PAT RABBITTE, T.D.
MINISTER FOR COMMUNICATIONS, ENERGY & NATURAL RESOURCES
LAUNCH OF ENERGY POLICY GREEN PAPER
Croke Park, Dublin,
12th May 2014
I am delighted to be here this morning to launch this Green Paper on Energy Policy. The many developments at national, EU and international levels since the Energy White Paper of 2007 make it timely to review our energy policy and to consider how best to shape it for the future.
The context in which these discussions will take place is inevitably complex, with many interrelated strands and competing interests. The cornerstone of energy policy will continue to be the three pillars of sustainability, security and competitiveness. In addition, there is increasing recognition that the energy sector is an important contributor to the economy both financially and in terms of the numbers employed in the sector. And it has potential to generate further economic activity and real employment.
This Green Paper is taking a long-term look at the policy, regulatory and societal interventions we need to make in the coming years. Government, industry, system operators and the public will all need to make sound, evidence-based choices. In developing our energy policy for the future, we face several key challenges including:
· the Energy Trilemma, which is the need to reconcile the competing and interrelated dynamics of the three pillars of energy policy, to ensure good equilibrium and maximum flexibility in an evolving energy landscape;
· significant international policy developments, such as the impact of indigenous shale gas in the US on EU energy prices, and geo-politics generally;
· the hugely important Fifth Report of the UN’s International Panel on Climate Change Report and Climate Change, and the need to closely align climate change and energy policy;
· the importance of informed engagement by the public in energy debates especially in relation to affordability, renewable energy, climate change and energy infrastructure;
· the potential of energy policies to transform the economy and stimulate jobs and growth.
The challenge for policy makers is to find the right balance of measures, taking account of these complex interrelationships and the need to maintain the economic and social fabric nationally and regionally.
In view of these many and complex energy challenges, I considered it timely to publish this Green Paper so as to stimulate an informed debate on the future shape of policy. I decided that, set against the backdrop of the three energy pillars and the need to stimulate economic growth, the Paper should focus on a number of key themes. Needless to say, this does not preclude anyone from raising other issues during the public consultation. The six Priority Themes are:
1. Empowering Energy Citizens;
2. Markets, Regulation and Prices;
3. Planning and Implementing Essential Energy Infrastructure;
4. Ensuring a Balanced and Secure Energy Mix;
5. Putting the Energy System on a Sustainable Pathway; and
6. Driving Economic Opportunity.
It is clear that there are inevitable tensions between competing policy objectives. Resolving these complex and interrelated policy choices lies at the heart of the energy trilemma and is critical especially if we are to encourage the right conditions for economic recovery and job creation.
These difficulties are further compounded by the continuously changing energy landscape. For example, the International Energy Agency’s World Energy Outlook for 2012 highlighted the very significant change in the global energy landscape which has taken place due to increased deployment of hydraulic fracturing (fracking) and horizontal drilling. The USA’s unconventional oil and gas production is now having a profound impact on international energy markets and prices and is likely to have significant implications for EU competitiveness and for geopolitics generally.
Of equal importance is how to reconcile energy policy and climate change policy. This point has been underscored in the Fifth Assessment Report by the United Nations’ Intergovernmental Panel on Climate Change, which concluded that the effects of climate change “are already occurring on all continents and across the oceans” but the world is “ill-prepared for risks from a changing climate”.
Ireland has consistently supported the EU’s pro-active leadership on climate policy. We have a progressive position on climate protection but we also have a long way to go in terms of economic recovery, particularly in the context of the very challenging greenhouse gas mitigation target for 2020 set for us under EU law. It is clear that an equitable distribution of effort sharing will be required in allocating national contributions to achieving new targets under the 2030 Climate and Energy Framework. Economic development and low-carbon transition are not mutually exclusive and can be progressed in parallel, provided we advance on an informed and sensible course.
Involving the citizen in debates on energy and climate change must be central to policy development. In developing balanced and far reaching policies on areas such as grid development, the use of wind resources and the streamlining of public permitting and consent procedures, it is important that past lessons are learned and that we adequately address valid public concerns on the impact of policies on the environment, health and safety – while at the same time ensuring security of supply and cost effectiveness.
The Government’s Policy Statement of July 2012 on the Strategic Importance of Transmission and Other Energy Infrastructure acknowledged the importance of public and local community acceptance. It also pointed to the need for development and renewal of the networks to ensure Ireland’s energy system is fit for purpose, safe and secure and ready to meet increased demand as economic conditions improve. In this regard, the EirGrid Grid25 Strategy is a most important investment in our transmission system – and the North South Interconnector in particular is essential to all-island energy security and should be built as soon as possible, following re-submission to the planning system.
The Green Paper aims to encourage a wide-ranging debate on this critical issue and I look forward to suggestions as to how we can achieve effective and informed public participation and engagement.
As we transition to a low-carbon economy, we will require a balanced and secure energy mix that creates the framework and market conditions for investment, stability and growth. The current situation in the Ukraine is causing grave concern across the EU, particularly since it has potentially serious consequences for security of energy supply. My Department is liaising closely with the Department of the Taoiseach and the Department of Foreign Affairs as we continue to monitor the Ukraine situation, in close co-operation with other EU Member States.
Currently, almost all (96%) of Ireland’s gas comes from the UK. Around 49% of our electricity was generated using gas in 2012. While the UK is not reliant on Russian gas, a shortfall in the supply of Russian gas could potentially result in an increase in the wholesale price of gas on the continent, including in Ireland. However, in Europe generally there are supplies of gas in storage and liquefied natural gas is also available. There is lower gas demand over the summer period. Gas flows consequential on any such supply disruptions and wholesale price rises are difficult to predict.
Detailed operational plans are in place to deal with any unexpected short term disruption to gas supplies. In the unlikely event of a major gas disruption, EirGrid and Gaslink would implement their respective emergency plans to deal with the situation.
Turning briefly to prices, this issue is important for all energy consumers, whether residential or business. The State has limited powers, however. Prices have been fully deregulated in the electricity retail market. The only market sector where retail prices are still regulated is the domestic gas supply; however, the timing of the complete deregulation of that market is now under active review by the Commission for Energy Regulation.
Prices are mostly, therefore, set by suppliers and are commercial and operational matters for them. Customers can and do avail of competitive offerings from electricity and gas suppliers.
Electricity and gas costs in Ireland are influenced by various drivers, including global gas and oil prices, the costs of capital, exchange rate fluctuations, the small size of the Irish market, geographical location and our low population density.
The most important factor affecting electricity prices in Ireland is the continuing upward trend in international gas prices. In Europe, wholesale natural gas prices have been on an upward curve since the second half of 2009. This feeds directly through to retail electricity prices, since most of Ireland’s electricity is produced at gas-fired stations.
The trend of increasing gas prices in European wholesale markets, and the underlying dependence on gas in the electricity mix, underline the need to maintain the focus on continuing to address controllable cost factors, to increase the penetration of indigenous secure renewables in the Irish electricity system and to take action on energy efficiency in homes and businesses.
At a national level, the competitive energy market in place helps put downward pressure on prices. In addition, we need to maintain focus on all possible additional actions to mitigate costs for business and domestic customers, including rigorous regulatory scrutiny of the network costs component of retail prices.
The promotion of energy efficiency is an area within our control where action can be taken to reduce energy costs. Initiatives such as the new €70 million National Energy Efficiency Fund will act as a catalyst to develop energy efficiency projects in the market and to enhance the level of finance available to support the clear energy and cost saving opportunity that exists for public and commercial sector organisations.
The development of indigenous sustainable sources of energy will also help offset the impact of volatile fossil fuel prices. I hope to hear innovative and creative suggestions as to the further steps we might take during the consultation phase on the Green Paper. I hope to publish a new Bio Energy Strategy in the coming weeks which will inform the debate on how best to put our energy system on a sustainable pathway.
Transforming Ireland's economy from one based on predominantly imported fossil fuel to a more indigenous low carbon economy which is centred on energy efficiency, renewable energy and smart networks, offers great scope to address the interrelated challenges of climate change, energy security and competitiveness. Achieving this transformation lies at the heart of this Government’s energy policy. Research and innovation in advanced energy technologies are crucial in the fight against climate change and securing energy supply.
There are exciting prospects for sustainable employment in the energy sector. With its natural energy resources and strong capabilities in areas such as engineering and ICT, Ireland is well positioned to profit from this opportunity.
The shift towards renewable energy and related technologies promises to bring many benefits including opportunities to develop new products in information technology, remote communications and software.
As we develop the new technological know-how to manage the electricity system of the future, we are creating opportunities for Irish based companies to be world leaders in Smart Grids and to deliver working solutions a decade ahead of their international competitors. In building on our strengths, we have the opportunity to further develop Ireland’s reputation in the renewable energy sector as a place of excellence in research and the development of new technologies.
In analysing options for increased use of renewable energy as we approach 2020 and work towards decisions for 2030 and beyond, we need to be mindful of the costs involved. Analysis being undertaken by my Department, the SEAI, EirGrid and the Energy Regulator will assess the costs and value of choosing the continuing path towards 40% renewable electricity generation in 2020, compared to a scenario where renewable electricity remains at 2013 levels. This analysis is on-going and will inform a report to be published in the next 2 months.
Initial indications are that there is a small additional cost to consumers resulting from the transition to renewable electricity generation to achieve 40% renewable electricity in 2020, but we should await publication of the report.
To sum up, we need a new transformative vision for a robust energy policy framework for the future. This Green Paper provides an opportunity to reflect and take stock of our current situation and to adopt a long term view on the interventions necessary to shape future energy policy. Competitiveness, security of supply and sustainability, as well as energy policy’s potential to support economic growth and job creation, will remain at the heart of energy policy as we move forward.
I look forward to an informed and robust debate and I want to encourage everyone to engage actively in the public consultation process, so that we can collectively transform the Irish energy system for the coming years.