IGU Global Gas Award Competition. Opening up the Gas Market

Transcription

1 Competition Opening up the Gas Market

2 Opening up the Gas Market One small Scottish community may well be about to change the gas industry for the better Contents 1 Abstract Background Aims Benefits Project strategy Customer and Stakeholder engagement Achievements so far Next steps Supporting statement

3 1 Abstract SGN s pioneering project, Opening up the Gas Market (OGM), aims to tackle the many of the challenges faced today within the energy trilemma by ensuring gas supplies are clean, secure and affordable. Great Britain (GB) is now a net importer of gas, with prices and access to supply increasingly depending on international markets. Hence, GB gas prices exhibit volatility, given the short-term and/or spot market conditions. Whilst the sources of new natural gas are numerous, gases have different compositions and GB s specification for gas composition is very prescriptive, therefore limiting the gas market and exacerbating the problem. Current arrangements dictate that in order for gases with compositions that sit outside of GB s gas quality specification to be conveyed and used within GB, expensive gas processing is required to bring them within these specifications. This limits the type and source of gases which can be used in GB and, in turn, ultimately leads to increased costs for the consumer. The Opening up the Gas Market (OGM) Project will demonstrate that gas which meets the European Association for the Streamlining of Energy Exchange-gas (EASEE Gas) specification but sits outside of the characteristics of specified within GB Gas Safety (Management) Regulations (GS(M)R) 1996 can be distributed and utilised safely and efficiently in GB. For this demonstration, we have a unique opportunity to utilise one of our discrete, isolated networks which we operate in remote parts of Scotland, called the Scottish Independent Undertakings (SIUs). This Project is based on the principles of increasing competition for network entry, improving energy security, reducing the cost of gas for customers through opening up the market to new sources and reducing the requirement for expensive processing in the future. This is a GB first and will pioneer the way for new sources of gas which can support energy diversity as well as security of supply. This innovation will be a first step towards the largest transformation of gas quality in GB since the conversion from town s gas in the 1960s to natural gas, and will lead the way for new sources of gas which can support energy diversity as well as security of supply. Not to mention, this is also the largest gas appliance study to have ever been undertaken in Europe. This is a unique project with a groundbreaking opportunity to make a significant difference to the gas industry not just in GB but also in Europe. The project commenced in January 2014 and is due to complete in July March 2015

4 2 Background Increasingly, from around 2005 and beyond, dwindling gas reserves in GB have created security of supply concerns, leading to GB gas price increases. The current GB gas specification requirements, as set out in GS(M)R (1996) differ from those employed elsewhere in the European Community and internationally. This poses difficulties for the wider industry with regard to the increased importance of imported natural gas, LNG and unconventional gas such as shale gas and coal-bed methane. Furthermore it restricts the use of biomethane as a renewable green gas and hydrogen as a clean gas option for injection to the networks. Wobbe Range of Various Gas Sources Wobbe Range (MJ/m3) LNG North Sea Shale Biomethane Hydrogen GS(M)R EASEE Gas Source Wobbe Index Comparison at 15 C and 15 C reference conditions With a backdrop of this type of market rigidity, the OGM project hopes to redefine the GB gas specification in order to help tackle the problems associated with security of supply and rising gas costs for the consumer. Changing GS(M)R to align with EASEE Gas will open the market and accommodate the introduction and use of abundantly available alternative sources of gas without the need for expensive processing. As a major natural gas consumer in Europe, GB has one of the smallest ranges of Wobbe Index allowable. The GB market is therefore attractive in terms of volume but less attractive in the requirement for gas processing and ballasting of LNG imports. Future harmonised European gas quality standards will improve GB s potential trading position. The Wobbe Index (WI) is the most important quality parameter in regard to the combustion of natural gas. Gas appliance technology has undergone decades of development reflecting the properties of the natural gases normally used in the respective counties. As a result European Union (EU) member states have developed and specified different WI ranges to ensure safe, low emissions and efficient operations. Europe is working towards a harmonised and wider gas specification called the EASEE Gas; a legislative package derived with a purpose to further open up the gas markets in the EU. Changing GS(M)R to align with EASEE Gas will widen the market and accommodate the introduction and use of abundantly available alternative sources of gas without the need for expensive processing. 4 March 2015

5 3 Aims The Opening up the Gas Market project aims to change the gas quality parameters in GB in order to ensure that future gas supplies are: 1. Secure: a range of reliable gas supply sources and no over-reliance on any source 2. Low-carbon: gas which is consistent with legally-binding carbon targets; and 3. Low-cost: delivering 1 and 2 at the lowest cost possible to consumers. 4 Benefits This project has benefits on many fronts, but can be broadly categorised as follows: Security benefits: Increases sources of gases which can be distributed and utilised in GB. Supports energy diversity Strengthens the case for a harmonised European gas quality standard Low-carbon benefits: Widens scope for accepting varying green gas specifications. Increases the likelihood of hydrogen injection in the future Negates requirement for out of specification gas flaring in GB Reduces requirement for manufactured gases used in processing Low-cost benefits: Increases market competition through introducing new gas supplies Increases market efficiency Eliminates the requirement for gas processing, leading to reduced cost for the consumer A recent study by National Grid Gas has estimated that, by removing the need for nitrogen ballasting in GB, the financial benefit of this project could be in excess of 325m per year, which would be passed back through to the customer 5 Project strategy The strategy for achieving the aims of the project is to demonstrate, through statistical sampling, that gas appliance installations in GB are capable of burning gases with a wider quality variation (either richer or leaner Wobbe Index) than currently permitted in GB. Following the successful testing of appliances, a pilot trial will be conducted by conveying rich Wobbe gas (that sits outside the GB specification) through the network. In order to do this, SGN have a unique opportunity to utilise one of our gas networks in Oban. Oban is a town in the Highlands of Scotland and is statistically representative of GB on a socio-economical level (essentially a microcosm) which means that the 1,104 gas properties in Oban contain the full 5 March 2015

6 range of appliance types and models likely to be out there in GB. This enables us to evaluate the potential for this solution to be rolled out across GB. Furthermore, Oban has its own independent gas distribution network. It is a discrete distribution system that is isolated from the UK National Transmission, Regional Transmission and Distribution systems. Gas conveyed within Oban is supplied as revaporised LNG. This makes Oban the ideal location for the project. There are three stages of the project: Stage 1 - appliance survey and detailed laboratory testing In Stage 1 a survey of gas appliances in 100 randomly selected customer properties in Oban was conducted in summer The survey results provided an understanding of appliance stock in Oban, recording their make, model, condition and manufacturer details. During this time, if any appliances encountered were considered to be unsafe or in need of repair, we replaced or repaired them for free. The appliance types present within the appliance survey data are likely to be typical and representative of the entire appliance population in Oban, which enabled the use of a selection rationale by which to choose a cross section of 18 appliances of various types for laboratory testing using gases over an extended WI limit ( M/m 3 ) that exceeded the current GS(M)R. These 18 appliances were selected by each class (cooker, local space heater, boiler or commercial catering equipment) in combination with additional criteria such as manufacturer, product type, flueing, control type, age and condition. They were then put through their paces in laboratory conditions, testing each appliance across the full EASEE gas range and in various simulated scenarios, such as no ventilation, poor maintenance and long-term tests. These laboratory tests concluded that there was no increase in inherent risk due to the variation in WI. The results from laboratory tests have demonstrated unequivocally that gas appliances correctly installed, serviced and operated can safely burn gas with WI of up to MJ/m 3. 6 March 2015

7 Stage 2 - In-situ appliance testing in all 1,104 customers' properties The project is now approaching the final phases of Stage 2, which began in November Since then, 680 appliances across 430 properties have been testing using three different compositions of natural gas 1 on their appliances. We designed and built our own portable testing vehicles specifically catered to the project s requirements to allow these gases to be transported to each property. During the tests appliance gas combustion performance is recorded and analysed. Appliances which do not pass the test performance criteria, e.g. those exhibiting high CO emissions, are replaced by the project free of charge and all customers receive a complimentary CO detector. The results from the field tests have also demonstrated that appliances correctly installed, serviced and operated can safely burn gas with WI of up to MJ/m 3. Of the appliances tested in Oban up to mid March 2015, approximately 95% are judged to fall into this category. The remaining 5% are considered At Risk or Immediately Dangerous, as per the Gas Safety (Installation & Use) Regulations and the guidance given in the Gas Industry Unsafe Situations Procedure, though this is due to the preexisting condition of the appliance rather than the variation in gas. Laboratory tests have shown an increase in WI to MJ/m³ would not expose the consumer to any further risk than that already posed from the appliance. Stage 3-1 year trial distributing rich Wobbe Index gas through network 1 G20 (WI 50.72MJ/m₃), G21 (WI 54.76/m₃), G23 (WI 45.66/m₃) 7 March 2015

8 For the final stage, a source of gas with a higher quality than already used in the network will be chosen and injected into the Oban network for one year. During that period, we will revisit 200 customers properties to test how their appliances are performing. The LNG will be transported to Oban from the continent via road tanker. To facilitate this we have ventured in to unchartered territory and set up GB s first ever LNG shipping agreement with between a Gas Distribution Network and a gas shipper. The gas will be transported primarily from Zeebrugge as illustrated below. 5.2 Customer and Stakeholder engagement Customer and stakeholder engagement is an essential ingredient to the success of this project. The project has two distinct categories of stakeholders; local and national. At a local level in Oban, the customers need to be engaged to allow access to their properties in order to test their appliances. This has required much emphasis to be placed on Communication activities and material. The project is also working alongside the local council, community groups and businesses to help ensure access to customers properties and in turn improve the results. An example of some of the local stakeholder initiatives undertaken by the project include the project team hosting a cooking with gas event whereby a professional chef provided cookery demonstrations for the local community. Other examples are SGN sponsoring the Oban Winter Festival, drop in sessions in the town hall to provide an opportunity for customers to ask questions and even showing the project film 2 as a trailer before films in the Oban cinema. 2 Project film can be found at 8 March 2015

9 On a national level, stakeholder such as the Health and Safety Executive (HSE) and other government bodies must be engaged in order to ensure the results of the project are disseminated nationally and acted upon. Primary stakeholders include Ofgem, the GB energy regulator, (HSE) who control the GS(M)R from which an exemption is required to allow the injection of the new gas into the network and the Department for Energy and climate change. A Technical Stakeholder group has been set up to aid future GB roll out. 6 Achievements so far Project results so far indicated that there is no reason to suggest WI cannot be increased to at least MJ/m³ in GB. As a further benefit of the work we are doing in Oban, the project has removed or rectified any dangerous appliances that we have encountered in customers homes so far... for free. Furthermore we have issued every customer with a free CO alarm. Feedback from customers and stakeholders to date has been overwhelmingly positive. My fire has been damaged for a few years I wasn t surprised when they [SGN] said it was dangerous I was really pleased that they offered to replace it for free Mr Graham, Oban "SGN's innovative project in Oban could pave the way for more secure gas supplies and lower bills across all of GB. Not only is the project itself innovative - it s the first of its kind in Europe. One small Scottish community may well be about to change the gas industry for the better - Mike Mackenzie, MSP for Highlands 9 March 2015

10 7 Next steps The project is currently midway through stage two and will continue to lead the way in the largest appliance study ever conducted in the EU by completing the testing in Oban. Following this, the results will be collated from which a conclusion can be drawn on a safe Wobbe Index limit for the GB. The HSE are currently reviewing the project s application to receive an exemption from the requirements of GS(M)R, which will allow commence stage 3 by enabling us to inject gas outside of these regulations into the Oban network The new gas source will be injected into the Oban network for one year to allow enough time to survey its performance. Following the success of this project, a road map for GB roll out will be devised and a strategy established for feeding into work on the European scene. 8 Supporting statement This project actively supports the promotion of natural gas for sustainable development. If successful, the project will prove that natural gas is the long term solution to providing energy not only for Oban, but also for the other Scottish Independent Undertakings, GB and Europe. The long term goal is to widen the GS(M)R permanently, allowing a wider range of natural gas to be used in the GB network. This will remove the requirement for gas processing through nitrogen ballasting, saving GB over 325m per year, which in turn will be passed through to the gas customer. This project is based on the principles of increasing competition for network entry, improving energy security, reducing the cost of gas for customers through opening up the market to new sources and reducing the requirement for expensive processing in the future. The project is a GB first and will pioneer the way for new sources of gas which can support energy diversity as well as security of supply. 10 March 2015