Address by Mr Pat Rabbitte T.D.
Minister for Communications, Energy and Natural Resources
Energy Ireland Conference
30 May 2012
Introduction I welcome the opportunity to set out my perspective on Ireland’s energy policy directions and priorities. The economic backdrop, together with international and EU energy developments requires us to take stock of energy policy and set the best course for the short, medium and long term.
The severe global economic conditions pose challenges for Ireland as a small open economy. Providing secure energy at a reasonable cost is a key priority not least as we work to continue the flow of inward investment and support indigenous business. The Government, the Energy Regulator, industry and other key players in the energy sector have a collective responsibility in this regard.
The three fundamental pillars which have informed energy policy remain valid. These are energy competitiveness, security of supply and sustainable energy. The degree to which we have direct control over the three dimensions varies but they define the broad framework for policy.
Reducing our dependency on fossil fuel imports, ensuring investment in the networks and delivering investor certainty through predictable responsive regulatory and policy frameworks are key drivers for energy policy. In line with both EU and international energy policy direction, the development of renewable energy and sustained ambition in energy efficiency are cornerstones of this Government’s energy policy objectives. They are also pivotal for jobs and growth.
Renewable Energy Strategy The Government’s Renewable Energy Strategy, which I launched earlier this week, shows how Ireland intends to meet our 2020 renewable energy targets. The Government’s five strategic goals will not just underpin delivery of our national targets, but will support the development of a renewable electricity export market to make the most of the enormous natural resources we have available in this country.
The Strategy contains 36 specific and concrete actions which serve to underline this Government’s firm commitment to realising the full potential of our renewable energy resources.
Bio Energy Strategy I will be launching the national bio energy strategy in the coming months. The Strategy which is being developed collectively with the Department of Agriculture, Food and the Marine and SEAI will optimise the sector’s contribution to meeting our electricity, heat and transport targets. It will underpin rural job creation, economic growth and regional development.
Ireland’s bio energy resources need a fully cohesive strategic approach which addresses the supply side as well as the demand side issues. I recently announced the REFIT 3 scheme for biomass technologies, which will incentivise the addition of 310MW of renewable electricity biomass capacity to the Irish grid. It marks an important step in providing certainty for the sector. As well as supporting forestry and energy crops, the Biomass REFIT scheme recognises the importance of more sustainable management of waste, through Anaerobic Digestion and Waste to Energy and the inherent potential this source has to contribute to meeting Ireland's renewable energy targets. However I acknowledge this is likely to require sustained focus.
Renewable Export Potential Ireland’s renewable energy potential greatly exceeds our domestic needs. Our rich onshore and offshore wind resources together with our untapped ocean energy resources represent a real economic opportunity for this country in the medium term. In order to make it happen we must set about immediately to create conditions for this development. In the middle of next month I will be meeting my counterpoint in London to discuss this issue.
There is already a real opportunity to develop offshore wind resources in the Irish Sea area in the short term given the proximity and accessibility to the resource. The Irish sea is suitable for development with existing technologies and such projects have considerable cost advantages over existing and planned projects in the North Sea which are further offshore and in significantly deeper waters. These are projects that are capable of being made operational in advance of 2020.
There is also the capability to develop a small number of very large onshore projects in Ireland that would be suitable for potential export to GB in the first instance. Again these would have a cost advantage because of the high onshore capacity factor that means the turbines produce more electricity in Ireland than they would in the majority of European locations.
Energy Efficiency Radically improving Ireland’s energy efficiency is an essential part of the Government’s energy and economic policy, and will play a vital role in increasing competitiveness, job creation, reducing dependence on fossil fuels, and reducing emissions. I want to see all sectors of the economy as well as the public sector firmly embed the principle of energy efficiency. Investments in energy efficiency deliver jobs and bottom line savings, while contributing to security of supply, competitiveness and sustainability. It is a win -win for all. Investment now will pay dividends well into the future.
National energy efficiency policy will be fundamentally influenced by the forthcoming Energy Efficiency Directive, which is currently under intensive negotiation with the European Parliament in Brussels. The measures in the proposed Directive are ambitious and will require a concerted effort across all sectors of the energy chain.
I have supported my Danish colleague in the work of the Presidency to achieve adoption of an ambitious but realistic energy efficiency framework by mid-year. I believe that a stretching but achievable level of ambition will deliver energy savings across the energy sector and the economy and create jobs and sustainable growth.
I have no doubt that existing energy efficiency obligations will increase under the Energy Efficiency Directive and will require everyone to step up to the plate. We have been working in the negotiations to ensure a flexible and even handed approach is taken in the Directive, which will distribute the obligations equitably across all energy suppliers.
The Programme for Government commits to the introduction of a Pay-As-You-Save (PAYS) scheme towards the end of 2013. This will replace the existing Exchequer funded RETROFIT programmes with innovative approaches to incentivising householders to undertake energy efficiency investments. As we know from international and European experience the PAYS model is complex from many perspectives and a great deal of work is still needed to get it right for Irish consumers and for Irish energy suppliers. I will be bringing proposals to Government in June to continue this complex and ground breaking work.
Public SectorDriving energy efficiency in the public sector makes sense. It reduces costs and creates economic activity. By demonstrating its commitment to excellent energy performance, the public sector can lead by example and in addition to cutting energy bills will stimulate the market.
Local Authorities play a role in driving sustainable energy strategies. Already several County Councils including South Dublin County Council are taking the lead in sustainable energy technologies and prioritising energy efficiency to generate savings for both themselves and local industry. I also believe that proactive engagement by local authorities in sustainable energy will help position their regions for economic investment.
Better Energy Programmes. The significant additional funding provided by the Government to the Better Energy Programmes since taking office has paid dividends. The funding for these Programmes in 2011/2012 amounts to a very impressive total of over €170m. In the face of difficult budgetary circumstances I have continued to give priority to the Better Energy Programmes as administered by SEAI.
This sort of investment can make a real impact on competitiveness. I am particularly pleased that the Better Energy Workplaces scheme supported 85 projects in the public, commercial, industrial and community sectors in 2011 to the value of €11 million leveraging a further €34 million of investment and achieving energy savings of €11 million in one year. That is an impressive one year payback on the State’s investment.
Irish companies and the energy intensive multi nationals are successfully adopting the new International Energy Management Standard ISO 50001. The 65 accredited Irish companies have already saved €150m in all in energy expenditure. I would also urge SMEs to avail of the advisory and support programmes of SEAI. Energy savings for participating companies average 11% in the first year. There are clear bottom line benefits for businesses.
Affordable EnergyThe Government’s Energy Affordability Strategy which I launched last November sets out, for the first time coherent and time barred strategies right across Government for tackling energy affordability. We are already seeing the economic, social and health dividends which accrue from systematically addressing the thermal efficiency of poorer homes.
Price
CompetitivenessThe Government fully recognises the importance of the cost of energy in the competitiveness mix. Our export performance has been a positive feature during the downturn. Export growth is pivotal to our future economic prospects. To export we must compete and this requires that both Government and industry do all they can to keep comparative costs down.
Our electricity and gas prices are effectively a function of the international price of gas and Ireland imports 95% of our gas requirements. We import all of our oil requirements. Currency fluctuations especially sterling in the case of gas and the dollar in the case of oil, together with transportation costs are also factors which impact on Ireland’s energy prices.
Driven by external factors in global fossil fuel prices, we have seen significant increases in electricity and gas prices over the last year. The Government has been and will continue to be as proactive as possible to mitigate these difficulties. This involves a series of measures all designed to promote the most competitive regime especially for electricity and gas prices. Some measures have more immediate effect and others will take a longer period to impact. They include:
- Full deregulation of both the residential and commercial market for electricity; this has complemented the diversity in the number of electricity suppliers giving much greater choice to the consumer;
- Targeted assistance for large energy users ;
- full support to the Regulator in exercising the most rigorous control of allowable costs across all segments of the electricity and gas supply chain;
- Continued support for cost-effective timely investment in networks to ensure the most efficient and modern transmission and distribution network for business and the economy as a whole;
- Investment in and promotion of energy efficiency; and
- Promotion of renewable energy.
We will be as proactive as we can. There is however, also a major obligation on the energy industry to reduce costs where it can. All generators and suppliers including State energy bodies must work to reduce controllable costs to keep prices as low as possible and they must also be innovative in their offers to consumers. Consumers should forensically scrutinise all elements of their energy consumption, devise ways to reduce it including taking advantage of the advice of the SEAI and Exchequer funded programmes to do this and should constantly shop around and bargain for the best deal.
Security of Electricity and Gas Supply The economy and society depends on secure, reliable and safe supplies of electricity, gas and oil. Consistently meeting these needs is critical for Ireland’s ability to maintain inward investment, support indigenous industry and create jobs. Energy policy is fundamental for economic and competitiveness policy.
Foreign Direct Investment absolutely depends on Ireland maintaining the supply of electricity at all times – twenty four hours a day, seven days a week, three hundred and sixty five days a year. Achieving that reliability needs continued investment in the electricity networks. The investment over recent years has demonstrated its worth many times over not least in the atrocious weather conditions in 2010 when the resilience of our networks and power generation kept the lights on for business and at home.
The timely and cost effective delivery of energy infrastructure projects, notably EirGrid’s Grid 25 Strategy, is critical to the national and regional interest. The sustainable development of Ireland’s energy infrastructure must be assured. The Government wants to give that strong consistent message to multi-nationals and Irish business that Ireland’s electricity networks are robust modern and safe because we invest in them and will continue to do so. The energy sector and business consumer interests needs to endorse that message at every opportunity.
Energy Infrastructure Package Ireland’s physical connection with the UK and European electricity markets will be achieved with the commissioning of the East West Interconnector this Autumn. The timely, and cost effective, delivery of such important energy infrastructure projects is critical for the economy and social well being of this country, bringing benefits in the areas of competitiveness, and underpinning sustainable and renewable energy and security of supply.
I welcome the Energy Infrastructure Package proposal from the European Commission. Support for major energy infrastructure projects, identified as having particular, cross-border, importance, will take the form of co-operation between Member States on accelerated planning and permitting and on cost allocation. There will also be the possibility of European financial assistance for such projects under the Connecting Europe Facility.
Work is ongoing on identifying potential electricity and gas projects for Ireland. The Commission has also issued a call for expressions of interest from interested third party project promoters. I would urge the private sector to avail of this opportunity
Secure reliable gas supplies are critical for the Irish economy. The strategic necessity of the two State owned gas interconnectors for security of supply remains paramount - even as new indigenous sources of gas are in development.
The bringing of Corrib gas ashore remains a priority in the national interest both for energy security of supply and for economic policy overall. I look forward to completion of the final stages of the project and to gas in 2015.
The Government has consistently given its support to the development of Liquefied Natural Gas (LNG) facilities and gas storage projects in the interests of, and at least cost to, the Irish energy consumer. I will be bringing proposals to Government in the coming months for the drafting and publication of a legislative framework for the commercial development of offshore gas storage. This will provide a greater degree of regulatory and policy certainty for potential investors in such projects. I also look forward to the establishment of regulatory certainty for all existing and future energy players in the gas market, including LNG projects.
Integration of Energy MarketsAmong the biggest strategic challenges and opportunities for the island of Ireland is the integration of Europe’s energy markets. The European Council Heads of State have mandated delivery of a single EU energy market by 2014. The Government is fully supportive of electricity and gas market integration while insisting that it must work in the interests of our small peripheral all-island energy market.
Regional markets are the stepping stones to the creation of the full internal market. The all-island Single Electricity Market is a positive example of cross-jurisdictional co-operation as is the ongoing joint work with Northern Ireland to create Common Arrangements for Gas.
Positioning the Single Electricity Market for regional and EU integration is a key strategic priority. Integration needs to be achieved at least cost with maximum benefit to the island of Ireland while retaining the important characteristics of the SEM. I must emphasise that this is not simply a regulatory or technical project. It is a collective policy endeavour led by the Departments and Regulators and Market Operators North and South and with the close involvement of the energy industry.
I welcome the consultation process with industry undertaken by the SEM Committee in recent months. There has been significant industry response which the SEM Committee will now reflect on and discuss with the two Departments, myself and Minister Arlene Foster. I would urge ongoing proactive consultation by the Regulators with industry over the coming months. We must all work together in the task of re-structuring the market in a way which ensures regulatory and investor certainty now and into the future.
Oil SecurityWhile we are working to reduce Ireland’s dependence on oil a strong focus is needed on ensuring the security of oil supplies for the economy and society. This requires robust national measures, enhanced cooperation on an all-island basis and continued active membership of the International Energy Agency and the EU, which will give Ireland vital support and no little influence in global oil security developments.
The National Oil Reserves Agency (NORA) plays the national role in ensuring Ireland’s strategic oil stocks. Over recent years, NORA has demonstrably enhanced oil security by increasing strategic stocks held on the island of Ireland.
The oil industry is critically important to ensuring uninterrupted access to commercial oil supplies and continued investment as needed in oil infrastructure. Given global developments, refining capacity has come into increasing focus in Europe. The operating environment for European refineries is difficult. We have been reviewing oil refining needs from a strategic oil security of supply perspective and in light of EU and international development having regard to the need to engage in the future of Whitegate refinery with its current
owners.
State CompaniesI would like to take this opportunity to record my appreciation of the work of NewERA since its establishment last year as the Shareholder Executive, which advises me and my Department to ensure the efficiency of the State energy companies.
Ireland can be proud of the contribution of our State energy companies, which have supported and indeed driven Irish economic and societal development by delivering critical infrastructure, safe and secure supplies of energy, innovation, competition and efficiency.
You will be aware of the Government’s commitment to dispose of the energy business of Bord Gáis and of non-strategic power generation of the ESB. Work on these disposals is proceeding, but I do not envisage any significant developments until next year. As agreed with the Troika there will be no fire sale of our State energy assets and the Government is determined to ensure best value for money in any disposals.
I also wish to emphasise Government policy on a continued strong State presence in the energy sector particularly in the generation and supply of electricity and ownership of electricity and gas networks. As you are aware, the Government confirmed last year its commitment to the ESB remaining as a vertically integrated utility retaining ownership of their transmission networks with EirGrid remaining as Transmission System Operator. Notwithstanding the commitment to dispose of some non strategic ESB generation assets the Government is also committed to a continuing significant ESB presence in the power generation market. Obviously this should be at a level that facilitates market efficiency and competition.
I wish to commend the performance of Bord na Móna in transforming itself from a primarily peat producer to a leader in delivering sustainable and innovative environmental products and services and renewable energy.
Irish PresidencyPreparations are intensively underway across Government for Ireland’s Presidency of the European Union from 1st January 2013. I have no doubt that the economic backdrop for Europe and ourselves will still be profoundly challenging in 8 month’s time But I fervently hope that the work of putting Euro Zone and national finances on a sustainable footing will have progressed solidly. Urgent action is needed to stimulate sustainable growth in all these economies, tackle unemployment and create lasting confidence for citizens, enterprise and investors.
The growth agenda is fundamental to sustainable recovery for Ireland and for Europe and energy policy has a pivotal role to play in creating the conditions for the return to growth and job creation. Ireland’s Presidency will focus on the contribution of energy policy to the growth agenda.
Our agenda will include finalising the Energy Infrastructure Package as a vital part of the ‘’Connecting Europe’’ Programme and which will represent a very significant opportunity for Ireland as we work to deliver our national gas electricity and renewable energy infrastructure. Our Presidency will also focus on renewable energy and energy efficiency beyond 2020 and progress towards completion of the internal energy market. We will also be completing the negotiations on the proposed safety regime for offshore exploration and production.
I am particularly keen that we use the opportunity of the Irish Presidency to highlight Energy, ICT and Innovation as representing vast potential for investment and jobs for Europe and for Ireland and we are continuing to build partnerships between energy and ICT companies and the research community and we intend to showcase our achievements and our competitive advantages in this sphere through hosting the Informal Energy Ministers’ Council and the Strategic Energy Technology Plan conference here in Dublin in April and May next year.
The new European Research Initiative Horizon 2020 will offer considerable opportunity for Ireland’s energy research community working in partnership with industry. The national energy research capability is continuing to expand and a key factor in its continuing work between my Department, the Department of Jobs and Innovation, SEAI, Science Foundation Ireland and the EPA, working with the research institutes. We are creating the basis for enhanced European and international collaboration by Irish players in the energy research sphere all of which with a view to generating economic opportunity and jobs based on innovation.
Energy Policy FrameworkWe intend to complete and publish a new Energy Policy Framework 2012-2030 by end year. The new Policy Framework will take account of the seismic developments since 2007 both nationally and in the European Union. Successfully delivering the very many energy policy challenges is critical to sustainable growth and jobs which are critical to recovery.
The new Energy Policy Framework will be informed by consultation and by the outcome of the policy review currently being finalised by the International Energy Agency. I intend, in that Framework, to set out the challenges and highlight the opportunities for Ireland in charting our own Roadmap to a sustainable energy future in the interests of the economy and society.
I look forward to working with all stakeholders in the energy sector and in the economy as we deliver on the challenges for energy policy over the coming years.