The Commission for Regulation of Utilities (“CRU”) published a policy on connecting biomethane producers to the gas network, including in relation to centralised grid injection (“CGI”) facilities.

This follows the consultation we considered here: Renewable energy: Consultation on biomethane connections, as well as other decisions supportive of biomethane, which we looked at here: Biomethane sector in Ireland: Decisions on Guarantees of Origin and Reverse Grid Compression.

Key points in the policy are summarised below.

Grid connections

Economic test for upfront costs

The economic test is designed to ensure that, over time, the socialised costs of a connection to the gas system will be recouped through the tariff revenues paid by the connecting party. The test is carried out in relation to a period of 10 years (the appraisal period). If assessed revenues are less than the socialised costs, the connecting party must pay a supplemental contribution (additional to the standard 30% customer contribution).

The appraisal period will now increase to 15 years, to improve the likelihood of projects passing the economic test without being required to pay a supplemental contribution.

Financial security

The CRU has decided to take into account different risk profiles as follows.

• Construction phase: Financial security will be required to cover all capex costs of the connection, less upfront contributions (noted above). It will not be required to cover the cost of the Biomethane Network Entry Facility (“BNEF”), which is a modular, relocatable asset that can potentially be redeployed to other locations if a project does not go ahead.
• Operational phase: Financial security will cover 70% of the capex costs (net upfront contributions), as well as the cost of the BNEF. The requirement will not be limited to seven years but will reduce in line with tariff revenues paid at the connection until cumulative revenues cover 70% of the capex costs.

These changes are intended to lower connection costs. The CRU considers that, for larger connections and those closer to the existing network, savings will primarily be driven by reduction in financial security requirements. For smaller connections and those farther from the network, savings will primarily result from lower upfront contributions.

CGI facilities

Cost allocation

A CGI facility enables injection into the network of biomethane transported by road from plants located too far from the grid for a direct connection. The CRU decided to implement the changes proposed in the consultation, meaning connecting parties will contribute to 30% of costs on a pro rata basis, in line with their contracted capacity. Cost allocation and financial security requirements will be based on the entire cost of the CGI.

GNI is pursuing a phased approach to the construction of the Mitchelstown CGI. The first phase is to deliver an injection capacity of 175 GWh per year, increasing to 700 GWh per year when fully operational. GNI will substantially complete the fixed civil works in the first phase and bear the risk of any future phases of development until the full capacity is contracted and the full proportion of capex is recovered.

Developer choice model

Under the developers’ choice model, the connecting party could choose between the maximum connection model, under which GNI installs, owns and operates a significant amount of the connection equipment, and the minimum connection model, under which much more of the connection could be provided by the connecting party.

The CRU considers it appropriate for GNI to engage with stakeholders on potential delivery of any future CGIs under a developers’ choice model. The CRU will consider the timing of transition to a developers’ choice model in the 2027 CRU Workplan.

Next steps

GNI will update its Connections Policy Document and any other relevant documents. The Code of Operations will be updated. The CRU intends to monitor the effectiveness of the updated policy through the PC5 Reporting and Incentives Framework.

The policy tackles certain network access and financial security barriers identified across Europe as obstacles to biomethane deployment. It is an important contribution to enabling the sector to scale at the pace required to deliver on domestic and EU goals. Further steps could be taken, such as the introduction of a dedicated support scheme, as is the approach in the renewable electricity sector.