European Commission plans could see natural gas rationed across member states if demand exceeds supply consequent on the war in Ukraine.

There is a stated intention to cut the volume of EU gas imports from Russia by as much as two-thirds over the remainder of 2022.

Since European domestic supply and the capacity to import non-Russian gas are limited, the prospect looms that there will be physical shortage.

An excess of demand over supply implies the allocation of gas through an administrative process, aka rationing.

The Irish situation is particularly acute since there is no importation terminal for liquefied natural gas and the only pipeline gas comes from is a non-EU country, the United Kingdom, itself not assured of adequate supply. The Government has commissioned a report on energy security, but its publication has been delayed.

There is guidance available from the State pipeline company Gas Networks Ireland (GNI) on the allocation priorities and there was a presentation to dairy processors last week.

The GNI guidance relates to an unspecified emergency and indicates how gas would be allocated among users in order to avoid operational problems for the high-pressure pipeline network. This is not the allocation plan for a prolonged shortage – such a plan must await the energy security review.

Roughly a quarter of Irish gas demand has recently been supplied from the Corrib field off Mayo but output is scheduled to decline as the field depletes. The rest is imported by pipeline from Scotland.

Gas demand in Ireland comes mainly from power stations, of which there are 11 in the Republic, responsible for 56% of total gas usage in 2020.

Despite the efforts to expand renewables, especially wind, almost half of all electricity consumed is generated from burning gas in these power stations.

Another 30% of demand is from business and industry and the remaining 14% goes directly to households, mainly in Dublin and Cork.

Emergency

The GNI plan envisages that gas users would, in an emergency by which they mean an unanticipated shortfall in availability, be denied supply in line with the size of their load.

Generating stations would be asked to shed load first, followed by the large industrial users in descending order.

This seems a reasonable procedure and the engineers know best what needs to be done quickly in these unforeseen circumstances.

But when a shortfall is expected, and thought likely to endure, the procedure will have to be different.

The priority to be attached to different customers becomes a question of economics – which customer loads have the greatest value if allocation by price has to be suspended – and a question of fairness, and thus of political decision.

The current situation, courtesy of Vladimir Putin, is that a scarcity of gas and an EU-mandated system of allocation is on the cards

The NGI document outlines a sequence of three steps which need to be taken in anticipating and managing a possible gas supply crisis. The first they call risk assessment, the second a preventative action plan should a serious supply risk be seen on the horizon. The third is the emergency action plan, the only component which NGI has outlined in any detail.

The document is dated February 2016 and would be a good guide to what might happen if gas supply suddenly went into unforeseen deficit.

The current situation, courtesy of Vladimir Putin, is that a scarcity of gas and an EU-mandated system of allocation is on the cards, and could last for an extended period.

The risk assessment has changed dramatically and there is no preventative plan, since the Government’s energy security review is not completed.

A good plan would be to build some gas storage, reconsider the Government’s opposition to the construction of an importation terminal in Ireland, and encourage exploration companies to check out the prospects close to the Corrib platform and the onshore terminal in Mayo, all built and paid for.

None of these strategies though do anything to improve supplies for three, or more years, and the Government needs a plan for allocating scarce gas in the here and now.

It needs to look at electricity and gas together, given the high reliance on gas for power generation.

Any heavy industrial user of gas, but also of electricity, should be assessed on the basis of their backward linkages into the Irish economy through the purchase of inputs in Ireland and their forward linkages through the provision of necessary inputs to those adding domestic value elsewhere.

Any big user of energy which imports the inputs, including capital equipment, and exports the product will have domestic value added consisting largely of payroll.

Every industrial and business user of gas and electricity should be checking out the ratio of energy demand to domestic value added, in case the Government does.