Thank you Chairman.
At the outset I would like to take this opportunity to congratulate the Institute for the work that it does in particular in the energy field. I can think of no other forum where the challenges facing this immensely complex sector could be teased out in such a constructive manner.
These are perilous times for the European Union. As Economics Commissioner Olli Rehn has signalled many of Europe’s major competitor economies have entered a second recession in three years and financial market turbulence and debt burden makes the road to European recovery much harder to climb.
Putting national finances on a sustainable footing, here at home and across the Euro Zone, is the fundamental task. But urgent action is also needed to create sustainable growth in our economies, address unemployment and create lasting confidence for citizens, enterprise and investors.
The first priority of the Government is to secure Ireland’s recovery and to ensure employment for our people. The Taoiseach has been to the forefront in pushing in Europe for new and urgent focus on growth generating policies. The urgent need for job creating growth is now right at the top of the European Agenda and will be the key focus at the European Council next week.
It is vital that this work is advanced rapidly and seamlessly at national and European level. Ireland’s membership of the European Union, and playing a full, active and influential role at its very core, is essential if Ireland is to prosper and grow.
If the growth agenda is fundamental to Europe’s sustainable recovery strategy, energy policy has a pivotal role to play in creating the conditions for a return to economic growth and job creation.
The wellbeing of both our economy and society depends on safe, secure, sustainable and affordable energy. We therefore fully endorse the objectives of Europe’s Energy 2020 Strategy for competitive, sustainable and secure energy. Since taking office last year, I have consistently supported the imperative for Europe to take all the necessary actions to meet the energy challenge. I believe that Ireland, as a peripheral island energy market, can benefit from a fundamental transformation of Europe’s economy to a low carbon economy based around radically increased energy efficiency, accelerated deployment of renewable energy, smart networks and a well functioning, well interconnected internal energy market.
The recent Energy Council focused on progress in relation to energy efficiency and renewable energy and their growth and job creation potential. European leaders will be taking stock of progress reports from all Councils and will undoubtedly call for more rapid and focussed implementation of the agenda for jobs and growth – including accelerated delivery on the energy priorities across Europe.
Early adoption of a robust and ambitious energy efficiency Directive is essential. The economic crisis itself underlines the importance of energy efficiency investments to boost sustainable growth in sectors negatively affected by the down turn. We are already focusing energy efficiency improvements on key sectors such as the housing stock, the public sector and products and services. This will underpin market uptake of new technologies and skills development and thus add to competitiveness and job creation. It will also contribute to reducing emissions and contributing to energy security.
And of course Ireland continues to promote cost effective development of renewable energy as a key contributor to sustainability, security of supply, competitiveness and climate change goals.
As you know, we must plan to ensure that, between now and 2020, there is a steady, progressive and measurable increase in the amount of renewable energy consumed in the electricity, heat and transport sectors.
Expert advice suggests that Ireland has the capability to achieve its national targets for renewable electricity from onshore renewable generation alone, with capacity to spare. This means both that our offshore wind resource should be developed as an export opportunity and that there is also potential for projects of scale onshore for export markets.
Our overarching strategic objective is not just to make renewable energy an increasingly significant component of Ireland’s domestic energy supply by 2020 but also to make it a significant component of our export sector and help our balance of payments.
We have in Ireland a rich and abundant wind and ocean energy potential which I firmly believe can be harvested and exported as a real economic opportunity for this island.
The EU Renewable Energy Directive is the framework under which Ireland can develop cross border trade in renewables. I am committed to delivering on that opportunity for Ireland through our ongoing work with the UK to develop a bilateral trade in renewable energy. That work is set to intensify over the coming months, with the objective of achieving an inter-Governmental agreement under the EU Framework to underpin the export of renewable energy. I propose to outline that work in more detail as part of a Renewable energy Policy Statement that I will be publishing within a few weeks.
It order to maximise the commercial benefit, minimise costs and optimise use of the required infrastructure, it is conceivable that this energy could flow via large scale storage based on this island. In other words, rather than exporting energy only as and when the wind flows, it would be stored here and then exported as reliable, dispatchable and carbon-free energy of premium utility during daytime high-demand hours. Clearly this would be a lower cost source of energy and of great value to the British economy.
Electricity storage of the scale envisaged would involve meeting technological, logistical and environmental challenges. If these challenges are met, however, there is a ready export market and it will be profitable. There is an ideal match between Ireland’s resources and UK energy needs.
There are as yet unresolved policy issues for both us and the British. Firstly, we have to be clear as to the strategic benefit in establishing an export market. Is it better that this country host a series of private projects linked via their own private interconnectors to the UK national grid bypassing our domestic network – effectively off-Wales wind farms that just happen to be sited on Irish soil? Or do we want to integrate these projects into our own national transmission system?
Second, there is the question of State participation. Apart from any other consideration, the State and its agencies are the largest landowners in the country and wind farms need land. But our energy companies are also major participants in the renewable energy market. Should we be growing their participation, with a view to reaping the major commercial benefits that are down the line? Or should we leave this market to be developed by the private sector and simply enjoy rental income?
To draw on the language of our latest agreement with the troika, the question is how we “ensure that state-owned assets are efficiently mobilised to reduce the government financing needs and provide some additional resources for reinvestment in job creation initiatives in the economy, while also increasing the overall efficiency of the economy”.
A related question is whether the present State participation, involving at least four different commercial State companies – the ESB, Bord Gais, Coillte and Bord na Móna – represents the most efficient form of investment in this market on behalf of the people. Should we rationalise our participation and what strategy considerations should we apply?
Third, State participation need not be active: it can instead consist of profit-sharing, perhaps through our taxation system. The starting point must be the Constitution, Article 10.1 of which states that all natural resources, “including the air and all forms of potential energy”, belong to the State.
This legal claim is stated in the text to be subject to any private interests that are for the time being lawfully vested in any person or body. But the wind, of course, is not owned by any private interests. It belongs therefore to the State and its exploitation as a natural resource must be on behalf of the people and driven by the public interest.
While it is one thing to have levies such as REFIT imposed on industry and domestic consumers to support developing sectors, the State can have a very different approach when it comes to fully commercial and profitable projects of scale.
Whatever is ultimately agreed, the commercial exploitation of resources that belong to the people must be accompanied by a very real commercial return to the people.
In both Europe and Ireland, we must ensure investment in new energy infrastructure as quickly as possible. Investment in the national networks will underpin economic development, as well as renewable energy. Investment in interconnection and smart grids will critically underpin the single European energy market and enhance security of supply, as well as enabling trade in renewable energy.
The proposed Energy Infrastructure Package needs to be progressed as swiftly as possible at EU level. As regular visitors to this Institute
will be aware, the Package may well fall to Ireland to conclude next year during our Presidency.
The Energy Infrastructure Package is also a vital part of the ‘Connecting Europe’ Programme, which includes Transport and Telecommunications. It is obviously critical to the jobs and sustainable growth agenda for Europe. It represents a very significant opportunity for Ireland as we work to address our national gas, electricity and renewable energy infrastructure needs.
Finally, investment in infrastructure is critical if we are to achieve the most ambitious of our energy objectives: completing the Internal Energy Market in both electricity and gas. The European Council has endorsed the goal of achieving a single integrated market by 2014. This is a major strategic challenge for Ireland. We need to preserve the important features of our existing gas and electricity markets, while maximising the benefits which integration can bring for Irish consumers and the energy sector itself.
One of the imperfections of the great European Project is the tendency towards one size fits all. Sometimes there is no alternative given the nature of law making. But sometimes this tendency becomes elevated to an economic doctrine that ignores whether the economy is major or minor, the local characteristics and experience.
For instance text book application of competition policy must be enforced even when circumstances have changed. For example, we now have several energy companies serving both domestic and business consumers in this small market. Further, the government has decided that the ESB should dispose of some powergen capacity. Yet some will continue to advocate a further breakup of one of our most successful companies. More significantly we are on the cusp of a regional electricity market where the ESB will be a relatively small company indeed.
Let me spell this out. Very shortly, in terms of our ability to plan for it, it will not just be renewables that will be traded internationally. Regional European electricity markets will be established in 2014 as an interim step towards a single EU-wide market.
Ireland will belong to the France-UK-Ireland (FUI) regional electricity market. This market will of course include two of Europe’s largest economies. Ireland’s consumption will account for just 3.5 per cent of the total FUI market – a market that will stretch from Rossaveal to Rouen.
In other words, our energy companies will be competing in a market more than twenty-five times the size of our current all-island market.
Of course, the market will not expand by that size overnight. The size of the real functioning regional market will be determined by the capacity of interconnection. Some very fundamental issues need to be addressed before this can become a reality. There are technical issues to do both with the need to align fundamentally different market models and to overcome current interconnector capacity constraints.
If these issues are dealt with, then direct interconnection with the European mainland becomes a real possibility. Greater interconnection will enable, but not necessarily guarantee, a gradual greater integration with the UK and France – and perhaps even further. When such trading becomes a reality, relative prices will then influence which way the flows will go – whether we become a net importer or exporter of electricity.
It is, for example, as of today an open question as to whether Irish demand for cheap French nuclear energy would outstrip French demand for Irish renewable energy. It is already the case that France is the world's largest net exporter of electric power, exporting 18% of its total production to Italy, the Netherlands, Belgium, Britain and Germany.
And there are therefore high level policy issues about the strategic positioning of Irish utilities – public and private – in preparation for competition in a market of that size.
I believe we need to re-assess our concepts of market share and market dominance in view of this imminent reality. Under the memorandum of understanding agreed with the EU and the IMF, there is currently underway an independent assessment of our electricity and gas sectors. The assessment is required to take due account of the EU regulatory context.
I very much hope that the International Energy Agency, which is carrying out this assessment, is looking not just at the current regulatory context but at the reality that we are now in transition towards an entirely new and more challenging context. It would make no sense for that agency to be applying last century’s regulatory criteria to a 21st century environment.
Specifically, it seems to me to make no sense to be arguing on competition grounds for a reduced market share for any of the major domestic players without taking some notice of the fact that the share reduction we are talking about would be a sub-decimal point percentage of the share of the regional market these players will enjoy in just a few years’ time.
Do any of us believe that either the British or French Governments are preparing for the imminent convergence of their two electricity markets by first downsizing their native electricity utilities?
We must confront the challenge of what the inevitable change in the market would mean for Irish Companies so as to ensure that there is an indigenous Irish energy sector.
Finally, in looking ahead to Ireland’s Presidency of the European Union next year, I have no doubt that the economic backdrop, for Europe and ourselves, will still be profoundly challenging in 10 months time. As President of the Energy Council, I will be working closely with the Commission, the Energy Council of Ministers and the European Parliament to ensure successful delivery on all priorities. These are likely to include the Energy Infrastructure Package as well as detailed discussions on setting renewable energy and energy efficiency policy post 2020 as Philip Lowe recently outlined here at the Institute.. The ongoing implementation of the internal energy market will be part of the challenging agenda during our Presidency.
Given the fact my portfolio covers Communications as well as energy, I am particularly keen that we use the opportunity of the Irish Presidency to move forward the joint agenda for Energy and ICT. The alignment of Energy, ICT and Innovation can unlock vast new potential for investment and employment for Ireland and for Europe as a whole. Ireland has distinct competitive advantages in this sphere given the presence of so many of the multinational companies here. There are also significant Energy/ICT opportunities for new innovative companies at start up and SME level. Europe needs to extend, and increasingly defend, its leadership in energy technology and innovation. I want to ensure that Ireland seizes the competitive advantage within Europe in this area as a prime location for energy research and innovation.
We also will continue to build R&D partnerships between Energy and ICT companies and the research community. Europe’s Strategic Energy Technology Plan, the Smart Cities initiative and the “Innovation Union” Initiative and “Horizon 2020” are critical to realising the potential – for Ireland and for Europe.
Ireland’s energy policy remains firmly set in the European and global context. Ireland’s security of energy supply also critically depends on the Union’s own strategies to ensure that Europe’s energy needs are met and are secure at all times.
2011 was a wake up call (if one was needed) for Europe and the world on the centrality of energy for economic viability. The events at Fukushima and the upheavals of the Middle East and North Africa last year put security of energy supply centre stage. The consequences of the proposed embargo by the EU on Iranian oil will pose its own challenges for EU and IEA countries and we are working in Europe and in the IEA to ensure necessary strategies are in place to deal with those consequences.
Ireland’s energy needs are best served by a strong European Union energy policy, both internal and external. I will continue to ensure that Ireland’s energy policy priorities are met as we work with our European partners to build a strong and sustainable Europe in energy terms.