I am delighted to be you this afternoon as I believe that policies on energy will be at the forefront of our economic development and as a society.
I also believe the development of our energy sector in an all-island context will be a focal point for administrations in both parts of the island. This co-operation is happening at a pivotal moment in the history of relationships on our island and I am looking forward to having the Northern Ireland Executive back up and running next week.
This Government’s new National Development Plan includes a €1 billion investment in North-South projects and initiatives and will improve the quality of life for everyone on the island.
Energy policy is now centre stage, not just in Ireland, but in Europe and globally. It fuels the engine of the economy and it is key national competitiveness and continued job creation.
We in Ireland need to improve national competitiveness and underpin the unprecedented economic progress, industrial activity and infrastructural development, which we have achieved.
All of this has placed additional demands on our overall energy requirements and that is why energy has been high on the Government’s agenda.
We must reduce energy costs and deliver the best possible conditions for competition and customer choice in the Irish energy market.
Over the past two years, I have set about a process designed to get people thinking about what is practically required to achieve this. In October I published an Energy Green Paper which set out policy proposals for the sector to consider and in March I published the agreed Government White Paper which sets out a vision for a new energy future in Ireland, with a full set of time bound actions to achieve this vision.
By 2020 Ireland will be a fully sustainable, secure, efficient, affordable and competitive all-island energy market.
Our energy market will have a reliable supply, competitive prices as well as cleaner and more diverse energy sources.
This will be underpinned by robust interconnection, infrastructure and ambitious technology investment.
We owe it to the next generation to be more challenging and farsighted in our energy management strategy. The development of the All-island Energy Market provides a good example of this.
Since my appointment as Minister with responsibility for energy, I have made it one of my priorities to secure the development of a single Energy Market.
The development of the single market is a real opportunity to create economies of scale in the energy sector. This will benefit consumers and businesses on both sides of the border as well as facilitating competition and improving investment opportunities.
There is strong political commitment, North and South, to deliver the Single Wholesale Electricity Market (SEM) by next November. And Government will continue to lead the way to ensure timely and successful delivery of this market.
The two Regulatory Authorities are currently delivering a massive work programme on the design and build of the new market. They are working closely with EirGrid and SONI and with all the industry players and I would like to take this opportunity to acknowledge and thank all concerned for their input to date.
The Single Electricity Market will improve competition and investment opportunities by expanding the market.
It will facilitate efficiencies and economies of scale in generation reserves, plant mix and fuel usage, as well as more transparent and equitable trading arrangements.
An all-island electricity market will have approximately 2.5 million electricity customers (1.8 million in Ireland, 0.7 million in Northern Ireland).
While this is relatively small in the EU context, it will provide an improved base for the entry of new market participants in generation and supply.
The overall findings of a Cost-Benefit Analysis on the medium to long-term economic impact of the SEM indicate an estimated net social benefit of €155 million over a ten - year period.
It terms of the likely short-term price impact, I am advised that by 2009 prices will fall by up to 2% in the South and by up to 1% in the North. This downward trend is confirmed in analysis prepared by the Regulatory Authorities, which indicated that by 2010 prices will fall further by up to 4.6% in the South and 2.2% in the North.
It is interesting to note that players in the two markets are already availing of opportunities to establish themselves on an all-island basis.
In 2004, BGE completed the Belfast to Derry gas pipeline and was granted a licence to serve the main towns along its route.
BGE also completed the construction of the South-North pipeline from Gormanstown to Belfast last year.
In the electricity sector, the ESB opened a 400MW gas-fired electricity generating station, in 2005, at Coolkeeragh, near Derry.
Viridian opened a 343MW gas-fired station at Huntstown in 2002 and is due to open a second unit at the same site later this year.
The planned second North-South electricity interconnector, which will be operational by 2011, will enhance security of supply and double the existing cross-border electricity transfer capacity to over 600MW.
This will contribute to a more robust electricity network capable of delivering long-term benefits to both economies.
One of the major factors identified as influencing the reluctance of independent generators to enter the market is the perceived and actual dominance of ESB.
This arises from ESB’s ownership of a large and diverse portfolio of plant and its ability to set prices.
The current situation requires an undesirable level of regulation and I do not believe this approach is tenable in the context of pursuing a market model. For that reason, an appropriate degree of structural change was required.
An Asset Strategy Agreement between the Commission for Energy Regulation (CER) and the ESB to reduce ESB’s market share in the power generation sector was announced in November last.
Under the Agreement, the CER will work with ESB to ensure the phased divestment / closure of 1,500 MW of ESB generation by 2010.
This divestment, together with the agreed details published in the Government’s White Paper, including,
• the creation of a landbank of “generation-ready” sites for independent power producers to develop,
• the transfer of transmission assets to EirGrid,
• the competitive provision of 240MW of flexible plant to be facilitated by CER and EirGrid over the next 12-18 months
will cumulatively serve to transform the landscape of this market for investors by improve its attractiveness for new and existing players. The message is clear- “We are open for business!”
While the SEM is the main priority of the All-Island Energy Market, I am glad to say that good progress is also being made in the gas area.
The South-North gas pipeline from Gormanstown to Belfast was completed last year and will support the development of the gas network on an all-island basis.
Ireland is rich in existing and potential renewable energies and co-operation in this area can play a key role in the island’s future.
The “2020 Vision” for renewable energy consultation sets out proposals for the integration of renewable energy within the All-island Energy Market.
The focus is on accommodating a significant growth in renewable electricity generation into the grid systems.
Indeed the Energy White Paper has set out an ambitious target of 33% of electricity consumption to come from renewable sources by 2020.
As part of the process of developing a joint strategy, the two Governments undertaking an innovative All-island Grid Study.
This will look at the long-term development of any investment in the grids to enhance sustainability and promote renewable electricity generation.
As this government finishes its term of office, the fruits of this North-South co-operation across the energy sector are now visible and progress has been considerable.
In a very short time we have moved to a position where we are now looking at taking the next step towards creating a seamless energy market on this island, with the establishment of the Single Electricity Market.
While much remains to be done, we are encouraged by the widespread and enthusiastic support for the all-island project and we are confident that the challenges ahead will be met.
These are our first steps towards Ireland becoming an integral part of a wider North West European regional energy market and benefiting from enhanced security of supply.
I believe that this Government has allowed this country to maximise our potential market size, ensuring competitive and efficient markets in both electricity and gas.
We can now greatly expand our renewable energy base, increase our energy efficiency and reduce our overall energy demand.
My colleagues and I in this Government are proud to have placed the All-Island dimension at the heart of energy policy development for the future.
Thank you
ENDS