Energy Ireland Conference 2007

This will be the third time I will have had the pleasure of addressing this audience and the opportunity to set out my vision for the energy sector.

When I took the seal for this office, I was convinced of the need for change and reform in this sector.

Since then I have worked hard with my Ministerial colleagues, my own and other Departments, the Regulator and you in the industry to deliver on a collective agenda for progressive and proportionate change.

My first decision on taking office was to review the electricity sector in the context of an overall review of energy policy. This desire for reform was born out of a considered response to developments in the sector and the changes that were happening both globally and at the EU level.

In terms of the energy agenda, I had three key objectives:

• Firstly, I considered it necessary to provide a coherent, stable yet ambitious policy framework for the sector.
• Secondly, I considered that progressive structural change to the electricity sector was required to deliver an effective and more competitive energy market, for the benefit of all consumers.
• Thirdly, I sought to prioritise renewable energy, energy efficiency and R&D as the policy priorities.

Over the last two years or so, I have quite deliberately set about a process designed to imagine a new and different energy future to deliver on these objectives and the commitment to take the actions necessary to achieve that vision.

Green Paper to White Paper

When I addressed this conference in June last year, I signalled my intention to publish the Energy Green Paper for consultation in the early autumn. The Green Paper, together with the Deloitte Report, was published on 1st October.

From October to December, my Department conducted a wide-ranging consultation process which resulted in a very comprehensive response from the stakeholders.

The outcome of the consultation process was broad support for the themes set out in the Green Paper and a strong consensus that the White Paper should be action oriented and time bound.

I am a very strong believer in the value of dialogue and discussion. Your views are of direct importance and were an essential element of the policy formulation process. I would like to thank all of you who took the time to engage in the process and contribute your views.

I launched the Government Energy White Paper on 11th March this year. It sets out the Energy Policy Framework to 2020.

The publication of the Green and White Papers in a 5 month period has been a watershed for national energy policy directions and I would like to thank my officials who worked tirelessly to deliver on this objective for me.

The White Paper is the first comprehensive statement of Government Energy Policy in thirty years. It is aimed at meeting the immediate and longer-term challenges in the energy sector.

The White Paper deals with the here and now as well as putting in place policies to continue our drive for a sustainable energy future right out to 2020.

We all now have the certainty of a framework, which is fully adaptable to technological and other change, but constant and consistent in its aim to underpin our society with a secure, competitive and sustainable energy sector.

Prioritising Renewable Energy, Energy Efficiency and R&D

Creating a sustainable energy future is built on ensuring a diverse and secure energy supply, protecting our environment and national competitiveness.

We have committed ourselves to a very ambitious policy of growing and diversifying our renewable energy sources, with the aim of meeting one third of all our electricity needs from renewable energy sources by 2020. The White Paper sets out a range of specific time-bound targets to achieve this objective.

We should not underestimate the significant degrees of change such a shift in direction will require. It will require a positive collective and individual response to firmly set ourselves on a path of lower carbon output and reduce energy consumption.

Furthermore, in light of the growing importance of bioenergy, the National Bioenergy Action Plan, which was incorporated in the White Paper, sets out a strategy for developing our indigenous bioenergy capacity to the greatest practical extent. It contains a commitment to using 10% biofuels in transport by 2010.

The accelerated development and deployment of renewable energy efficient technologies is fundamental to delivering a sustainable, competitive and secure energy future for Ireland. Such technologies offer significant opportunities for jobs and growth, not least in rural areas.

What I would like to see happen over coming years is the development of a strong renewable energy sector, capable of operating, competing and winning business on a global scale. Ireland has enormous potential and the proven entrepreneurial spirit to participate in this development. Our research bodies and small and large companies should grasp that opportunity.

Securing Energy Supply

As an island nation we face particular challenges to security of supply, both in terms of physical access and interconnection with neighboring markets. We have committed ourselves to a path which will end the isolated nature of our energy sector and place Ireland in a wider North European regional energy market.

The first step on that path is the development of the Single Electricity Market on an all-island basis, increased electricity interconnection with Northern Ireland and new electricity interconnection with the Britain.

The regulators, system operators and the electricity industry itself, both North and South, have put a remarkable amount of work and effort into this project, which I applaud and acknowledge.

The enactment of matching legislation in the Oireachtas and in the UK Parliament to underpin the SEM is the proof of the political commitment to the all-island energy project and to the launch of the SEM in November next.

In addition to increasing the scale of our market and access to a broader range of supply, I believe that more competition, more innovation and more choice for consumers will be inevitable in a wider pool of supply.

Energy Efficiency

Creating a society that values energy and uses it efficiently will be a key factor in reducing energy demand, and has the potential to be the cheapest and cleanest method of reducing greenhouse gas emissions.

Efficient energy use also has the potential to significantly reduce costs for consumers and for energy intensive businesses.

Sustainable Energy Ireland has been working in this area for a number of years with the Large Industry Energy Network and the new programme of Energy Agreements.

SEI is also promoting an Energy Management Action Programme aimed at the Small Enterprise sector, and these programmes will be a key element in our competitiveness strategy for the future.

There is, however, a need to significantly raise awareness of the benefits of improved energy efficiency among individual consumers and across all sectors of the economy including the transport sector and the public sector.

The Power-of-One campaign is designed to develop that awareness over time. We will no longer be having an “Energy Awareness” week - in effect, every day of every week should be an energy awareness day, with each of us considering “What one change can I make?”

We are committed to achieving a 20% energy saving by 2020. We have, to set an example, committed the Public Sector to reducing its energy demand by 33% by 2020.

Research and Development

Energy research and development, fully aligned with policy objectives, has a key role to play in economic competitiveness and in the development of the energy sector as a whole. This is reflected in the Strategy for Science Technology and Innovation 2006 – 2013, which supports the development of Ireland as a knowledge economy.

The National Development Plan includes a spend of €149m on energy R & D over the period to 2012. This delivers much needed resources to a previously neglected, but now priority, area in our energy sector.

While the volume of R&D activity is important, it must also be focussed and high quality. I have taken structural action to improve the coordination of existing energy research activities.

More fundamentally, I have set about laying the groundwork for planning for the future. Structures and programmes have been established to develop an energy research infrastructure and build capability for the future.

The Irish Energy Research Council will ensure coordination of energy research activities and help optimise international research linkages. It is working to ensure that energy research policy is well aligned with wider national energy policy.

Climate Change

Everyone here is aware of the significant challenges posed by climate change and the need to act now. While there are different priorities in the developing world and differing opinions in the developed world about the best way to proceed, there is very little disagreement about the need to act now for our long-term self-interest.

The National Climate Change Strategy 2007 – 2012 was published in April. It strongly reflects the overall direction taken in energy policy, in terms of promoting growth in renewable energy, implementing the National BioEnergy Action Plan and improving energy efficiency.

Through these actions the energy sector will make a significant long-term contribution to reducing Ireland’s greenhouse gas emissions.

Meaningful international negotiations have not yet commenced on greenhouse gas emissions limits post-2012. However, given the extent of the global climate-change challenge and the on-going evidence that serious damage is being inflicted on our environment worldwide, the EU has taken a decisive stance.

The EU has committed to a target of a 30% reduction in emissions of greenhouse gases over the 1990 level in the context of an international agreement following the post-Kyoto negotiations.

In any event, the European Union is committed to a 20% reduction. The targets are ambitious but achievable. Europe has stepped up to the mark and taken the lead on this. It is up to the global community to follow. We too must make the changes which will enable us to meet our targets not just to 2012 but thereafter. Now is the time to start on that process not 2012. Planning and executing change over a longer period makes better economic and environmental sense than stalling until the last possible minute and then having to effect radical change and severe cuts.

Competitiveness

Energy policy must be strongly focussed on creating conditions which will enable the energy sector to support national competitiveness and our high growth economy.

Where there is scope for change we must be ambitious to ensure that the structure of the sector works for the benefit of all consumers and for the economy.

Seventy per cent of the higher prices experienced in Ireland can be explained by our fuel mix, and external factors. These factors limit our ability to manage future energy price increases. Our focus therefore must be on tackling controllable costs.

I have long held the view that there is merit in considering the scope for public funding for strategic national energy infrastructure projects. That position was reflected by Government in the National Development Plan.

However, actions to enhance market structure are crucial for cost competitiveness, for investor confidence and for the consumer.

The SEM is a fundamental development to promote an efficient electricity market and I have no doubt that it will contribute positively to competitiveness in the longer term. It is a first step in the move to an all-islands energy market which will see integration with the UK electricity and gas markets.

There are a number of structural issues which need to be addressed both North and South to deliver an investment framework which is transparent, can be lightly regulated and functions well for all players.

To date, the lack of competition in the electricity sector here has contributed to higher prices and insufficient investment in new power generation stations. The ESB’s dominant position presents a deterrent to existing and new private sector players.

The key actions in the Energy White Paper aimed at reforming the electricity sector will have immediate and long-lasting effect in relation to energy cost competitiveness.

I believe that an electricity sector which has no questions about the independence of the ownership and operation of the transmission system will be a key driver in attracting investment in the sector in the future. To this end, we have now begun the process of transferring the transmission assets from ESB to EirGrid, thus combining the ownership and operation of the national transmission system.

The availability of suitably serviced sites for new power generation is also an essential component of an investment-friendly sector. The creation of a landbank of sites, administered by EirGrid, will help in the opening of the market to new players.

When taken in conjunction with the CER/ESB Asset Strategy Agreement, designed to reduce ESB’s market share, the creation of a landbank of suitable sites, will further improve the attractiveness of the Irish market for investors.

The Government believes that the electricity networks should be run to minimise the price to consumers and not to maximise profits and has firmly ruled out any privatisation of the electricity transmission and distribution networks.

As a monopoly network, the distribution system will be operated under a risk-related rate of return, set by the Commission for Energy Regulation, with the benefits passed on in full to all electricity consumers.

These are positive reforms in the interests of consumers, business and the economy as a whole. They reflect a new policy direction to deliver more competition and a healthy energy market.

The cumulative effect of all of these actions is to transform the landscape of the Irish electricity market and improve its attractiveness for new and existing players. The Government has adopted these reforms in the interests of consumers and domestic competitiveness.

These actions mark out the clearly the route to achieving prices lower than would otherwise be the case and in sustaining and improving our competitiveness performance.

Conclusion

Most people I know in politics are there to make a positive difference in people’s lives. I believe when people look back over this time in terms of energy policy they will be able to say we made a difference. We made the right decisions, we did the right thing, we looked to a newer and different future and we prioritised the right policy objectives. We had the courage to make the decisions to let them happen.

I believe that the White Paper firmly sets out a comprehensive, coherent and detailed action plan to create a better energy future for all of us.

I do not underestimate the formidable challenges to be faced individually and collectively. But I have every confidence that we will rise to the challenges.
This Government has played its part in leading and driving the agenda. You can be assured that the next Government will continue to do the same.
Industry must also continue to play its part.

The focus will now necessarily shift to implementation of the major policy decisions set out in the White Paper which will create a sustainable energy future for us all. I look forward, in whatever capacity, to playing my part in that.

Thank you.

ENDS