Ervia to invest €6.5bn on gas and water infrastructure protection
05 May 2015
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Author: Michael McNicholas, chartered engineer, CEO of Ervia
I expect that many readers of this article may not have heard of Ervia and that is not a surprise, as we are only 12 months old as a company. Yet we have over 40 years’ experience operating in Ireland and, in the next seven years, we expect to spend approximately €6.5 billion on critical national infrastructure.
Ervia’s origins stem from the former Board Gáis Éireann (BGE) – and from two key decisions made by Government in 2011. The first was that BGE should sell its energy division, but retain the national gas transmission and distribution infrastructure in State ownership. The second was that the company would be responsible for the establishment of a new national water utility. The sale of the energy division required us to change the name of the company and we saw this as an opportunity to transform the company to create a multi-utility company focused on delivering critical national water and gas infrastructure and services. And so Ervia was born.
In the last two years, we have completely restructured the company, changed our name, rebranded our gas business to Gas Networks Ireland and established Irish Water as a national utility responsible for water and wastewater infrastructure and services.
Ervia is a 100% Irish company and operates as a commercial semi-State. We have responsibility for the development of Ireland’s national gas and water infrastructure to meet the needs of the Irish economy. We are driven to do this efficiently and will seek to maximise the synergies, savings and benefits from having two utilities in the one group, in essence to deliver a high-performing Irish multi-utility company.
Gas infrastructure and services business
Gas Networks Ireland develops, operates and maintains the natural gas transmission and distribution networks in the Republic of Ireland and provides gas-transportation services to major energy companies and industrial gas users. In Ireland today, we have one of the most modern gas infrastructures in Europe. We have a national distribution pipeline network of 11,218km and a transmission network of 2,467km that links Ireland to the UK and Continental gas markets through two Interconnector pipelines with Scotland.
The energy mix that powers Ireland’s economy has changed significantly in the last decade with a major increase in the use of renewables, the building of an electrical interconnector to Britain and the focus on decarbonising our economy.
As a low-carbon fuel, gas has a critical role to play in Ireland’s future energy needs. Gas is a competitive fuel for business and industry, is cheaper and much lower in carbon dioxide than heating oil for domestic customers and gas-fired generation is the natural source of power to compliment intermittent renewable power. In simple terms, gas is the transition fuel to a low-carbon economy in Ireland.
In the next seven years, we plan to invest over €1 billion in improving the security of supply of Ireland’s gas network, expanding the availability of natural gas and in helping reduce carbpn dioxide in transport by supporting the development of a compressed natural gas (CNG) network.
CNG is a cheaper, low-carbon alternative to diesel for transport and Ireland is mandated by the European Union to implement a network of CNG filling stations in the next two years. Gas Networks Ireland will actively support the development of this network. We will also focus on the development of bio-gas to ensure a supply of renewable gas is available for national and multinational companies that require this as part of their energy mix.
Transforming Ireland’s water services
Irish Water is the new national water utility responsible for providing safe, clean, reliable and affordable water services to approximately 1.7 million homes and businesses in Ireland. Ireland’s water infrastructure is ageing and in poor condition; it struggles to meet increasing environmental and health standards and growing economic needs. Critical investment is essential to mitigate imminent risk of failure that would lead to problems with drinking water quality and supply, and wastewater treatment in many parts of the country.
The establishment of a single utility gives us the opportunity to take a structured, engineering based approach to fixing our water services. Irish Water will implement best utility practices in terms of asset management, standard operations and maintenance procedures, work planning and delivering capital projects.
The challenge we face in bringing our water services up to the required standards is enormous and will require a multi-billion euro capital investment programme. Irish Water must fix the existing infrastructure while delivering significant savings in the cost of the service. It must also be a consumer-led organisation with a focus on delivering improved service to customers. To put some numbers on it, we plan to invest approximately €5.5 billion in water and wastewater services, while delivering over €1 billion in cost savings over the next seven years.
At the end of this investment cycle, we will have delivered a system that meets the required standards for drinking water and for the treatment for wastewater, while meeting the increased capacity needed for a growing economy. Similar transformations in other countries have taken up to twenty years to be achieved, so we have set very ambitious targets for Irish Water.
We must acknowledge that the establishment of a new water utility and the introduction of domestic water charging have been challenging and the subject of much public debate. However, I believe a single national utility is the right approach to the provision of water services. These are critical services for a modern economy and it is not sustainable to allow them evolve as they have in recent decades.
A single utility with, the ability to raise capital in the international markets and that ensures long-term planning and funding of our infrastructure, provides the mechanism to fix this situation. Charging for water is a part of this journey and aligns Ireland with the practice in most modern economies. The prize for Ireland is the efficient treatment and supply of a precious natural resource with the capability to recycle our waste water cleanly back into our ecosystem for reuse. It is a vital prize that we must deliver not just for today, but for future generations.
A dual utility – presenting unique opportunities
Our bigger ambition for Ervia is best illustrated by a project we are working on at the moment. Gas Networks Ireland is bringing gas to Arrabawn Co-Op on the outskirts of Nenagh. This project provides us with the opportunity to bring gas to Nenagh town.
At the same time, Irish Water is planning the rehabilitation of the water and sewer network in the town. We have now combined this into a single multi-utility project. The two teams are working together to scope the project and ensure we deliver the gas, water and sewer project at the one time, minimising the disruption to the town and saving 30% on the cost of the project.
This is just one example of the benefits that can be delivered for a multi utility. Ervia’s focus is on maximising the synergies that can be gained from having two national utilities in the one company – from combined gas and water projects in cities and towns and seeking to procure all of our gas pipes and water pipes together, to getting economies-of-scale benefits for our customers.
In the future, we will look at a single call-centre for our customers, so that our service providers on the front line can deal with our gas customers and our water customers efficiently across the country. The potential opportunities are enormous and by achieving them we believe that we can bring real value and benefits to our customers.
Michael McNicholas was appointed CEO of Bord Gáis Éireann (now Ervia) in May 2013. Prior to joining Bord Gáis, he held the positions of CEO and chief operating officer during his time at NTR plc. Prior to joining NTR plc in February 2010, McNicholas worked with ESB for 26 years. He was an executive director for 10 years and held a range of leadership roles including executive director of ESB International, ESB Generation and ESB Supply. McNicholas has over 30 years’ experience in the Irish and international energy industry where he has held senior positions with responsibility for general management, organisational change, delivery of major capital projects, funding, international growth, managing regulatory environments and competing in open energy markets. He has a degree in engineering from University College Galway and is a chartered member of Engineers Ireland. He is also a Board member of the Irish Management Institute and has completed the Advanced Management Programme at Harvard University.
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