21.05.2015

• Elering is managing Estonian electricity and gas transmission systems with purpose to ensure high-quality energy supply to Estonian consumers at every moment.

• Starting from 02 January 2015 Elering AS (electricity TSO) is majority shareholder of Estonian gas TSO Elering Gaas AS

• Efforts towards full ownership underway

• Target to finalize merger of electricity and gas TSO-s by 2016

Elering AS

Estonian Gas Market – Recent Developments

• Forecasted demand for 2015 (ca 500 mcm) ca 50% from year 2006 (1008 mcm).

• Over 60% of gas is consumed in Tallinn area

• Elering operates pipelines with MOP38 and MOP55 bar; non-odorized gas

• Interconnections with Russia (2) and Latvia (1)

• In 2014 nearly 100% of import was by Eesti Gaas - in 2015 share of gas import from Lithuania ca 24%

Key figures 2014

Network length885km

Transmission volume538 mcm

Regulation stations

(#)37

Metering stations

(#)2

Peak day4,5 mcm

Gas Demand

442

645

745

816786

736 719

826865

724

838

962991 10081004

963

655701

627679 689

538511

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Annual Monthly profiles

Further decline in demand is expected due to fuel swich in district heating

Grid development

• Estonia-Finland interconnection (Balticconnector) - 2019

• Estonia – Latvia interconnection enhancement (bidirectional flow) – 2019

• Projects are intended to develop regional Baltic-Finnish gas market

• An integrated market with a larger market area and higher gas demand enables additional opportunities for new market-based supply sources (incl renewable gases)

• Considering the huge potential of renewable gas (biomethane etc.) in Finland and other Baltic countries the new interconnections have a considerable role in developing a renewable gas sector in the region.

The vision is to support development of a renewable gas hub in the Baltic-Nordic area to contribute to climate goals by enhancing gaseous renewable fuel uses

Developing regional gas marketAfter acquisition of gas transmission network by Elering in the beginning of 2015 the Baltic gas market coordination group worked out short-term measures brought out below. Complete Baltic-Finnish gas market action plan will be composed beginning of 2016.

- Harmonization of gas Network & Storage Access Rules in the entire gas market of the region

- Accounting of cross-border gas flows offsetting the differences in energy value

- Harmonization of gas quality requirements - Harmonization of the gas supply licencing framework (retail and

wholesale) in the region - Roadmap for harmonized implementation of requirements of European

Network Codes in Baltic States and Finland; - Financing of EU Projects of Common Interest (PCI)- Harmonization of measurement of gas flows for technical and commercial

purposes in energy units (kWh at gross calorific value) - Launching a common virtual trading hub and a gas exchange in the region - Establishment of common gas Data Hub platform - Data exchange - Common approach to the definition of protected customers

Gas networks in Estonia

• Gas distribution grids covering only limited area close to transmission pipelines (green circles)

• Most of territory is not covered by distribution networks

• Low demand – most of potential sites of production can’t be connected to distribution grids

• Network configuration does not meet needs of distributed production/consumption, especially CNG stations

Gas Quality Standards

• Quality standard of gas injected into Estonian transmission grid (MOP38; MOP55)o http://gaas.elering.ee/kasulikku/vorgugaasi-kvaliteedinouded/

• Quality requirements harmonazed with Baltic TSO-so Follows EN 16726 (Draft when Baltic standard was adopted); o Common requirements for gas transported between Baltic gas

systems

Corrosion – the main issue with renewable gases in transmission

grid

• The corrosion due to substances like H2S, O2, H2O, etc• Increasing oxygen content from 0.2 to 1% doubles the carbonic acid corrosion rate (@14

bar)• The hazardous corrosion rate sensitive to pressure

o Oxygen limits for low (<75 mbar) pressure not limited and for intermediate pressure (75 mbar to 2 bar) up to 17.25 % molo Oxygen limits for transmission over 0,2 % mol, generally considered as substantially increasing risk of damage o Pipeline inspection have revealed considerable corrosion damage due to H2S, O2, H2O, whereupon the oxygen content was limited to 2 vppm

• It is likely that a complex interaction between oxide, carbonate and sulphide corrosion products will occur that could either lead to localised attack (and consequently higher corrosion rates)

• Further research would be required to determine the effect of higher oxygen partial pressures which would be generated in gas transmission and distribution pipelines

Elering is planning a reserch project in cooperation with Tallinn University of Technology to introduce justified requirements for renewable gases content, taking into account the aim to promote development of renewable gases

Conclusions

• Elering as TSO promotes diversification of supply sources of gas, especially local (regional) production of renewable gaseous fuels

• Transport sector could be a driver of increased demand and also local renewable gas production

• Connection of new renewable gas production and CNG stations to grid is limited due to poor geographical coverage of todays network – need to review the topology

• Content of hazardous substances in renewable gases imposes certain risk to gas pipelines - target to find balance between risks and costs

• Based on the huge potential of renewable gas (biomethane etc.) in Finland and other Baltic countries, vision is to support development of a renewable gas hub in the area to contribute to climate goals by enhancing gaseous renewable fuels use.

Thank you!Mart.Landsberg@elering.ee