In the year 2022, natural gas has been the focus of everyone’s attention. After the increase in natural gas prices in international markets, due to a series of diverse causes, the invasion of Ukraine by Russia generated a climate of extreme volatility and great uncertainty in energy prices, natural gas being the most affected, becoming, in turn, a first-order political priority.

The upward trend in natural gas prices, which began in the fall of 2021, became more acute with the start of the war between Russia and Ukraine in February 2022. As Western sanctions against Russia, one of the key players in the global supply of natural gas, together with the interruption of gas supplies to Europe, caused prices to rebound, a situation that posed the potential threat of serious supply difficulties for the winter, with the consequent risk of blackouts and restrictions of energy throughout Europe, a scenario that ultimately has not materialized.

The European response to these threats took the form of a series of savings, diversification and price controlmeasures. Urgent measures were taken in our country within the framework of the National Response Plan for the economic and social consequences of the war in Ukraine. These initiatives required changes in the processes, derived from the new normative and regulatory changes, adapting Madrileña Red de Gas in a minimum period for the correct implementation of said measures.
On the other hand, the fear of an unaffordable increase in their bills led households and companies to reduce their consumption on their own initiative. According to the International Energy Agency (IEA), the EU’s gas demand fell by 13% in 2022, the “biggest drop in history”.

In this sense, a greater flexibility of contracts was established, a new rate of last resort for natural gas temporarily applicable to communities of homeowners, for which the distributor communicates to the marketer the average consumption of this type of the last 5 years of customers on each invoice issued, as well as an improvement in the information available to the natural gas consumer in terms of energy consumption and choice of supplier, which implies that customers entitled to
use the rate of last resort will be It includes the average consumption of those consumers who share the postal code and toll level of the local network.

Everything described above has had a full impact on the energy market and in particular on the gas system. In the case of Madrileña Red de Gas, although the growth in new supply points has been less than in previous years, we have exceeded the historical figure of 900,000 supply points, positioning ourselves as the fastest growing Natural Gas distribution company in Spain and approaching the second position in total volume of installations.

Regarding the company’s economic results, even in this difficult context, MRG continues to show the ability to maintain stability in the face of adverse economic cycles and unexpected events, obtaining excellent results that confirm great financial resilience, as well as solidity and predictability in the income generation.
With regard to regulation, it should be noted that the Spanish National Markets and Competition Commission (CNMC) has approved two resolutions in 2022 that will encourage gas system agents to manage their imbalances (differences between gas inputs and outputs) in a more active way, initiatives that promote the participation of agents in the market and improve the economic sustainability of the gas system. Another of these new regulatory requirements is the modification of Regulation 2019/942 of the European Parliament and of the Council on the reduction of methane emissions, which is expected to enter into force in 2023.

In the case of Spain, renewable gases can and should play a relevant role in the energy transition. Spain, due to its privileged position, is postulated as one of the main producers of green hydrogen worldwide. In this sense, the “green energy” marketed in Spain increased by 12% during the year 2021.

The fear of an unaffordable increase in their bills led households and companies to reduce their consumption on their own initiative. According to the International Energy Agency (IEA), the EU’s gas demand fell by 13% in 2022, the “biggest drop in history”

The production and distribution of hydrogen is one of the great challenges of the energy transition, not only in Spain but also in the European Union and the rest of the world. In this sense, from MRG we want to be a company clearly committed to the fight against climate change and provide solutions to society.
Based on the regulatory development foreseen in the National Integrated Energy and Climate Plan (PNIEC) and the Biogas and Hydrogen Roadmaps, as well as the measures already implemented by neighbor countries, it is proposed to develop a series of additional measures that would place Spain in a more favorable position for the development of renewable gases. For this, three main axes of action are proposed: regulatory measures, administrative measures and measures to promote technology and infrastructure.

The current natural gas networks will be the same ones that will facilitate the entry and distribution of green gases in the increasingly near future, already a reality in the case of biomethane. Having access to natural gas in new urban developments is as much as facilitating the supply of green gases in buildings. MRG is proposing the installation of pipelines that, although they distribute natural gas, are 100% prepared for the distribution of biomethane and hydrogen.

The production and distribution of hydrogen is one of the great challenges of the energy transition, not only in Spain but also in the European Union and the rest of the world. In this sense, from MRG we want to be a company clearly committed to the fight against climate change and provide solutions to society

At Madrileña Red de Gas, we have an infrastructure capable of channelling renewable fuels, since our networks are prepared to supply both green hydrogen and biogas, without having to alter the supply conditions. The results of the CavendisH2 study, carried out by SEDIGAS and its associates, demonstrate this. According to this study, after an in-depth analysis of the competitiveness of renewable gases and the investment required to adapt current gas infrastructures, it is concluded that an investment of 2,334 million euros would be necessary to adapt transmission and distribution networks to their operation with hydrogen. , equivalent to only 6% of the remuneration of the last 20 years to natural gas transportation and distribution companies.

In addition to a lower investment effort, the greater penetration of renewable gases in the CavendisH2 scenario would complement the development of renewable energies for electricity generation, which would mean a more reliable, flexible and safe system, and a significant reduction in greenhouse gases, would reduce possible barriers to entry, requiring less investment in terms of subsidies, and would promote the development of Spain’s role as a generator and exporter of hydrogen.

The use of green hydrogen, both for the supply of heating and domestic hot water, as well as its use in the mobilization of vehicles within cities, represents a great advance in achieving decarbonization and the energy transition towards more sustainable energy production. In addition, natural gas is positioned as one of the most reliable and consolidated alternatives in the energy mix, on the path to a renewable future.

At Madrileña Red de Gas we are aware of this, being pioneers in projects as innovative as the Pryconsa project, where MRG is developing the necessary facilities to supply almost a hundred newly built homes with green hydrogen, for use in heating and water sanitary hot. Having natural gas in new urban developments is the entrance to having green gases in buildings.

In addition, we continue to participate in the most important mobility project with green hydrogen in the Community of Madrid, the Inspira Madrid project, together with FRV and the Ruiz Group. The purpose of the project is to achieve the decarbonization through green hydrogen of urban public mobility fleets, through a network of five publicly accessible hydrogen generators, in a first phase, which combined will supply light and heavy vehicles, at a competitive price compared to conventional fossil alternatives.

In addition to green hydrogen, Madrileña Red de Gas is committed to another renewable fuel, such as biogas. This by-product is generated during the anaerobic digestion process of organic waste. Biogas is mainly composed of methane and carbon dioxide, and as we have seen, it has high potential as a renewable energy source.

At the European level, by 2030 it is expected that 10% of the total consumption of natural gas in the EU will come from biogas. In this sense, there are currently four biogas projects in our networks. Two of them are biomethane plant construction projects, in which MRG is carrying out studies and possible designs in our distribution network to be able to absorb the production of future plants, with the aim of being able to inject gas from the medium distribution network pressure to the high pressure network.

The other two biogas projects correspond to a plant for the recovery of livestock and agro-industrial waste, as well as a closed landfill that currently produces said fuel, where MRG will manage the injection point and the new distribution infrastructure that will be necessary to connect the landfill to the natural gas network.

All these initiatives show the great commitment and willingness of Madrileña Red de Gas to collaborate, together with the Administrations, in the design of energy policies and in the adaptation of the regulation of the gas sector to this new scenario of the future, based on the “Green Energies”, in which continuous dialogue is a key element for success.

To finish, for yet another year, to express the company’s gratitude to the shareholders for their support in this delicate and difficult context, as well as their essential support in achieving our strategic objectives, the basis for the successes we hope to achieve in the future. Likewise, to show my gratitude to the human team that is part of MRG, for their commitment, effort and dedication during the year 2022, as well as their confidence in our vision of the future. We would also like to thank our customers and suppliers for their loyalty and trust in our project.

Thank you very much to all of them who make the success and continuity of our company possible.

 

Pedro Mielgo