4. NATURAL GAS
The wholesale gas price in Ireland is linked to the gas trading hub (NBP) of the United Kingdom plus the transport cost to Ireland via the subsea interconnectors. If there is a gas supply emergency (e.g. a failure of the subsea interconnectors), Ireland relies on demand-side measures: interruptible contracts, fuel switching and load shedding (voluntary and forced) of major industrial users and households. During such events, demand and supply from the Irish market participants would be handled through the IBP, based on indigenous production, as that would be the only available supply. The wholesale gas price would likely rise to find a new balance between domestic demand and limited available supply. The government should investigate how demand restraint would work to limit gas demand in the case of an Irish-only gas shortage, when the IBP price is relevant.
Protected customers are given priority if there is an emergency. If load-shedding measures have to be applied, the order of load shedding to reduce gas demand is:
power generators
large daily metered customers, with an annual gas quantity metered higher than 57.5 GWh (e.g. large industrial consumers)
daily metered customers, with an annual gas quantity metered of 5.55-57.5 GWh
protected customers, as defined in EU Regulation 2017/1938 (e.g. emergency services, domestic load).
Volumetric savings resulting from this load shedding are used to protect the non-daily meter sector. Non-daily meter refers to less than 5.55 GWh of annual gas quantity metered. This covers small industrial or commercial customers and residential properties.
Gas-fired power stations in Ireland cover over 55% of gas demand. They can be instructed by EirGrid to switch to secondary fuel to prevent or respond to a gas emergency situation. Baseload gas-fired generators are required to have access to five days of secondary fuels, which are typically distillate oil. Mid-merit generating units are required to have access to 3 days of secondary fuel stocks. This secondary fuel obligation is an EirGrid grid code requirement. The latest version of the grid was updated in 2015. However, there are operational and technical risks associated with switching to secondary fuels or continued operation on secondary fuels for an extended period.
Assessment
The Irish government acknowledges that natural gas is essential to the security and sustainability of Ireland’s energy system. Since the last IDR in 2012, the share of natural gas in TPES has remained stable at around 31%, but the share of indigenous gas in total gas supply has significantly increased due to the Corrib gas production at the end of December 2015. The high level of self-sufficiency in gas supply is expected to decrease significantly. Corrib gas production is projected to more than halve by 2026, and gas imports from the United Kingdom will be restored as the dominant supply source by as early as 2019.
The Irish government has been proactive in engaging with the private sector in exploration and production activities. The outcome of the Atlantic Margin Licensing Round 2015 has demonstrated a strong interest from oil and gas companies to prospect the Irish offshore. Although fiscal and regulatory incentives have been introduced, reflecting on the extended time it took for Corrib gas field to start production from its
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discovery 22 years ago, the Irish government can benefit from streamlining the regulatory procedures and engage as early as possible with all local stakeholders to improve social acceptance.
Development of indigenous renewable gas would also provide Ireland with flexibility to optimise the role of gas. There is no production of biomethane in Ireland, but the country has the highest potential for biogas production per capita among EU member states. Ireland would benefit greatly from upscaling its limited biogas processing facilities. For promotion of renewable gas in the transport sector, the Causeway Project is a noticeable achievement that the Irish government should continue to closely monitor and support to reach the ambitious target of at least 20% of renewable gas injected into the network by 2030. More support programmes should be introduced to promote decarbonisation in the transport sector in the long term. The Irish government should conduct a comprehensive cost and benefit study to allocate necessary resources and accelerate the development of renewable gas in Ireland.
Ireland’s annual gas demand has increased since 2014, and is expected to grow by 23% to 2026. Electricity generation will remain a dominant driver of the anticipated growth. Gas consumption for the residential sector will depend on the outcome of gas distribution network development, although it is also expected to grow.
The natural gas market has experienced several positive developments in recent years. The unbundling of the previous vertically integrated utility Bord Gáis Éireann and the sale of its retail unit Bord Gáis Energy have greatly improved the liquidity of the Irish gas market. More-balanced market shares among diversified companies and the increasing number of switching customers in the retail market are positive signs of increased competition.
There are still some challenges ahead for Ireland regarding the SoS. The United Kingdom remains its only gas import source, and there has not been a gas storage facility in operation in Ireland since 2017. The European supply standard (N-1 target) is met only due to the joint risk approach between Ireland and the United Kingdom. It is crucial for Ireland’s gas SoS to maintain a strong regional collaboration when the United Kingdom leaves the European Union. Building LNG import facilities soon would improve gas supply security in Ireland, as the country is not yet connected to the global LNG market.
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Recommendations
The government of Ireland should:
Ensure a stable and streamlined regulatory framework, and conduct regular licensing rounds, to encourage exploration activities and, subsequently, develop domestic reserves.
Optimise the role of gas in the transition to a low-carbon-energy system, including encouraging, through appropriate regulation and policy, the development of an LNG import facility and seasonal gas storage. A costbenefit analysis should be used when deciding on any public infrastructure investments and developing programmes for gas demand in the heating and transport sectors.
Subject to a cost and benefit analysis, introduce and promote, through a robust support scheme, the production of biomethane as an indigenous and sustainable form of gas that will contribute to the security of supply and sustainability targets.
References
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CRU (2018b), Revenues & Tariffs (Price Controls), CRU, Dublin, www.cru.ie/professional/energy/energy-networks/revenues-tariffs/#5-year-allowance (accessed 29 October 2018).
Dancer, P.N. et al. (2005), The Corrib Gas Field, Offshore West of Ireland, Petroleum Geology Conference Series, Vol. 6, Geological Society, London, pp. 1 035-46, https://doi.org/10.1144/0061035.
DCCAE (Department of Communications, Climate Action and Environment) (2018), Types of Authorisations, DCCAE, Dublin, www.dccae.gov.ie/en-ie/natural-resources/topics/Oil- Gas-Exploration-Production/licensing/types-of-authorisations/Pages/Types-of- Authorisations.aspx (accessed 29 October 2018).
DCENR (Department of Communications, Energy and Natural Resources) (2015), Ireland’s Transition to a Low Carbon Energy Future 2015-2030, DCENR, Dublin, www.dccae.gov.ie/documents/Energy%20White%20Paper%20-%20Dec%202015.pdf.
EC (European Commission) (2017), Optimal Use of Biogas from Waste Streams – an Assessment of the Potential of Biogas from Digestion in the EU beyond 2020, EC, Brussels, https://ec.europa.eu/energy/sites/ener/files/documents/ce_delft_3g84_biogas_beyond_202 0_final_report.pdf.
EPA (Environmental Protection Agency) (2012), Inspector’s Second Report – Corrib Gas Pipeline, EPA, Dublin, www.epa.ie/licences/lic_eDMS/090151b280451a4a.pdf.
GNI (Gas Networks Ireland) (2017), Network Development Plan 2017 – Assessing Future Demand and Supply Position, GNI, Dublin, www.gasnetworks.ie/corporate/gas- regulation/system-operator/publications/GNI-Network-Development-Plan-2017.pdf.
GNI (2018a), The Causeway Project, GNI, Dublin, www.gasnetworks.ie/business/natural- gas-in-transport/the-causeway-project/ (accessed 6 November 2018).
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GNI (2018b), Long Term Resilience Study 2018, GNI, Dublin, www.dccae.gov.ie/enie/energy/publications/Documents/22/Long%20Term%20Resilience%20Study%202018.pdf
IEA (International Energy Agency) (2018a), World Energy Balances 2018, OECD/IEA, Paris, www.iea.org/statistics/.
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