The state must help us, otherwise the costs will affect the prices, says Pacovský from Pražská plynárenská

What’s on your mind right now?

Request to increase safety stocks. All gas companies hold winter stocks in summer, and the State determines the so-called security stock that each trader must have in order to be able to cover, for example, a period of extreme cold. Now there is pressure from the state to increase this stock quite significantly.

This of course poses the problem of funding. Last year, as Pražská plynárenská, we had gas in storage tanks worth one billion crowns. This year, it looks like we’ll be in the range of four to nine billion, depending on the current price. The fact that the state wants greater security on the one hand, but the service stations have to finance it on the other hand, must be resolved.

Would a guarantee or an interest subsidy, etc., suffice?

Even at the level of the European Commission, there is a debate on guarantees. We are discussing with the Department of Industry and Trade who should have the security supplies. We see a certain parallel with the material reserves of the state, because in them the state holds, for example, oil. Thus, by analogy, he could buy gas to keep it in stock in the event of a break or reduction in supply. However, if commercial entities have to do this, some may not even have the money and it will certainly have a big impact on prices.

When do you start filling the bins?

In April, at the latest in May. The discussion must therefore be fairly quick.

In Europe, Gazprom rented a lot of tanks and left them empty.

This situation concerns more or less Germany. The question of who owns these facilities is a legitimate one. If they shouldn’t be part of critical infrastructure and if some shouldn’t be state owned. In the Czech Republic, they are filled by individuals, not by the state, and in the ongoing debate it is a question of who is going to fill them now and for what.

So do you prefer it to be a state? Or would other forms of support be enough for you?

Basically, anything is possible. The state could mainly guarantee loans to banks to finance the purchase of gas. That’s how it works in Germany now. Or shop alone. But there is one more thing to do. Namely, that you buy gas in the tank for a price, which may not apply at the time you sell it. Right now, we are buying gasoline at a higher price than expected next winter. At the same time, no business entity can buy on condition of selling at a loss. It should also fix this problem.

Which probably won’t please the budget maker.

The advantage is that the money does not fly away. There will be gas in the tanks which will have some value. But if the state or the European Commission want greater security of supply, which is right in itself, they must also make a financial contribution. If this does not happen, the city will have to reinforce our capital, which we negotiate with it. Fortunately, there is a relatively high level of reception. But again, this will affect consumers. Thus, the issue of fuel poverty is even more in the spotlight. Assistance to low-income groups will need to be strengthened and simplified.

Is there enough gas for such an operation?

Hooray. It’s important to say that. The situation is wild, but there is a lot of gas right now. Nobody needs to worry about him now. However, it is also necessary to purchase storage capacity. Therefore, if the State were to buy part of the gas, it would have to cede part of its capacity to it. This is another reason why the decision cannot be delayed much. We, as Pražská plynárenská, are in favor of it. Finally, when security costs are not paid by the state, they are paid by stronger commercial entities, but are then necessarily passed on to prices for the final consumer.

Everyone says today that we must diversify the sources of gas for Europe. But we talked about it years ago and nothing happened.

Nord Stream has even increased the dependency. This is due to the German energy policy based on the fact that the transition to renewable energies will go through gas. It is good in itself. However, supplier diversification needs to be more pronounced. In Europe, liquefied gases, ie LNG, biogas and shale gas, are real alternatives. However, its exploitation is not yet authorized, mainly due to environmental impacts.

But is it realistic to replace Russian gas in terms of capacity?

Unfortunately, there is a shortage of liquefied gas terminals and, for example, Germany does not have any. It will take a few years to build it. In addition, liquefied gas is of course more expensive. In my opinion, the solution is a mix of measures, not a bet on one thing. I am a strong supporter of renewable energy to reduce our dependence on gas as well as coal. Next, consumption must be reduced by the thermal insulation of buildings, which is already being done, but also by reducing thermal comfort. Because most gas is used for heating. At the same time, according to statistics, we drown more than, for example, the Dutch. And a number of these measures are possible.

Even if there is enough gas, there is already talk of prioritizing customers. What would that mean?

In the event of a shortage or reduced supply to the Czech Republic, a ten-point scale would be introduced, according to which consumption is reduced. The largest industrial customers are reduced first, and only in last place are households. In the event of a crisis, industry will be more threatened than households. In my opinion, however, high energy costs pose a greater threat to the industry than it would actually reduce. If the inputs are five to ten times higher, this must lead to higher prices for energy-intensive operations.

Predicting the price for one year, for example, would probably be guesswork, but can you at least suggest a few scenarios?

In my opinion, it will depend on how, for example, the stock is filled. The price for next winter will affect not only the development of the conflict in Ukraine, but also the weather. This can shut down renewables or mean you have to heat more due to more frosts. The price of gas is made up of several factors, some of which can be affected by the state. But you really can’t predict from a crystal ball right now. We are in a situation where the price fluctuates enormously. Last year gas cost twenty euros per megawatt hour, a few days ago it cost three hundred. So more than ten times. It’s weird how quickly thought changes. Now that the price is down to a hundred, we thought that was good. At the same time, it’s another five times.

Does it matter what technology you buy?

Whether it is Russian, Norwegian or liquefied gas, for example, does not matter. Another thing is biogas, the use of which should contribute to diversification. The Prague biogas plant in Troja, of which we are a partner, is already capable of producing so much bio CNG that it could be used to run a large part of public transport in Prague.

Gas was supposed to be a green fuel, then a fossil fuel, and now it’s a bit of a grace. How do you see the future in terms of European regulations?

I am convinced that the gas will be there for at least another twenty years. In Prague, where most buildings are used to heat it, it will take even longer. We will have to diversify our resources and the situation we find ourselves in will accelerate this change. On the other hand, I expect a debate on how to replace coal with gas. But all of this will take time. There are no magic bullets when it comes to energy. Personally, I think that the European Commission should further develop the idea of ​​buying natural gas together. Because in such a case it will be better to work with the requirement of its origin.

Martin Pacovsky (49)

is the Chairman of the Board of Directors of Pražská plynárenská. In the past, he held management positions within the CEZ Group. After temporarily leaving the energy sector, his Gourmet Invest group invested in several small breweries, such as Znojmo and Jarošov. He has been Chairman of the Board of Directors of Pražská plynárenská since January 2021.

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