This section provides an overview and an assessment of the gas demand forecasts used to determine the optimal requirements for gas infrastructure. The basic methodology employed by BGE and its consultants in developing the demand forecasts is presented together with the main assumptions. Gas demand forecasts are presented for both the Republic and Northern Ireland.
For the purposes of this evaluation we are assuming in the baseline demand forecast that the (fuel oil) Poolbeg Steam power plant (510MW) is interruptible. This assumption contrasts with the original demand forecasts in the BGE/Sofregaz 2025 study which were based on a firm load. Gas demand by the new CCGT power plant at Poolbeg (470MW), which is due to be completed during the winter of 1999, is assumed to be firm, although it would be possible to run those units on gasoil. Emission characteristics of running Dublin dual-fired plant on oil would have to be taken into account.
2.1: The Basic Methodology
The basic approach taken in the gas demand study was a scenario based approach to planning for the future which considered the following:
Certain predetermined elements of the future such as demographic changes, electricity/gas liberalisation, etc..
Some elements which are capable of being forecast with some degree of certainty, though that capability becomes more uncertain the further out into the future one looks.
Other uncertain elements that require views about how the world might develop over time.
The scenario approach was adopted to enable a range of future supply options to be evaluated from a technical point of view. In this regard the consultants consider the scenarios to be wide enough in scope to take on board all (reasonably) possible future worlds.
2.2: The Gas Demand Scenarios
Three gas demand scenarios were developed for Ireland according to different sets of assumptions related to a set of main drivers, which included economic, political, social, technological and environmental factors, which we review later.
Gas World:
This scenario combines all of the elements that would lead to a high demand for gas. There are two variants A and B as follows:
Gas World A
: The highest demand scenario for gas without the conversion of the Moneypoint coal power plant to gas.
Gas World B
: The highest demand scenario for gas with Moneypoint converted to gas between 2005 and 2010.
Battlefield
This scenario combines all the elements that would lead to a low demand for gas.
Conventional Wisdom
Under the Conventional Wisdom scenario gas demand is forecast between the Gas World and the Battlefield scenarios.
The level of peak day gas demand forecast for Ireland is shown in Figure 2.1. The Battlefield Scenario represents the lowest demand at 24.5 mscm/d in 2025 compared with peak demand at 48.1 mscm/d under Gas World B. Gas demand at the peak amounts to 38.75 mscm/d in 2025 under Conventional Wisdom, which is marginally ahead of the mid-point between the Battlefield and Gas World B scenarios.
2.3.1: Political
The key issues here comprise:
The implementation of the EU Electricity and Gas Directives.
The liberalisation of the power generation sector in Ireland will be by way of the authorisation model.
In a high gas demand scenario there is the possibility of more generation plant being built than that required to meet electricity demand growth only.
The varied levels of security of supply offered by the gas infrastructural options.
Political developments will impact on the degree of commercial linkage between the South and Northern Ireland.
2.3.2: Social
The key social drivers are:
The growth in the number of independent households reflecting demographic pressures such as the rise in the adult population and the level of immigration.
Increasing headship rates will increase household formation bringing the average number of adults per household to just over 2 by 2011, almost in line with the current EU average.
The underlying household formation of around 19,000 households per annum will continue.
2.3.3: Economic
In preparing the gas demand forecasts for Ireland the approach is based around the ESRIs Medium-Term Review central forecast. The average growth in GNP is assumed to be 5% a year over the period 2000-2005 with some deceleration to 4.2% a year in the following five years. Beyond 2010 the average annual growth rate is forecast at 2%. It is this growth in economic activity which will drive the demand for energy, and as a result, the demand for gas over the period to 2025 in the Gas World and Conventional Wisdom scenarios.
In the Battlefield Scenario the MTR projections are revised downwards to an average of 3.5% a year out to 2010 and to 1% a year thereafter. The lower economic growth reduces the demand for gas across the economy as a whole.
The level of gas prices relative to those of fuel oil and coal will also impact on gas demand. Apart from the Battlefield Scenario it is assumed that gas prices remain competitive with oil or alternative fuels, resulting in gas gaining market share from existing fuels.
The assumptions for economic growth impact on gas demand in the following sectors:
a. Power Generation
b. Residential
c. Industrial
d. Commercial
(a) Power Generation
Gas demand for power generation is based on the relationship between GDP and total final consumption of electricity. The derived GDP elasticity of demand is 0.91.
The existing power stations in Ireland using gas are Marina (85 MW), Aghada (255 MW), North Wall (250 MW) and the Poolbeg Steam plant (510 MW).
The assumptions concerning new plant take into account the results of an analysis of capacity requirements for power generation carried out by the ESB over the period to 2005. The broad conclusions of that report were, assuming a median demand scenario:
New plant is required in late 2001/early 2002.
New capacity of over 800 MW is required by 2005.
The gas demand forecasts for power generation assume that new power generation is built earlier than suggested by market growth. Thus under Gas World A scenario, the first four new CCGT (4*350 MW) stations are built in 2001, 2002, 2005 and in 2006, with every third station assumed to be located in Cork and all others in Dublin. Existing dual fired stations are replaced with CCGT. By 2025, there are the equivalent of twelve new CCGT stations, nine of which are located in Dublin and three in Cork.
Gas World B is similar to Gas World A except that Moneypoint is converted to the equivalent of three new CCGT stations (3*350 MW) by 2007.
Under the Conventional Wisdom scenario, the first four new CCGT (4*350 MW) stations are built in 2002, 2004, 2006 and in 2008, with every third station again assumed to be located in Cork and all others in Dublin. New CCGT are built to meet market need only, in contrast to the Gas World scenarios. Nonetheless, by 2025, there are also the equivalent of twelve new CCGT stations, nine of which are located in Dublin and three in Cork.
(b) Residential
The gas demand forecast for the residential sector is based on the ESRI/MTR Central forecast for households in the Gas World and Conventional Wisdom Scenarios. The latter assumes that the number of households increases by 1.7% per annum between 1998 and 2010 to reach 1.44 million by 2010 and by 1% per annum over the following fifteen years to reach 1.67 million by 2025. A lower bound scenario is assumed for the Battlefield Scenario which assumes that the number of households reaches 1.39 million in 2010 and 1.61 million in 2025.
Gas market penetration increases to x% of households (where gas is available) under Gas World A and B and to x% under Conventional Wisdom but only to x% under Battlefield.
The above assumptions for gas market penetration give rise to an increase in new residential customers ranging from x per year up to 2010 under Battlefield to x per year under the Gas World Scenarios.
( c) Industrial
Under Gas World the demand for industrial non-electricity energy demand is based on the ESRI/MTR Central Forecast for manufacturing employment and assumes, based on historical trends, that the share of gas in the industrial non-electricity energy market
.
.. x%. Industrial gas demand is held constant at 1997 levels in the Conventional Wisdom and Battlefield Scenarios.
Gas demand for industrial processing is included under IFI demand, which is assumed to remain at 1997 levels in all scenarios, except in the Battlefield scenario, which assumes that IFI ceases production.
(d) Commercial
An upper bound for energy demand in the commercial sector is determined by regressing energy demand on the volume of consumption expenditure and on the price of electricity relative to consumer prices. The level of gas demand is estimated by assuming that the gas share of energy consumption remains constant over the forecast period. Gas demand under Conventional Wisdom is assumed to rise in line with employment in the services sector. The lower bound forecast in the Battlefield Scenario is based on the lower forecast for services employment in the ESRI/MTR review.
2.3.4: Technological
Combined Cycle Gas Technology is assumed to be a key driver of gas demand in power generation, providing economical, environmentally acceptable and modular solutions to generation in liberalised markets.
CHP technology is assumed to reach 5% of electricity demand by 2010, which entails significant growth over present levels.
A build up to 1,000 MWs of power generation from renewables is assumed in all scenarios.
2.3.5:Environmental
Environmental legislation is assumed to be framed at Global, EU and National levels, although responses to meeting obligations can be determined locally.
The key issues here comprise:
The implementation of the Kyoto Agreement on CO2 and other greenhouse gas limits.
Longer-term energy efficiency issues that have the potential to reduce significantly the usage of gas per household in the long term with correct fiscal incentives. This is more likely in the low demand scenario where householders are assumed to retrofit high efficiency equipment, insulation etc.