Good evening and thank you for inviting me here today to speak at this event about the future of energy in Ireland.
After the summer we’ve endured, it may offer some comfort to know that Ireland’s weather confers a significant comparative advantage in the area of green energy. The geography of the country has gifted us with some of the best and biggest renewable resources in Europe. For example, it is estimated that a wind turbine on the west coast of Ireland will give around twice the annual output of the same turbine installed in northern Germany.
Work carried out by Sustainable Energy Authority of Ireland and Eirgrid shows that wind energy is making a strong contribution to Ireland’s electricity system, without significant net additional cost, while at the same time reducing our use of imported gas by over 20% and reducing our annual CO
2 emissions. In looking to the future, this sector has the potential to contribute to economic growth by exporting to an increasingly interconnected European energy market.
Similar to a lot of countries, we are heavily reliant in Ireland on fossil fuels for our energy needs and we currently import approximately €6bn worth of fossil fuels per annum.
The ongoing economic turmoil and geo-political uncertainty only further underline the enormous exposure Ireland has to price volatility shocks associated with such heavy reliance on imported fossil fuels.
This dependency underlines the long term imperative of enhancing energy security, reducing price volatility and ensuring environmental and energy sustainability at competitive prices for both individuals and businesses.
The manner in which we face up to these challenges will be a critical determinant of our future economic prosperity and wellbeing.
In addition to our national concerns, Ireland is subject to wider EU commitments. We have undertaken to achieve 40% penetration of renewable energy in electricity consumption by 2020.
Commitments to reduce carbon emissions may appear aspirational in the current economic environment but the case for investment in green energy is not an altruistic one. I'm not a big fan of inflated job numbers but one thing is clear - a robust wind energy sector in Ireland will produce more employment and other benefits for the economy than a fragile or nervous sector.
We understand that investors in green energy need clarity and indeed seek certainty. In this you are no different from other energy investors. Returns on investment are over the longer term and investors need confidence in future market conditions. I also appreciate that securing financing for projects is harder than it was three or four years ago. We want the sector to succeed which is why I am focussed on bringing as much certainty as possible.
Firstly I should mention that REFIT payments are fixed for 15 years so as to provide the sort of certainty that developers need.
But there are other things we can do also. The Government recently agreed a policy statement on the importance of Energy Infrastructure – providing clear guidance to the local Planning Authorities and to An Bórd Pleanála. This should assist in the delivery of Grid 25. Similarly I appointed an expert commission to consider the question of the so-called North-South Interconnector. The Oireachtas has now considered that Commission’s report and it is to be hoped that the tie-line can go into planning again at an early date.
In order to increase certainty we are also focussed on clearing up outstanding issues concerning the REFIT regime - notably the backstop date on which I hope to have clarity from the European Commission soon.
Also, of course, through its DS3 programme, EirGrid is working on the necessary operational changes required to the grid to ensure that system security and stability are maintained, while catering for the significantly increased amount of intermittent renewable generation to be incorporated into the electricity system by 2020. This work will mitigate issues of constraint and curtailment.
Critics have pointed out that energy is a key input across a range of enterprise and that jobs growth cannot occur if this input increases in price. This is not disputed. However, research by Eirgrid and SEAI has shown that investment in wind energy has not increased energy bills.
It has been suggested that wind is generously subsidised so it is helpful to look at the facts. In 2011/12, the wind sector received a PSO funded subsidy of around €36m. This represents less than 2% of total electricity expenditure in the year. This gross cost represents an insurance premium against future oil price increases. As shown in the Eirgrid/SEAI study, it is more or less offset by the reduction in brings by lowering the pool price in the SEM.
There are those who suggest that energy prices will collapse and that shale gas will provide plentiful inexpensive energy, however, this is far from certain. Shale gas, while abundant in the United States does not appear to be set for export any time soon. Reserves have not been found in quite as plentiful supply in Europe, while higher environmental standards mean that extraction will face real difficulties in coming through the planning system.
Distribution of wind benefits is a contentious issue. Many anti-wind campaigners would make the case that benefits arising from wind are not enjoyed locally but by consumers far removed from the locus of generation. This overlooks the substantial commercial rates paid by generators, in the region of €7,000 per MW per annum, a real boost to local authority finances in the relevant counties. In addition to this, I gather that the majority of wind generators contribute in excess of €1,000 per MW into voluntary local community development funds.
The situation I have discussed so far relates primarily to the domestic market. Let me turn now to the export market as this has been the subject of some particularly speculative commentary. Firstly, I want to be clear that REFIT support will not be offered to energy destined for foreign energy markets. On the contrary, any such energy exported will be subject to the State retaining a share of the renewable energy value and/or a type of royalty payment bringing revenue into the Irish exchequer. Exporting to foreign markets provides an opportunity to boost economic growth here at home.
This export potential is newly emerging as the Irish grid is connected to the wider European electricity network. This has begun with the all-Island Single Energy Market. It continues apace with the new East West inter-connection to the UK and will in all probability, grow further in time with interconnection to the French electricity market. Participation in this wider market will drive down costs through competitive forces. Furthermore, it provides backup against wind’s intermittency.
I would like to turn to another dimension of the green economy - energy efficiency - for a moment. I was delighted to have the opportunity, a couple of weeks ago, to engage with key stakeholders (in the energy, financial services and construction sectors) on the proposed new Pay-As-You-Save Scheme. The PAYS concept is an important commitment in the Programme for Government with the roll out planned by 2014. PAYS will replace the Exchequer funding currently being provided for domestic retrofit measures under the Better Energy Programme. The Programme has proved to be a very successful scheme to date. By the end of 2012 we will have disbursed around €240 million on energy efficiency measures to 240,000 homes.
While the transition to a market-based mechanism by 2014 is complex, the PAYS concept will allow consumers to finance energy efficiency measures, using the money that they would have otherwise spent on their energy bills. My Department is working very closely with the Sustainable Energy Authority of Ireland (SEAI), financial institutions, energy suppliers and industry to finalise design details for the new scheme.
The Better Energy Workplaces Programme that is administered by the SEAI evaluates new approaches for implementing energy upgrades to existing facilities in the public, commercial, industrial and community sectors. The Programme assists Ireland in meeting it 2020 energy efficiency targets by accelerating the scale and depth of retrofit in existing facilities.
The Workplaces scheme disbursed €11million in grants in 2011 and co-financed 85 projects and in the process is estimated to have supported 250 jobs. The estimated annual monetary savings are €11 million, effectively repaying Government funding within 12 months. Due to the success of the Programme in 2011, €16.5 million has been allocated to the scheme for 2012 and 145 projects have so far received grant offers this year.
The SEAI Energy in Business Programme supports efforts by business to improve energy efficiency and competitiveness through structured energy management. The Programme now involves 170 of the largest business energy users and annual savings of 2% have been achieved over the past 16 years.
The Programme also lends support to 2,000 small businesses. The SEAI forecasts energy saving of 75 Giga Watt hours and monetary savings of €3.7 million to businesses who received support through the Programme in 2011.
Irish industry has had great success with the development of the ISO 50001 that lays down international standards for energy management systems. Irish based businesses who are adopting advanced energy management protocols, are avoiding an estimated €150 million in energy costs. In doing so they are setting world class standards and indeed many of the 65 Irish business sites accredited are now sharing their knowledge and expertise on a global basis within their broader company groups.
In summing up, Ireland’s climate, whilst not ideal for picnic planning, provides us with a unique opportunity to develop green energy. This potential is maximised through interconnection to a wider European electricity market which is increasingly finding it more difficult to meet their renewable energy targets.
Ministers are often pilloried for taking a short-term view. It is ironic to find myself criticised, in certain section of the media, for having a longer term perspective than the next election cycle.
Continued dependence on fossil fuels is a dead end. This is not Chicken Licken fretting over the sky, this is prudent future planning. Petrol prices are currently at an all time high. Relying on fossil fuels, into the future, is not only unsustainable, it is highly expensive. For this reason, I will continue to champion the business case for Ireland’s continued investment in Green Energy.
Thank you.