in total; and that each residential customer in an apartment will require 7.5 meters at the same price, costing $150 in total. Appliance Conversion Costs It is estimated that the cost of converting a residential LPG cooker or water heater could be approximately $35, if conversion were carried out on a large scale. Conversion of a residential oil-fired central heating boiler could be approximately $800, making the purchase of a new wall-mounted combination heating and hot water boiler (“combiboiler”) with balanced flue an attractive alternative.
Economic Results of Distribution Case Studies Regional transmission costs of about $25/Mcm (downstream of the offtake points from a major transmission pipeline, such as the TGI, TAP, or Nabucco). Adding local distribution costs for most of the cities brings the total to $100–$200/Mcm. Adding residential connection and installation costs raises the total to $250–$350/Mcm. Table 3.26 shows the estimated costs of transmission and distribution for each of the 20 case study cities. The three largest cities—Tirana, Pristina, and Skopje—have the lowest estimated distribution costs (roughly $40/Mcm, and approximately $215/Mcm when residential connection and installation costs are included). The smallest town—Horezu, Romania—has the highest distribution costs ($750/Mcm, approaching $1,000/Mcm for residential customers when connection and installation costs are added). This cost level would be unlikely to be economic with oil prices below $70 a barrel. All of these values are based on discounting 20 years of projected volumes building up linearly from zero to the long-run demand over 10 years, at a discount rate of 10 percent a year. Comparison of the values in table 3.26 with those in table 3.1 suggest that there is sufficient margin for most distribution costs around these levels. In a number of cities, however, the transmission and distribution costs exceed the margin for heavy fuel oil; but transmission-connected customers using heavy fuel oil could be converted to gas in some cities. Changing the buildup to 15 years, and discounting just 15 years of revenues at 15 percent a year, more than doubles the transmission and distribution charges necessary to recover the investment. The margins appear large enough for this in many cities. Figure 3.15 plots the transmission plus distribution cost results from table 3.26 against the population of each city. Box 3.2 provides a case study of some of the commercial strategies that can be used to build a successful gas distribution business, while ensuring that the financial incentives for customers to switch to gas and continue using it align with the economics of gas.
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The Future of the Natural Gas Market in Southeast Europe