Address by Mr Pat Rabbitte T.D.
Minister for Communications, Energy and Natural Resources
Energy Institute Dinner
18 Oct 2011
(Check Against Delivery)
Introduction
Chairman (David Taylor) - thank you for your warm welcome.
Mr Chairman, members of the Regional Committee, fellow guests, ladies and gentlemen, thank you for inviting me here to address you tonight.
Energy plays a key role in all of our economic lives and
It is critical that we identify and deliver the right energy solutions for this country which will enhance our collective security of supply, reduce our dependence on imported fossil fuels, reduce our levels of emissions and, crucially, minimise costs for all consumers.
While these have long been identified as the critical objectives of energy policy, the focus now must be firmly on delivery. In particular, the delivery of our vital energy infrastructure projects to underpin security of supply. This is in the long term best interests of every citizen of this country and this is a key message that I would like to highlight here tonight.
The Government fully recognises the strategic national importance of investing in Ireland’s electricity transmission infrastructure. It is essential in order for us to achieve our binding renewable energy targets as well as to foster balanced economic growth. Development of the high voltage electricity grid as planned in the GRID25 strategy is critical to our long term economic recovery. It has been argued in some quarters that the severe step down in economic activity ought to result in pulling back investment in this area. It is true that the contraction of the economy has been dramatic but it is also true that infrastructure investments are long term investments by nature, are projects that can take as much as a decade to deliver but in turn deliver benefits to us for decades thereafter.
The East West electricity interconnector between Ireland and the UK will improve security of supply, as well as increasing competition in our market and assisting in achieving our ambitious renewable targets. The project is on track be completed by the end of next year.
The current economic downturn does not in any way diminish our requirement for the North-South electricity link from Meath to Tyrone. It is a key strategic project for economies and consumers, North and South and is critical to ensuring energy supply adequacy on the island of Ireland. It is also very important for the effective operation of the Single Electricity Market.
Analysis has shown that the lack of the planned North-South electricity interconnector is imposing significant costs on electricity generators and consumers on both sides of the border. These costs are in the region of €20million to €30 million each year and are set to increase every year the interconnector is not in place .
As part of delivering on our Programme for Government commitments, I established an independent international expert commission to review the case for, and cost of, undergrounding all or part of the Meath-Tyrone line. The commission has interacted with the parties concerned and I look forward to shortly receiving their report.
Utilisation of gas from the Corrib field is of critical strategic importance for the security of our energy supply. It will reduce our reliance on gas imports and encourage further exploration in our waters.
I look forward to the completion of the remaining elements of the construction phase of the project and to the actual commencement of the production of gas.
At peak production Corrib is capable of supplying over 60% of Ireland’s natural gas needs – this underlines the strategic importance of the project.
The exploitation of our indigenous petroleum resources has the potential to bring significant benefits to Ireland in terms of both increased additional tax revenues and strengthening our energy security of supply. Yesterday morning when opening the Atlantic Ireland Conference, I stressed the need to continue the new momentum in exploration activity, if we are to benefit from our indigenous natural resources. There is a need for both an increase in the pace and in the level of exploration activity.
Yesterday I also announced the results of the 2011 Atlantic Margin Licensing Round. I am happy to say that the results were broadly positive. The round attracted the highest number of applications under any licensing round in Ireland to date and also resulted in the highest number of proposed awards. A further positive feature of the licensing round was that the thirteen proposed awards included seven new entrant companies.
Yesterday’s announcement has largely been well received and fairly covered in the media. However, the national interest requires us to dispel persistent myths which I have seen crop up in some of the commentary. The Irish Times is determined that I should establish a state exploration company as well as changing the fiscal regime. Morning Ireland broadcast the criticisms of a Dáil colleague to the effect that the companies conceal information from the Department and will hoard the licences. The facts are we can not afford a state exploration company and the fiscal regime has been changed in the 2008 Finance Act. The companies are required to share information and data with my Department and the structure of the licensing announced yesterday ensures companies either “use it or loose it” after 24 months.
There are also some positive signs of an increase in drilling levels over the next two years, with the first in a series of expected wells due to be spudded next month. I wish those companies involved in drilling every success and look forward to what we all hope will be some successful drilling campaigns.
While the Irish offshore can be described in general as being underexplored, there are vast prospective areas in respect of which very limited data has been acquired and there has been little or no exploration drilling. This represents a real challenge to both industry and Government. In the wake of the announcement of the outcome of the Atlantic Margin Licensing Round, I would like to reiterate my invitation to industry to provide its views and its proposals as to how Ireland can:
- encourage an increase in drilling and data acquisition levels;
- attract more new entrants and an increase in exploration investment;
- get companies to focus their attention more broadly in terms of our deeper water basins; and
- go about filling data gaps, where such data gaps represent a barrier to companies considering looking at certain large areas.
This is a time for innovative and inventive thinking and I hope that the industry will not be found wanting in its response to this invitation.
We must prepare for the development over the next few years of a significantly more inter connected pan European energy market. Ireland will ultimately be a small part of very large European regional electricity and gas markets and this inevitable development must strongly inform energy policy, including that relating to ownership and structure of State Energy Companies.
It is my own view that given the crucial importance of the energy sector to the State, that the State must continue to have a strong and direct presence in generation; networks and supply. This must be done in a way that protects overall economic competitiveness and does not deter private sector involvement in generation and supply. This approach does not however preclude extracting value from the strong and profitable State Companies that we have built and the Government has recently signalled its intention to divest a minority shareholding in the ESB.
Overall there have been vey positive developments in our electricity and gas systems in recent years. There is considerably more competition at the generator and retail levels. This has assisted in a significant competitive improvement in Ireland’s electricity and gas prices, even allowing for our country’s high exposure to volatile international gas prices. Market reforms as exemplified by the Single Electricity Market, complemented by good regulation and a strong commitment to continued investment have all contributed to a more positive energy landscape. We cannot however afford to become complacent.
Given the dramatic change to our own and indeed Europe’s economic fortunes, I firmly believe that now is a good time to evaluate our energy policy directions.
As many of you will be aware, the International Energy Agency were here last month to undertake their regular in-depth review of Irish energy policies. (The previous IEA review was carried out in 2007). The IEA review includes a detailed assessment of the efficiency of the Irish electricity and gas sectors, taking full account of the EU regulatory context for these sectors.
I look forward to receiving their assessment of our energy policy and their analysis will feed into a review of the 2007 Energy White Paper that will be carried out over the coming months in consultation with stakeholders with a view to publishing during 2012 a new energy policy framework for 2012 to 2030 period.
In conclusion, I am keenly aware of the important role the audience here tonight will play in the future development of our energy sector and I look forward to the Institute’s continuing engagement and positive interaction on matters of key common interest in the year to come.