I am very pleased to have the opportunity to address you this morning at what has become the major conference event in the Irish energy calendar.
This year’s conference is being held against a setting of sustained international high prices for oil and gas. This is the backdrop to an international debate about future energy priorities and policies with the focus now shifting towards safeguarding security of supply and creating a sustainable energy future.
The need for such a change of focus is highlighted by the fact that despite these sustained high oil and gas prices energy demand is continuing to rise. While much of the growth in worldwide energy demand can be attributed to developing economies such as China and India, it is also true that demand continues to increase in the OECD countries.
At national level much is also happening to stimulate lively debate over the next two days. Last Friday both Regulators published the high level design for the new Single Electricity Market, following an extensive public consultation. In addition, both TSOs announced their intention to establish a Single Market Operator function.
I very much welcome these developments. The current trading arrangements operating here are part of the transition from monopoly supply to a fully liberalised market. As this milestone was reached earlier this year and to fulfil our commitment to the establishment of a Single Electricity Market, new market arrangements are needed to deliver the benefits of open competition to electricity consumers.
I understand that the general reaction to these proposals has been very positive. Naturally, there will be concerns about certain aspects and I am aware that further discussion has to take place around the critical issue of capacity payments.
While obviously I would like to see electricity prices reducing, I am also conscious of the importance of ensuring that the market works in such a way as to encourage new players and, critically, to send the appropriate signals about the need for new investment, particularly in generation, while simultaneously working to maintain national competitiveness.
North/South Dialogue
The Single Electricity Market proposals highlight the benefits of the excellent relationship that has been built up between the Administrations, Regulators, System Operators and market participants both North and South in recent years.
In a very short timeframe we have moved to a position where we are now looking at taking the first step towards the creation of a seamless energy market on this island.
The publication, last November, of the All-island Energy Market Development Framework was an important milestone toward an all-island energy market. It set out the commitment of all concerned, to achieving a single market that will contribute to a more secure and cost efficient service for all consumers. The Framework is target driven and sets out clear goals. The challenge now is to continue to work together to translate the agreed policy framework and work programme into practical action.
I recognise that implementing the Single Electricity Market will require matching legislation to be enacted simultaneously here and in Northern Ireland. I want to assure you that the Government is giving this legislation a high priority to allow us to meet the July 2007 deadline for the implementation of the Single Electricity Market.
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Electricity Review
I am sure by now most people will be aware that, I have appointed Deloitte and Touche to carry out an in-depth review of the electricity sector in Ireland.
Decisions on the future structure of our electricity sector will have major implications for all consumers and for our ability to sustain our economic competitiveness. It is right and proper, therefore, that such decisions are taken on the basis of robust, independent analysis and advice. The consultants have committed to delivering a final report to me by December this year.
Between now and then, the consultants will be engaging with the sector and I would like to take this opportunity to urge all interested parties to engage openly and constructively with them when the time comes.
Energy Policy Paper
In addition to this work, I intend to produce an Energy Policy Paper. Having taken the time over the last few months to review the full breath of activities in the area of energy policy and the range of work being undertaken by the Department, I considered it timely to pull all this work together. It is my intention that this paper will set out an overall energy policy for Ireland in the medium term (2012) and also present a perspective on energy policy out to 2020 and beyond.
There has been widespread public consultation on a number of policy areas – the development of the All-island Framework Document, on the future contribution of renewable energy to the overall energy mix and most recently on ways of improving the coordination and effectiveness of energy research and development.
We intend to draw on views already expressed and in addition, make provision for a consultation process, which will capture the views and concerns of all stakeholders. Again, we look forward to receiving inputs from all of you here today! Because of the volume of work already completed, I believe the majority of work on this paper can be completed by year-end.
Creating a sustainable future
My previous role as Minister for the Environment means that I have a particularly keen interest in environmental sustainability. In my current brief, it continues to be a major focus for me. My own interest is reflected internationally by the new EU Energy Commissioner, who has already signalled the area of energy efficiency as being top of his agenda. This area was also very much the focus of discussions at the International Energy Agency Ministerial meeting, which I attended last month.
To reflect this priority, we have recently created, within my Department, a new division, which will focus exclusively on this topic, to ensure that appropriate resources are devoted to developing policies and measures in this area.
We have a successful track record in this area to date, the structure of the Irish economy, fuel choices for electricity generation and real energy efficiency gains have all played a part in reducing the energy-intensity of the economy. Energy-intensity has been decreasing by 3% per annum since 1990, during a period of unprecedented economic growth.
This is a successful track record. We must build upon it, by raising awareness right across the economy. We must bring about a step-change in the way that we use energy.
The Department has been working closely with industry and relevant Government agencies to bring forward policies which will increase the deployment of cleaner, greener technologies, including CHP, wind, tidal, biomass and a recently announced biofuels programme. I believe these are areas where we can work jointly with our Northern colleagues, for the benefit of all.
SEI is developing an Energy Management Action Plan to assist any business, which wants to manage their energy needs. They have also been working with the National Standards Authority of Ireland to develop a new Irish Energy Management Standard, IS 393. I am pleased to be able to report that this work is now complete and that NSAI will be issuing this new standard shortly.
I have said publicly in the past and repeat it here – public/consumer behaviour can be changed- if we really want to do so- through well-managed and effective campaigns- the plastic bag levy and smoking ban being prime examples.
It is incumbent upon this generation to make continued improvements and changes to the ways we produce and consumer energy.
Now is the time for us to build upon the successes of our past in order to face the challenges before us.
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Kyoto Protocol
Improving energy-efficiency and reducing energy demand has the effect of reducing our energy bills. It also has the effect of reducing CO2 emissions. The first phase of the EU Emissions Trading Scheme is now up and running, with the second phase to run from 2008 – 2012.
International negotiations on a successor to the Kyoto treaty have yet to begin and I don’t think that anyone expects those negotiations to be easy. I think that we must prepare ourselves now to deal with carbon constraints in the future by more efficient and effective use of energy.
In the area of climate change and energy use, I think it is important to mention the role of the transport sector. Transport energy consumption has grown by 123% since 1990, and CO2 emissions from the transport sector have grown by 129% from 1990 to 2003. These figures alone indicate the importance of the whole-of-Government approach, which has been adopted in dealing with Climate Change.
Renewable Energy
A key component of current and future energy policy is the continued growth of renewable energy resources in our energy mix. While some regard our target of having 13.2% of energy consumption generated from renewable technologies by 2010 challenging, I very much regard this as a staging point for the more ambitious longer-term development of our renewable energy sector.
We have made significant progress in this area. In 1997 there was 20MW of wind connected to the Irish system. Currently, there is just over 400MW of wind connected with a further 575MW of wind with grid connection contracts agreed. In total we have 660MW of renewable energy currently connected to the system. A figure that will need to double if we are to meet our 2010 targets.
While some renewable technologies are becoming more competitive, I am satisfied that the sector cannot yet compete with fossil fuel technologies. That is why I recently signalled an end to the AER competitive tendering support schemes that we have used in the past and why I am bringing proposals to Government this week for a fixed price support scheme to ensure that this important industry sector can move forward in a confident manner.
The purpose of the support mechanism is to incentivise the building of the required new capacity onto the system while at the same time ensuring that the interests of consumers are taken into consideration and that the competitive position of the economy will be maintained in years to come.
Renewable generating technologies remain at different levels of market readiness with some clearly more competitive than others. For this reason I will be offering a banded fixed price system to the market with different prices for different technologies.
While wind will provide the majority of our new renewable capacity in the short to medium term, we need to develop a range of different technologies in the bio-energy and ocean areas for balanced long-term development.
While price support is critical for the deployment of renewable technologies, other issues such as the length of time it can take to get connected to the national grid and cost of connections to the grid must also be addressed.
If we are to seriously develop our renewable technologies we must ensure that any potential barriers are addressed in a speedy manner and that developers are encouraged to build their projects as quickly as possible. I want to make clear that our 2010 target is a minimum figure and that it should not be seen as a ceiling for our ambition in this area!
Conclusion
The challenge of maintaining security of energy supply in an environmentally sustainable manner while protecting our national economic and social well-being is a major one. It is not however, the sole responsibility of Government. We all have an important role to play. It is my responsibility as Minister for Energy to provide a lead role in the development of sustainable policies and practices that will facilitate the type of future we want for this country
ENDS