Seanad debates

Tuesday, 30 June 2015

2:30 pm

Photo of Paddy BurkePaddy Burke (Cathaoirleach of Seanad; Fine Gael)
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I welcome the Minister of State, Deputy McHugh, to the Chamber.

Photo of Lorraine HigginsLorraine Higgins (Labour)
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I request the Minister for Energy, Communications and Natural Resources to explore additional funding streams in order to provide for the roll-out of natural gas areas of strategic importance. Extending our gas network requires Government-level support and an obvious starting point would be to use some of the profits from the sale of the Bord Gáis energy division to bring gas to our smaller towns, providing for above-ground installation. This would go some way towards reducing our dependence on imported fuel and protecting our environment, which will be of much economic and social importance in the years ahead.

Natural gas is a clean, an efficient and a cheap alternative to fossil fuels and it helps to eradicate the scourge of fuel poverty for low-income families. Major multinationals, like pharmaceutical companies, for example, rely on gas lines, and from a foreign direct investment standpoint, access to gas networks makes Irish communities all the more attractive to those considering basing themselves here. As Ireland begins to rebuild after austerity, we need to do everything possible to attract corporate heavy hitters to our shores, and a well-serviced and widely available gas network could really assist with such endeavours.

As somebody based in Galway East, I take my home town of Athenry as an example. Putting Athenry on the gas network would not require major investment and it would reap many rewards for the locality, especially with Apple's arrival on the horizon. In the first instance, the work required would create short-term employment but local residents and businesses could enjoy the ease of having the option to use a gas network if they so desired. In light of the Apple announcement, demands for homes in my area is likely to rise, and being on the gas network would further increase that demand. The entire community, from small businesses to home owners and large corporations, stands to benefit, offering a major return on the initial investment. I certainly hope the Minister of State will pass this message to the line Minister. We should consider finding alternative revenue streams. For instance, we could get a portion of funds from the sale of the Bord Gáis energy division to ensure that places like Athenry and towns right across the island can access the gas network to the benefit of local citizens.

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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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.

Photo of Lorraine HigginsLorraine Higgins (Labour)
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I accept the role of Gaslink in all of this. However, the Government and, in particular, the Department of Communications, Energy and Natural Resources, have an obligation to fund Gaslink to enable it to expand the network. In regard to Athenry, there is currently a large volume of industry in the region and this is set to increase following the granting of the planning permission for the Apple project. There is also a strategic investment site earmarked for development by the IDA. Athenry is also a nodal point in Galway, with motorway and rail networks making it attractive to people seeking housing. I expect the population in Athenry to increase into the future, leading to a potential increase in the demand for natural gas. I would ask that consideration be given to my proposal that funds from the sale of the Bord Gáis energy division be allocated to the roll-out of natural gas in strategic locations across Ireland - Athenry, my home town, being one of them.

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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I will convey the Senator's message to the Minister. However, I must reiterate the importance of strategic decision-making. Athenry, Craughwell, Headford and Tuam in County Galway and Ballina, Ballyhaunis, Castlebar, Claremorris, Crossmolina, Knock and Westport in County Mayo were included in phase 1. Construction on this €40 million project has been completed and the towns of Craughwell, Tuam and Headford in County Galway and Ballina, Castlebar, Claremorris and Westport in County Mayo have been connected to the gas network. The Senator will be aware that connection in respect of the three remaining towns of Athenry, Ballyhaunis and Knock is uncertain, which is the reason she has raised this issue today. I am sure the representative bodies from Athenry have made representations regarding existing industry and potential future industry in the region to the consultation process. The report of this process, commissioned by the Commission for Energy Regulation, is awaited. Official statutory responsibility for these matters was given, via legislation, to the Commission for Energy Regulation in 2006. The commission has a responsibility to decide which towns have sufficient demand and ensure that decisions made are economic and strategic. If we bring gas into towns where it does not make economic sense to do so, we are into a situation where there will be additional costs for consumers. Those are the mitigating factors. I take the Senator's point, however, that if extra moneys were available, there would be scope to balance the demand versus supply issue. I will convey that message to the Minister.

Sitting suspended at 3.30 p.m. and resumed at 3.35 p.m.