Elering: Need to upkeep gas pipelines to Narva, Värska must be assessed
The network company Elering and the state as its owner will have to decide in the next few years whether it is worth investing more than a few hundred million euros in the gas pipelines to Narva and Värska, and if not, what to do with the gas consumers there, said Elering's chairman Kalle Kilk.
The pipelines that brought gas from Russia to Estonia just a few years ago have become dead ends. Kalle Kilk, the chairman of Elering's board of directors, said that these pipelines still have a service life of 10 to 15 years.
"We don't have too much time to decide what to do with them later," Kilk told ERR. "For example, if we want to build a new pipe to replace the old one, it cannot be done in one year, it is a multi-year project. The decision point should be years before the end of the old pipe's life."
Elering estimates that the long-term maintenance of these pipelines would require an investment of more than €200 million.
With this in mind, Kilk pointed out that since the beginning of the war in Ukraine, Estonia's gas consumption has dropped by 30-40 percent.
"We have seen such a steady, relatively modest decline in gas consumption in the past, but now we've had a very sharp, very large decline. It's worth discussing what's going to happen to gas in the long term."
That is why Elering, in its recent draft of the Gas Transmission Network Development Plan, raised the question of whether there is a future for gas pipelines to Narva and through Tartu to Värska. If not, we need to think about how to proceed.
"It is clear that there are existing customers who also have some plans for the future," Kilk said, stressing that the changes need to be discussed with all parties.
"In the long term, it is possible that if such a large and powerful backbone network is no longer needed, there will be some kind of local network solution," he said. In such a case, the LNG would reach the local network by road or rail.
The Gas Association believes gas consumption will not fall any further
Heiko Heitur, the executive director of the Estonian Gas Association, said there was no point in talking about pulling the plug on the gas network. He pointed out that in Finland, for example, gas consumption is on the rise.
There were no applications for additional capacity from the gas network last year, but more than a dozen projects are now being added in northeastern Estonia.
"It is also important to identify future gas power plants, which will be an essential component of Estonia's energy policy, particularly to cover peak loads during extremely cold weather or when the sun is not shining and the wind is not blowing," Heitur said.
Kilk said that Elering also supports the expansion of controlled generation capacity. However, it is worth considering where to put gas plants in the region.
Kilk said the future security of the investment is significantly stronger in the area of the pipeline connecting Latvia and Finland. "Especially given that other networks can be quite expensive to maintain. This is directly reflected in the network charges," he said.
Eesti Energia recently announced the construction of the Narva gas plant
A great example is Eesti Energia, which unveiled plans for a new gas power plant in Narva last year. Although there is no agreement in the government on whether to give Eesti Energia the funds for this, the state-owned corporation is already planning.
In Eesti Energia's vision, the gas plant could generate both electricity and heat. Together with possible heat pumps, the plant should provide a means to decouple Narva's heating from oil shale. But such a facility cannot be developed near the Latvia-Finland gas pipeline.
If Eesti Energia does not give up on the idea, the choice is between two options. Either invest a significant amount of money in replacing an aging gas pipeline or begin distributing gas to the region via road or rail.
According to Rein Vaks, the head of the energy department at the Ministry of Climate, Elering must make these decisions in consultation with consumers.
"To be honest, these decisions should be put on the table and the possibilities should be evaluated," Vaks said, adding that in addition to Eesti Energia, local industrial consumers also depend on this decision.
A capacity component must be included in the network charge
Changes to network fees are inevitable. Kilk said that while the usage of the gas network has hitherto been taxed based on consumption, Elering intends to shift the network cost in the future to be partly capacity based.
"This is because many gas network customers utilize gas as a backup fuel. They use another fuel before turning on the boiler house at a specific time. And these gas-fired power facilities are likely to be identical," Kilk said.
The gas consumer would also be responsible for the cost of replacing the Narva and Värska gas pipelines. Elering, for example, will be unable to use funds raised from electricity transmission fees to expand the gas network.
Heitur said that Elering should already have enough money to repair the gas network based on current network prices. According to him, network charges here are much higher than in neighboring countries.
Maybe our remedies are too pricey. Maybe things could be cheaper and easier. I think that the assessment for the development or replacement of the transmission network is also perhaps over-stretched," Heitur said.
Biogas may or may not be a game changer
Heitur said that he picked up the idea that the decision had already been made at Elering. He said that the state-owned company's draft gas network expansion plan highlighted EU initiatives that show gas demand could fall while ignoring advances such as biomethane.
Kilk said that the European Union's approach to natural gas and its lower-carbon alternatives has been constantly evolving. It is also unclear where the EU's attitude will head in the future.
"There is a chance that in four or five years' time, the approach will change again and this is another issue that needs to be considered," he said. He did, however, add that a prospective decarbonization of the gas network could shift the issue's focus.
"A big part of what comes into play here is how much it costs," Kilk said. "Biogas production is more expensive than fossil natural gas today, but it can be cheap enough to prevent some technologies from switching from gas to something else."
Heitur said that in the long run, biomethane could replace a large amount of natural gas. He said that the country was working under the idea that future climate-neutral buildings would not require gas.
How much bio-methane the companies will be able to produce from the Estonian agricultural sector is anyone's guess. Rein Vaks, the head of the energy department of the Ministry of Climate, pointed out that previous analyses ranged from one to four terawatt hours. "And we don't have to start from Estonia's own potential. Our gas market is connected to the Baltic States and Finland," he said.
Who and how should forecast the future of gas use?
Kilk said that no decisions have been made about the Narva and Värska pipelines, and Elering just wants to start the discussion. He said that the Ministry of Climate is now working on the "Energy Economy Development Plan 2035," which could provide insight into the future role of gas.
Heitur said the Energy Development Plan may not give a full picture of the potential for natural gas consumption because it does not cover future companies that come in and reveal their plans to start production somewhere.
Vaks also said that the needs of the energy sector will be summarized in the Energy Sector Development Plan to be finalized at the end of the year.
"Industrial policy is excluded from the development plan. We will have to look at it at the Ministry of Economy to see how the policy is moving from that perspective and how the gas consumers are positioning themselves," he said.
But who could produce a document detailing the future of gas consumption in Estonia? Vaks said that Elering itself could take the lead.
"Elering will also try to take the easy way out," Vaks said. "But inevitably, the system operator has to look at the big picture and look at different scenarios, evaluate them, and also ask the state what their plans are. And based on that, a decision has to be made."
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Editor: Kristina Kersa