Disruptive technology risk

Natural gas distribution Natural gas distribution

Description (What is the Risk)

Gas demand falls significantly due to rapid falls in other energy prices (for example the cost of solar), new pipeline technology makes existing tariff uneconomic (for example use of plastic piping), gas demand falls significantly due to gas price increases (for example a substantial carbon tax)

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Contracting Authority will usually take the risks associated with reductions in gas demand due to change in technology affecting the customers or gas suppliers.

Mitigation Measures (What can be done to minimize the risk)

The regulatory reset process allows the Contracting Authority and the Private Partner to assess the impact of disruptive technology and how such advances can be addressed in the stricture and rate of the tariff.

Comparison with Emerging Market

The process of gas being distributed in more developed markets has been disrupted due to the rapid rise in the use of solar PV generation.

Back to Natural gas distribution

Description (What is the Risk)

Gas demand falls significantly due to customers switching to alternative energy supply (such as microgrids with solar PV and storage)

Risk Allocation (Who typically bears the risk)

Allocation: Public Private Shared
Rationale

The Contracting Authority will usually take the risks associated with reductions in gas demand due to change in technology affecting the customers or gas suppliers.

Mitigation Measures (What can be done to minimize the risk)

In an emerging market the disruptive technology may enable the operator to employ new technologies and reduce operating costs when compared to traditional models.

Comparison with Developed Market

In emerging markets, this risk is not typically addressed in the project documents. As project implementation and execution are often delayed in emerging markets, the risk of disruptive technology may be considered higher than in developed markets.

Back to Natural gas distribution