Key Priorities for the Price Control 4 Gas Innovation Fund

Introduction

Gas Networks Ireland (GNI) has a Gas Innovation Fund of €4.17m that is available to applicants. There is an innovation allowance of €1m for research and €3.17m for strategic projects over the PC4 period. This document sets out the key priorities that should be addressed when applying for innovation funding from GNI’s PC4 Gas Innovation Fund.

Background

The Commission for Regulation of Utilities (CRU) published its decision on Gas Networks Ireland’s fourth price control at the end of August 2017. As part of this decision*, the CRU has provided an opex allowance to support innovation funding for the period from October 2017 to September 2022 (known as the Price Control 4 period). In making its decision the CRU was ‘mindful that ongoing utilisation of the gas network is important so as to ensure that gas remains competitive as a fuel and that tariffs are contained for customers’. Gas innovation funding has been provided for the Causeway Study, governance and programme management, Research and Strategic Projects.

The Causeway Study is an EU and CRU funded project to examine the impact of the introduction of Compressed Natural Gas (CNG) on the gas network through the installation of 14 CNG stations in Ireland. The EU has provided a grant of €6.5m for the Study and the CRU has approved €12.83m** so that the Study can be completed. The allowance for the Causeway Study makes up the majority of the €17.5m that was approved by the regulator for innovation. The CRU has indicated that there is potentially an additional €2.5m available for innovation funding. The CRU will make a final decision on the allocation of the additional €2.5m at a later date in PC4 and the decision about the additional €2.5m will be informed by the outcomes and outputs of the innovation fund throughout PC4. The CRU has provided an allowance of €0.5m for the PC4 period to GNI to maintain the innovation framework developed during PC3 and for programme management.

The four key priorities for the Gas Innovation Fund are:

  1. Increase throughput through the gas system;
  2. Assist in the transition to a low carbon economy;
  3. Deliver significant carbon savings;
  4. Provide measurable value to all gas customers

Increase throughput through the gas system

The gas network in Ireland is owned and operated by GNI and GNI is a regulated entity. The CRU regulates GNI under a revenue cap model which ensures that GNI earns no more and no less than the amount of revenue that the regulator has agreed for a five year period. The tariffs for using the gas network are set on the basis of the allowed revenue and the expected usage of the network. This is an important priority because the more the gas network is used, the cheaper it is for everyone to use it. An example of increasing throughput through the gas system is the use of Compressed Natural Gas (CNG) in transport.

Assist in the transition to a low carbon economy

Ireland’s transition to a low carbon economy is both a national and European objective. At a national level the government set out its vision and a framework for Irish energy policy up to 2030 in its Energy White Paper entitled ‘Ireland’s transition to a low carbon energy future’. The EU has highlighted the need to continue to drive progress towards a low-carbon economy which ensures competitive and affordable energy for all consumers, creates new opportunities for growth and jobs and provides greater security of energy supplies and reduced import dependence for the Union as a whole. An example of assisting in the transition to a low carbon economy would be the production of biomethane and its injection into the gas network. Biomethane is a renewable, carbon neutral fuel which gas customers can use to decarbonise their thermal needs without requiring any change to their equipment.

Deliver significant carbon savings

The EU has set out the target for everyone to reduce the GHG emissions from their energy sector by between 80% and 95% (compared to 1990 levels) by 2050. The 2020 climate change targets require a 20% cut in greenhouse gas emissions while the 2030 targets look for at least a 40% cuts in greenhouse gas emissions. Both of these targets involve a reduction in GHG emissions compared to their 1990 levels. An example of delivering carbon savings is when an energy customer switches from burning coal to using gas or on a much bigger scale when carbon capture and storage is used to capture carbon from industrial use or power generation.

Provide measurable value to all gas customers

It is important that the Gas Innovation Fund generates value for gas customers. This can be done in a number of ways such as by increasing the usage of the gas network or through research that aids the sustainability of the gas network. Research into the production and use of different types of renewable gases is essential to meet the needs of consumers in the future. In addition, research and demonstration projects that exploit the synergies between the gas and electricity networks e.g. power-to-gas can produce value for gas and electricity consumers.

Applications to the Gas Innovation Fund

All applications to the Gas Innovation Fund must be able to demonstrate how their project meets at least one of the above key priorities.

 

*Decision on October 2017 to September 2022 Distribution Revenue for Gas Networks Ireland (CER/17/259)

**The decision re the €12.83m was made by the CER in the Compressed Natural Gas Funding Request, Decision Paper, CER/16/313. https://www.cru.ie/wp-content/uploads/2016/07/CER16313-GNI-CNG-Funding-Request-CER-Decision-Paper.pdf