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Questions over Arlene Foster's energy bill legacy

To coincide with Arlene Foster's departure from Stormont Political Correspondent John Manley casts an eye over Gas to the West – an ambitious project she championed while economy minister

Pictured at the launch of Gas to the West in 2015 are SGN's John Morea, Utility Regulator Jenny Pyper, economy minister Arlene Foster and Paddy Larkin of Mutual Energy. Picture by Press Eye

ARLENE Foster will be remembered for many things – crocodiles, of being accountable but not responsible, of acting as the DUP’s self-styled “gatekeeper” during 2015’s hokey-cokey ministries stunt. More benignly, others may wish to associate her with the Giro D’Italia or bringing the Open to Portrush.

It can be argued that her legacy is also very apparent in your gas and electricity bill.

For seven years, the former DUP leader held Stormont’s economy portfolio – a ministry her party has occupied exclusively since devolution was restored under the St Andrews Agreement in 2007.

Her oversight – and criticism of it – when it came to the non-domestic Renewable Heat Incentive (RHI) has been well documented. She famously told this newspaper in 2016 that nobody could expect her to be “across every jot and tittle” of her brief, which included aspects of the north’s lucrative energy sector.

In addition to the aforementioned RHI, the costs of which have been substantially curtailed, Mrs Foster was instrumental in implementing other large scale energy-related policies for which consumers are still paying and will continue to be charged for decades to come.

Last month, Stormont’s Public Accounts Committee delivered its report on the Northern Ireland Renewables Obligation (NIRO), another ‘green’ energy scheme involving £5bn worth of subsidies, dwarfing RHI.

Many in the renewables industry point to the success of the scheme in encouraging green electricity production and creating jobs but significant questions remain about whether it provided value for money.

Similar questions are now beginning to be asked about another energy project Mrs Foster was responsible for commissioning while economy minister. Gas to the West, a £250m venture extending the natural gas network west of the Bann, was ambitious in its scope as it was targeting an area of relatively low population density. It was also being conceived at a time when, in response to climate change, UK energy policy was starting to move away from fossil fuels.

While many big businesses had complained they were disadvantaged by a lack of access to gas, a technical and economic feasibility study and business case analysis in 2012 concluded that the infrastructure would not to be commercially viable without a cross subsidy or government funds.

Since first coming online in 2017, the project has delivered a cheaper, more environmentally-friendly fuel to previously oil-dependent big businesses like Co Fermanagh glass maker Encirc and more than two dozen other large manufacturers, including LacPatrick Dairies, Dale Farm and Moy Park. Getting big users connected is a priority as they drive the investment, especially early on.

Between them, the large businesses currently consume more than 84 per cent of the fuel pumped through the Gas to the West network, which was supported by a £32m grant from Mrs Foster’s then department, with the rest of the cost spread over 40 years. Mutual Energy, a company limited by guarantee, has financed the project through a long-term, low interest deal with Legal and General. According to Mutual’s CEO Paddy Larkin, this deal and reduced construction costs, enabled a £100m discount on other bids.

However, there have been delays in rolling out the project and a failure so far to convince enough households and small business in towns like Dungannon, Strabane and Omagh to switch to gas. Gas is now available to some 18,000 homes and small businesses but the Utility Regulator says fewer than 1,800 have switched, a figure the watchdog says represents 30 per cent of its target for uptake in the Gas to the West region.

The project was pitched, and received government support, on the basis that it would make gas available to 40,000 households, helping combat fuel poverty and lower carbon emissions.

The Gas to the West transmission pipeline is operated by SGN and the distribution network by its sister company SGN Natural Gas. SSE-Airtricity has a domestic retailing monopoly in the region due the immaturity of the market.

The more customers who sign-up, the more the overall cost is spread. Also through a concept known as postalisation, the cost of the pipes is subsidised by gas customers in the so-called Ten Towns region and Greater Belfast, where the latter’s domestic users currently pay £3 a year from their bills, or around £120 in today’s money over the project’s lifetime.

Notably, when the Utility Regulator was asked by The Irish News what the total cost to all gas consumers over the lifetime of the Gas to the West is, a spokesperson said the range of variables meant it was “not possible to provide a reliable estimate of the lifetime costs” or to say what proportion is borne by domestic customers in Greater Belfast.

Against a background of rising gas prices and the expected effort to decarbonise the north’s energy sector, questions are now being asked about whether Gas to the West provides good value for money and even if it could become redundant during the payback period, as fossil fuels are phased out. In 2015, the Committee for Climate Change noted in relation to Gas to the West: “Although gas is a cleaner more efficient fossil fuel than oil there could be a risk of locking into an unnecessary infrastructure.”

Foyle MLA Sinead McLaughlin, deputy chair of Stormont’s economy committee, told The Irish News data demonstrated that what she termed the “big winners” from Gas to the West were a “select few companies, rather than domestic consumers”.

“Consultants told Mrs Foster’s department at the outset that the finances for the project wouldn’t stack up without government support and now its long-term financial viability looks questionable, even with more than £30m of taxpayer’s money," she said.

"Hard-pressed consumers cannot afford to pay anything more for Gas to the West.”

Ms McLaughlin also questioned the wisdom of building a network that utilises fossil fuel a decade after UK climate change legislation came into force.

"Governments have known for decades about climate change and the need to decarbonise, and gas is one of the fossil fuels responsible for carbon emissions and the climate crisis,” she said.

“So it is impossible to understand why decisions were taken so recently to move ahead with the further use of gas, rather than focusing on making our homes more energy efficient."

According to SGN Natural Gas, the project “remains firmly on track” though the company concedes that Covid has slowed things down.

SGN Nartural Gas told The Irish News: “We are in line with our company forecasted uptake.

“To be clear, the 40,000 connections target you refer to is by 2056.”

The company also argues that Gas to the West is “uniquely positioned” should there be a transition from natural gas to more environmentally-friendly hydrogen as a means of heating homes and powering businesses. Its parent company is involved in a pioneering project that uses offshore wind to produce hydrogen that will then be used to heat around 300 homes in eastern Scotland.

Ms McLaughlin is sceptical about the potential for hydrogen to replace gas in the network, describing it as a “very optimistic hope, given current knowledge”.

"Using renewable sources for hydrogen production is an excellent opportunity for use in some transport and industrial applications, but there is no reason to believe at present that it will be a realistic and sustainable home heating source,” she says.

Th Utility Regulator said the Gas to the West project is about “providing choice for energy consumers”.

“There has also been a pick up in the number of household and small business connections and it is expected that there will be further significant growth in connections across these consumers going forward,” a spokesperson said.

The Irish News contacted Mrs Foster’s office and the Department for the Economy for comment but there was no response from either.

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