of gas fired and CHP power plants;

• The growth of production from renewables caused the problems associated with support schemes-additional financial support – pay day???;

Some significant changes in markets for electricity and gas required a lot of adaptability.

Since national legislation on energy issues was not yet fully harmonised with the requirements of EU, Slovenian energy sector has faced with difficulties also in 2012.



…someone problems are for others Challenges & Opportunities…

A new gas supplier entered in 2nd half 2012 into natural gas retail

market and make it happened…

The competition impact on gas prices

Natural gas price (only commodity) for HAUSEHOLDS in 2012with a consumption from 501 in 1500 Sm3/year

-25%



Decrease of natural gas price

Natural Gas war in 2012 – fight for the customer

• Gas prices reduction for more then 15% in two months;

• Gas price drop for more then 25% in one year:

• Hrvoje Draškovič, the CEO of Energetika Ljubljana: „I feel like a robber of our customers“

• Customers: “Why I have paid for energy 25% more then other average customers in EU?“

„I feel like a robber of our customers“

Hrvoje Draškovič, CEO of Energetika Ljubljana



Households „run“ for a new gas supplyer

• 2011 -> 97 customers switched to another supplier;

• 2012 -> 11.294 customers in 2012 switched to another supplier, which is around 8.6% of all customers (131.652 end gas customers);

• 2013 -> 4.618 customers changed the supllyer in the first 6 months this year;



Natural gas market changes



• Share of natural gas purchased under the long-term contracts were still decreasing, short term is „trendy“;

• Short-term gas contracts based on spot markets have a positive effect on lowering the gas prices;

• Hybrid products are prevailing (short term+long term contracts), also from the perspective of the security of supply.

The gas competition impact on DH prices

• DH prices in Slovenia have decreased from 8% to 22%, for households and up to 40% for industry (for customers who have not been locked with long term contracts).

• City TRBOVLJE: 20% drop of DH prices for households and 40% for industry, because of market competition and efficiency increase (new investments into the reduction of heat losses of the DH network).

• City MARIBOR: Long term gas supply contracts for DH company's paralyzed the DH prices. The end customers wanted to jump from DH to individual gas fired heating systems.





Average retail prices of DH for household in selected Slovenian towns for 2010–2013

EUR/

MW

h

Surce: Statistical office of RS

-8,5% (long term contracts)

GASCOAL GAS GAS

-20% (long +short term contracts)

…DH systems which are using for energy source biomass are pushing Natural gas behind…new DH systems switch to biomass source…Biomass is „trendy“

• Local energy concept (LEC) is adopted in the form of a decree with the prior consents of the minister responsible for energy.

• Existing and planned use of energy should be present LEC and should comply with the state or European energy policy on the following objectiv -> the share of renewables in final energy structure should be 25%

Low budget for renewables subvention scheme

• On January 2013 GOV RS gave its approval to rise the fee for RES sub. scheme by approx. 335% for the year 2013.

• Lowering the competition for Metal industry -> Its almost a 100% increase on an annual basis which represents additional financial burden (for exmpl. from 6.7 EUR/MWh network charges duties Metal industry are obliged to pay additional 6.2 EUR/MWh =12,9 EUR/MWh).

• Metal industry view: „Having already high el.energy prices in Slovenia compared to their competitors in Europe, this increased fee, is a reckless move from the government which does not help economy but it presents further, unnecessary burden. „ said by Marko Drobnič, CEO Talum.



Energy Policy implementation

Implementing the 3rd Energy package and the Energy Efficiency (EE) Directive 2012/27/EU into national legislation would:•enhance Security of energy supply and security of energy services,•foster Competitivness of the society, economy and of energy supply and energy services,•assure Environmental Sustainability and reduce climate change chalanges.

…but EU energy framework legislation is still not yet fully implemented into the national legislation with the:

– Energy Act EZ-1 (is still in Parlamental procedure), probably will be acting in 2014,

– a new Energy Concept is planned for 2014 (aim is Increasing the Energy Efficiency (EE) and use of RES, network development with introduction of active networks -> smart grids)



Energy efficiency Directive 2012/27/EU

• In 2007 EU summit, MS agree on a 20% energy efficiency target by 2020, together with a 20% renewable energy target and a 20% CO2 reduction target;

• This targets are indicative' and not binding targets!

• Will this be met in SLO?



Declared targets in SLO for 2020



Renewable energy sources (RES) share target



RES

shar

e in

gro

ss fi

nal c

onsu

mpti

on Target 2020

Heat consumption

Transportation

Electricityconsumption

RES share target 25%District heating included

RES target by sectors for 2020



Surce: Ministry of infrastructure

Greenhouse gas (GHG) emmisions by sectors in SLO



Emis

sion

s G

HG

[m

io t

CO2 e

kv]

Other sectors (process emissions, waste, agriculture, etc.)

Transport

Manufacturing&Construction

Transformation (Production of el. energy and district heating)

Other wide use

ReductionGrowth of (+5%)

Energy efficiency Directive 2012/27/EU

• By the end of 2015 MS shuold carry out and notify to the EC a comprehensive assessment of the potential for the application of high-efficiency cogeneration and efficient DH and cooling.

• first semester of 2014, EC will review the progress towards the 20 % energy efficiency target, report on it and assess whether further measures are needed;

• The II. Action plan for EE from 2008-2016 , is 9% and will be realized.



The Energy efficiency Directive (EED) 2012/27 implementation in SLO

• Proposal for implementation of the EED in national energy law EZ-1 for EED is still not in implementation;

• The EED is a game-changer for energy companies, which are required to achieve 1.5% energy savings every year among their final clients;

• The main changes in the EE Directive are:– A 3% renovation rate for public buildings which are “central government-owned and

occupied”;– An obligation on each EU member state to draw up a roadmap to make the entire buildings

sector more energy efficient by 2050 (commercial, public and private households included);– The new directive also includes additional measures on energy audits and energy

management for large companys, cost-benefit analysis for the deployment of combined heat and power generation (CHP) and public procurement.



The Slovenian Energy Policy results to 2030

• 6 mio EUR investments in RES and EE yearly,• 1.300 mio EUR total investments in energy sector

yearly,• Approx. 8.000 direct employment only from RES and

EE, if business sector will follow with employment - doubled.

Result are not only in achieving targets -> but benefits which will cause lower import of energy for around 1 % GDP and higher competiveness of economy.



Invitation to

International district energy conference

Slovenia, Portorož, March 2014



SDDE - Slovensko društvo za daljinsko energetikoKarlovška cesta 3, 1000 Ljubljana

[email protected]

Thank you for your attention !



Documents

The “new rules” impact on the Slovenian energy market in respect of district heating Dejan KOLETNIK, vice-president of SDDE MaTáSzSz - Autumn district