Mr. Liam O'Sullivan:

I thank the Chairman and the members of the joint committee for inviting us to talk about Gas Networks Ireland’s plan to maximise the use of the gas network and, in particular, to outline the real benefits to Ireland of developing natural gas in the transport sector. Before I outline our plans in more detail, I would like to give some brief background information about natural gas in Ireland. Natural gas is available in over 160 population centres in 19 counties throughout the country. Approximately 650,000 Irish homes and 23,000 multinational and Irish businesses depend on natural gas for their energy needs. Natural gas is an ideal partner for renewable energy because it provides the flexibility and effective back-up needed to compensate for the intermittence of wind or solar power generation. Natural gas burns more cleanly than other hydrocarbons. It produces up to 30% less carbon dioxide than oil and approximately 45% less than coal, which makes it the ideal choice to help Ireland to make the transition to a low-carbon future. Gas Networks Ireland is cognisant of the environmental challenges associated with global warming and the imminent publication of the White Paper on energy. It has devised a strategy to help Ireland to achieve its objectives in this regard. The three core elements of this plan involve developing a market for natural gas as a transport fuel, switching existing oil users near the gas network to natural gas and introducing renewable gas into the network. The combination of these activities will bring a series of benefits to Ireland, including lower emissions, improved security of supply and lower energy costs for Irish consumers.

We could discuss a number of topics today but we believe the focus of this meeting should be on the use of compressed natural gas, or CNG, as a transport fuel. CNG is a cleaner and cheaper alternative to oil and is already a proven technology. CNG represents a great opportunity for Ireland and for fleet operators in the transport sector. It is of note that Ireland is already behind the curve in using CNG as a transport fuel. There is strong growth in CNG across Europe, with over 1.8 million CNG vehicles in the EU and approximately 18 million such vehicles worldwide. In a nutshell, we want to develop a fuelling infrastructure, consisting of approximately 70 filling stations around the country, to support the development of a viable CNG market in the transport sector. Why do we want to do this? Commercial vehicles using diesel currently account for 3% of the vehicles on Irish roads, or some 80,000 vehicles, but they account for a more significant 20% of total energy used and 30% of total transport emissions. If these vehicles were converted to CNG, the benefits would include cheaper fuel for fleet operators, lower air pollution and reduced noise pollution. Lower transportation costs could ultimately translate into lower transportation fares for the Irish public. In addition, the higher use of the gas network would ultimately benefit all gas users through lower tariffs and end user prices. We are here today to outline our plans but it is important to stress at the outset that we need the necessary regulatory, policy and funding support to ensure this happens.

Ireland’s transport sector faces a series of challenges including emissions reduction, security of supply and cost competitiveness. We believe introducing CNG into the transport sector here would be a key step in addressing such challenges. CNG is ideal for community fleets such as buses, local authority vehicles and delivery trucks, as well as heavy goods vehicles. CNG vehicles emit 22% less carbon dioxide than similar vehicles running on diesel. CNG delivers fuel cost savings of up to 35% for fleet operators. For example, the conversion to CNG of 50% of the national fleet of buses and HGV trucks, or approximately 5,000 buses and 10,000 trucks, would result in the fuel cost savings for the Irish economy of €524 million per annum over diesel and emission savings of 165,000 tonnes of carbon dioxide per annum. If biogas or renewable gas were used, the annual carbon dioxide saving would be 2 million tonnes. On a practical level, how does CNG work? CNG vehicles can be purchased from many leading vehicle manufacturers and cost approximately 10% more than conventional diesel trucks. A CNG vehicle can be refuelled in five minutes at a service station, which is similar to a diesel or petrol vehicle. Importantly, we see CNG working in partnership with electric vehicles, rather than competing with them. Electric vehicles make sense for the private and family car market, while CNG is the ideal and indeed the only viable alternative for operators of truck and bus fleets. In our view, there is a perfect synergy between the two.

What have we done to date? Gas Networks Ireland has been working on the development of CNG in Ireland in recent years. Ireland’s first fast-fill CNG station was completed at our office in Cork last year and we introduced five CNG Volkswagen Caddy vehicles to the company’s fleet. Using our CNG Volkswagen Caddy, a round trip between Cork and Dublin costs €35, whereas the same trip using a diesel van would be €50. This is as a result of an approximate natural gas price of 79 cent per litre equivalent, compared to diesel at €1.19 per litre. The range of the Volkswagen Caddy using CNG is 650 km per fill, so there is no need to refuel for a round trip between Cork and Dublin. The 2014 budget applied a welcome favourable excise treatment for CNG, with the application of the minimum level of excise duty on natural gas as a transport fuel, as well as a commitment that this will remain in place for eight years. We have carried out a number of successful trials to date with Bus Éireann and some major fleet operators. We are working with a number of businesses to convert their fleets to CNG. What do we need to do next? The EU requires Ireland to develop a national policy framework for the development of a CNG refuelling infrastructure by 2020. Gas Networks Ireland is ideally placed to develop this refuelling network and ensure Ireland complies with the EU directive. We want to roll out a national network of fast-fill stations, with 27 stations initially building up to 70 stations across the country over time. Gas Networks Ireland has targeted three station openings in 2016.

Government funding and cross-departmental support is critical to the success of the roll-out of this infrastructure. Similar to electric vehicles, we need to incentivise fleet operators to convert from diesel vehicles to CNG for all major fleets of HGV trucks and public transport buses as CNG vehicles typically cost 10% more than an equivalent diesel vehicle. A VRT and motor tax treatment should also be implemented to recognise low emission vehicles, similar to electric vehicles.

In addition to developing CNG, Ireland needs to develop a renewable gas infrastructure that will facilitate the development of an indigenous energy source as part of its overall energy mix well into the future. Renewable gas can be readily harvested from food waste and agricultural residue. This gas can then be injected into the gas network or it can be used independently as a fuel for heating, transport or power generation. If this renewable gas were directed to transport through CNG, we would also benefit from the 20% lower carbon dioxide emissions versus diesel. Renewable gas is a key resource for the future, it is already a proven technology and many other countries in Europe are pursuing the same long-term strategy.

I hope the foregoing has provided some useful information to the committee. I thank the Chairman and members of the committee again for giving us the opportunity to explain Gas Networks Ireland’s plans and the significant benefits we see in developing natural gas for the transport sector. With the right policy and investment supports these natural gas initiatives combined offer huge potential benefits for Ireland. In summary, we see the benefits as a significant reduction in CO2 emissions; energy savings for connected households and businesses; increased utilisation of the network thereby reducing tariffs for all gas customers; meeting the requirements of multinational and indigenous companies for renewable energy; and provision of a cost competitive advantage in commercial transport.

Notwithstanding the fact that we have been invited to discuss Gas Networks Ireland's plans for the future, it is important to recognise the contributions that others have made to what we have done to date, in particular our interactions with the Departments of Communications, Energy and Natural Resources, Transport, Tourism and Sport and Environment, Community and Local Government, which have been very positive. The Departments have been very supportive of what we have been trying to do and we want to acknowledge that. In particular, I reference the role of the Commission for Energy Regulation, CER, as it has been supportive of what we are doing. Ultimately, the CER approves all of what we do and it has made available innovation funding to allow us progress many of the initiatives we have spoken about. I want to recognise its contribution.

We are happy to take questions from members.