Seanad debates

Tuesday, 30 June 2015

Commencement Matters

Natural Gas Grid

2:30 pm

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael) | Oireachtas source

I thank the Senator raising the matter, which I will address on behalf of the Minister for Communications, Energy and Natural Resources, Deputy Alex White. I will certainly convey the Senator's concern today.

I will cover in my remarks how Ireland's natural gas network infrastructure is assessed, planned, rolled out and funded under our own and EU-compliant gas regulatory framework. The development and expansion of the natural gas network is in the first instance a commercial matter for Gaslink. Gaslink is mandated under section 8 of the Gas Act 1976, as amended, to develop and maintain a system for the supply of natural gas that is both economical and efficient. Gaslink receives revenues from gas consumers to fund its operations and functions, including the development of the gas network. The Commission for Energy Regulation, CER, is statutorily responsible for all aspects of the assessment and licensing of prospective operators who wish to develop and operate a gas distribution system within the State under the Gas (Interim) (Regulation) Act 2002.

As regards the development and rolling out of the natural gas network, the CER approved a gas connections policy in 2006 that enabled assessment of the feasibility of connecting new towns to the gas network. In order for any town to be connected via new infrastructure to the gas network, certain economic criteria must be satisfied. The policy provides that the construction and operating costs of connecting a town, or group of towns, to the network are recovered through the consumption of gas and the associated network charges on consumers.The distance of a town from the gas network is the major factor in determining the cost of building a gas pipeline. The anticipated industrial or commercial gas usage in the town largely determines the revenue from gas network charges, which must balance the connection costs. Uneconomic gas pipeline projects would unfairly increase energy costs for all gas consumers.

Gaslink has completed three comprehensive studies of nearly 80 towns in the context of connections to the gas network, resulting in more than 20 new towns having been connected in recent years. The key factor which would qualify a town or a group of towns in any future review would be a significant increase in demand for natural gas, probably resulting from the addition of a new large industrial or commercial facility.

As regards funding streams for the roll-out of natural gas, energy infrastructure is usually financed by the market and through tariffs paid by users. However, in order to meet the challenge of interconnecting all EU member states by 2020, the European Union has established funding to leverage the investment needed. The most prominent of those funds is the Connecting Europe Facility, CEF. I can go into more detail separately on these new funding streams and their implications for Ireland, if the Senator wishes.

While I would again stress that energy infrastructure is usually financed by the market and through tariffs paid by users, both CEF funding and the recently proposed European Fund for Strategic Investments, EFSI, are very important for, and welcomed by, Ireland as additional funding streams and will assist in ensuring the correct balance is struck between cost burdens and cost benefits in further developing our electricity and gas infrastructure. I am conscious that my response is broad but it was provided in response to the broad question put forward by the Senator. In regard to the Senator's reference to the new investment in Athenry, the consultation process, which is under the authority of CER, is currently reviewing submissions and hopes to conclude its work in this regard in the coming weeks. I am sure it will consider all areas that may warrant investigation. This is about demand and not impinging on the price in the marketplace for the consumer.

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