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Northern Gas Network’s (NGN) innovation project has been approved for £700,000 of funding by Ofgem after it agreed to cover additional costs itself.
Ofgem welcomed the commitment NGN has shown to its CNG Connection project by agreeing to fund a more expensive connection if required.
It agreed to partially fund the £1.1m project through the Network Innovation Competition in November last year, on the proviso NGN adressed its concerns.
NGN will build the UK’s first scalable city-based compressed natural gas fuelling station for back-to-depot city-based vehicles. The project will test the business case for a charging arrangement where costs will be collected over an extended period of time, which could help drive future private sector investment across Great Britain.
The regulator said in November it had put the project forward for funding despite its concerns as “it is an area in which network companies have done little innovative thinking in the past and we consider that this project’s learning could potentially be of industry-wide value and not just for gas.
“We strongly welcome work done by industry to explore novel charging arrangements”.
NGN’s head of innovation and futures Andy Irwin said: “There are still some significant hurdles to overcome before the project can become a reality, but the funding is an important step forward. We believe that this project will offer significant benefits to the Leeds region.”
NGN has asked to receive the benefit from the commercial arrangement with project partner Leeds City Council “before any money is returned to customers”. Ofgem said this is in the consumer interest as it will enable the project to go ahead. The regulator will be holding an informal consultation on the necessary licence modification shortly.
The future of innovation funding for networks is currently being considered with Ofgem recently consulting on the future of the NIC and NIA schemes. Opinion is divided on whether the schemes should continue, and in what form, with Ofgem ultimately hoping to remove the mechanism.
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