10.30am, 8th December 2011
Chairman, members of the IBEC Energy Committee - I am glad of this opportunity to speak to you about energy policy directions.
We are in challenging, unprecedented times. The imperative to ensure secure, sustainable and competitive energy for the economy and for society is fundamental to economic recovery and well being.
This is a collective endeavour involving the energy sector, Government, the Regulator, enterprise, consumers and, increasingly communities themselves. Everyone has a role in delivering the best energy solutions for this country which ensure security of supply, reduce our dependence on imported fossil fuels, de-carbonise the economy and contribute to overall competitiveness.
The current economic backdrop, together with EU and international energy developments requires us to take stock of energy policy directions and ensure that we set the best course for the short, medium and long term. That being said, though some of the key drivers for energy policy have changed in the last 5 years, the overriding policy objectives remain the same.
And security of energy supply must be top of the list. Demand destruction since 2008 and investment in conventional power generation in recent years means that generation capacity is not, thankfully, a concern at present. But we still need to diversify and reduce our dependence on fossil fuel for generation and above all we need to invest, cost effectively, in the transmission and distribution networks to underpin regional economic development and renewable energy. The Government wants to be able to give that strong consistent message to Irish business and multinationals that Ireland’s electricity networks are robust, modern and safe. That requires the investment programmes of EirGrid and ESB Networks to stay on course. The energy sector and business generally needs to endorse that message – in your own interests and in the interests of Ireland Inc.
Energy Policy Review
I have already announced my intention that a new energy policy framework 2012 – 2030 will be developed and published next year. The Policy framework will take account of developments since 2007 both nationally and in the European Union where energy policy has become a very central policy imperative over the last five years. The 2050 Energy Road Map will be published by the Commission next week and will further serve to inform strategic thinking. The new policy framework will be informed by consultation and by the outcome of the in-depth review of Ireland's energy policy currently being undertaken by the International Energy Agency. Many of you will have met the IEA last September when they consulted with over 80 stakeholder groups.
Energy Market Integration - Internal Energy Market
The creation of a single integrated European energy market, in both electricity and gas, has been given priority status for Europe. The goal, endorsed at the European Council earlier this year, is to achieve it by 2014. This is a hugely demanding objective, for the EU institutions involved and all Member States. But greater integration of electricity markets across the EU has the real potential to bring benefits to customers, such as more efficient pricing, greater access to renewable energy and a more secure supply.
The creation of a single integrated European energy market by 2014 is a major strategic challenge for Ireland i in terms of maximising the benefits it can provide to Irish consumers at least cost, while preserving the best aspects of our existing markets. All of us including industry and business need to engage together on this challenge.
We are working through our involvement with the France-UK-Ireland regional electricity group to ensure a good outcome for the island of Ireland in the process of regional market development that originally began with the Single Electricity Market.
The two regulators North and South are working extremely closely to deliver effective solutions for the SEM in a regional context both in terms of market operation and cost. As you are all aware, their joint Project Team is in place and both Departments North and South as well as EirGrid and SONI are committed to a collective approach In consultation with industry stakeholders such as yourselves. I expect that the nature of the change required to SEM will become much clearer early next year.
Ireland needs more diverse gas supply. The commissioning of Corrib is national priority and we will continue to support the development of commercial gas storage and LNG facilities in the best interests and at least cost to the Irish gas consumer.
Following a public consultation period on the regulatory options for offshore commercial gas storage work is now underway in my Department on the drafting of legislative proposals. I will seek Government approval for the drafting and publication of a Bill to provide an appropriate regulatory framework next year.
I hope also that imminent decisions from the CER on the remuneration of gas infrastructure will strike the best possible balance between the needs of industry, the consumers and the fundamental imperative for security of gas supply.
Ireland's critical dependence on imported oil for transport underlines the importance of robust oil infrastructure. My department has commissioned a review of the strategic case for oil refining on the island of Ireland to inform future policy in this key area. The commissioning by the National Oil Reserves Agency of two new strategic oil storage facilities on the island of Ireland this year is an important contribution to energy security.
Renewable Energy
Renewable energy is playing a key role in shaping Ireland’s energy future and is critical to delivering the policy goals of secure, clean and affordable energy supplies.
We need to develop our indigenous renewable energy resources to switch away from imported fuel sources. By doing so we not only improve our balance of payments position, and reduce economic exposure to global fuel prices but we reduce carbon emissions.
The achievements to date in this area are reflected in the significant reduction in emission levels from electricity between 1990 and 2009. While earlier improvements in this area were primarily due to replacing older, less efficient generating plant on the system, it is clear that in later years the growing deployment of renewable energy has increasingly contributed to the overall emission reduction.
While we have seen good progress in the last few years, going from 5% renewable electricity in 2005 to around 15% renewable electricity now, we still have a long way to go to ensure that we reach our national 2020 target of 40% renewable electricity. In order to deliver successfully we need a fully cohesive approach across relevant Departments, Agencies, CER and EirGrid as well coherence between national policy objectives and the planning system The EU Commission itself has acknowledged the need for better coherence between EU environmental objectives and the delivery of renewable energy projects - this needs to be addressed at EU and national level.
I am confident that Ireland has the capability to achieve its domestic targets from the onshore wind projects already in the existing Gate processes despite the many difficulties being encountered and the undoubted challenges which remain for a number of projects.
EirGrid projections show that around 4,750 MW of renewable capacity will be required to deliver our national 2020 target. This requires the roll out of Grid 25, the delivery of the essential North South Interconnector, and the completion of the East West Interconnector.
The Government together the UK Government, Northern Ireland, Scottish and Welsh administrations, working under the auspices of the British Irish Council, is firmly committed to developing the renewable energy resources of these islands and to developing cross border trade in renewable energy across our jurisdictions. We are also working together to see how best we can cooperate to better plan and build our future energy infrastructure. I have had further discussions in recent weeks with the UK Energy Minister Charles Hendry and we are both firmly committed to this cooperative work to mutual benefit.
If, by combining our efforts, we can find ways to reduce the overall amount of infrastructure required and to ensure the optimal use of the infrastructure that is built, then all electricity consumers will be better off in the long run.
Ireland is also working in Europe with the UK and 8 other Governments under the North Seas Offshore Grid Initiative to create a planning, market and regulatory framework to support offshore development and renewable energy trading across North West Europe.
I am very heartened by the fact that renewable energy is increasingly being recognised by the IDA and Enterprise Ireland, as part of their Clean tech industrial strategies for the coming years. Boosting the deployment of renewable technologies in Ireland in the offshore offers business opportunities to our companies, not only in traditional manufacturing and construction sectors but also in the ICT, financial, insurance and legal sectors. There are also opportunities for ports to develop new businesses and for deployment and support companies to prosper. And we intend to develop our renewable energy export potential in a way that does not expose the Irish business or domestic electricity consumer to costs.
Energy Efficiency
The actions which will be set out in Ireland’s forthcoming new National Energy Efficiency action plan are projected to deliver on the target of 20% energy savings in 2020. While these projections are realistic in my view achievement of the 2020 goals requires sustained commitment to implementing measures across all sectors.
Better Energy
The Better Energy Programme has stimulated the upgrade of 150,000 buildings in the past three years. On coming into Office, I significantly increased the funding available to the programme for 2011.
This year SEAI will have disbursed €90 million in grants for energy efficiency, supporting total investment of almost €250 million in one year. This is bringing many benefits for all involved in the programme, which includes the upgrading of 70,000 homes in 2011. It is directly supporting 6,000 full time jobs, addressing energy affordability and reducing energy costs for business and families. In total there is an economic benefit of €5 for every €1 the government spends on energy efficiency.
I launched the Government’s Energy Affordability Strategy two weeks ago which sets out for the first time ever, a set of coherent and timebarred strategies for tackling energy affordability right across Government. The economic, social and health dividends which will accrue from systematically addressing the thermal efficiency of poor homes will be considerable and measurable.
Pay as You Save
Most of you will be aware of the Programme for Government commitment to move away from State supports for energy efficiency towards a pay-as-you-save scheme. Such a move makes economic and financial sense although it is undoubtedly complex as the experience in the UK and elsewhere has shown.
PAYS is an innovative financing mechanism that will allow consumers to finance upgrades directly through the energy savings generated. My Department is leading a project team of key stakeholders which is working on the detailed design of a PAYS model for Ireland. I look forward to progressing this work next year with a view to putting in place a transition strategy towards 2013. I have in the meantime secured the necessary Exchequer funding to support the Better Energy programmes next year.
Energy efficiency is increasingly at the core of European Energy Policy and at the Energy Council two weeks ago Commissioner Oettinger exhorted Energy Ministers to show real credibility on energy efficiency I am pleased to say that in bilateral discussion with him he recognises that Ireland is one of the credible performers on energy efficiency. The Commission has set the bar very high with the publication of the new draft Energy Efficiency Directive in June. I support that ambition while recognising that Ireland and other Member States have difficulties with some of the detail – that is the challenge of the negotiating process underway and we are intensively engaged in that process to ensure that the outcomes are realistic , not excessively burdensome for industry but still deliver an ambitious set of measures. My Department will continue to consult and engage with members of this Committee on Ireland’s position in the negotiations.
The Danish presidency will give top priority to concluding the Directive and I have already signalled to my new Danish colleague that we will support their work while noting the challenges to be addressed. I have also met the Chair and other members of the Industry Committee of the European Parliament which will lead on the negotiations between the Parliament and the Council.
In closing I return to the theme of energy infrastructure. For the European Union, and particularly for small peripheral energy markets such as Ireland, the challenge of delivering urgent, vital energy infrastructure over the next decade has emerged as the key to security of supply, sustainability and competitiveness. The Commission has launched its proposals for connecting Europe in recent weeks and the proposed 9 billion Euro Energy Infrastructure Package is a vital part of that programme. I have welcomed the Commission’s proposals, which will be negotiated over the next twelve months – and may well fall to the Irish Presidency to conclude in 2013. Among other things it proposes innovative financing mechanisms for Strategic energy projects to incentivise the necessary public and private investment. The Package represents a significant opportunity for Ireland as we work to address our gas, electricity and renewable energy infrastructure needs. We will work with the energy sector, as represented around this table, to ensure good outcomes for Ireland.