As there are no amendments on Report Stage, we will proceed to Fifth Stage.
Bill received for final consideration.
Vol. 657 No. 2
As there are no amendments on Report Stage, we will proceed to Fifth Stage.
Bill received for final consideration.
I thank Deputies from all sides for their help in advancing the significant measures provided for in the Electricity Regulation (Amendment) (EirGrid) Bill. I especially thank those Deputies who spoke on Second Stage and who contributed on Committee Stage for their positive input to the Bill and its various provisions dealing with the east-west electricity interconnector. I note all Deputies recognise the strategic national importance of the interconnector and the pressing need to expedite its delivery in the shortest possible timeframe.
I take this opportunity to mention some of the potential benefits to Ireland from interconnection with the UK market. The annual generation adequacy report, produced by EirGrid, sets out forecasts for the supply and demand balance for electricity over a seven year period. This report has identified a need for additional capacity over the next seven years to maintain security of electricity supply. I am advised there is significant generation capacity available in the British energy market. The east-west interconnector will link Ireland to that market, enhancing security of supply on this island.
As the UK market is also one of the most liberalised energy markets in Europe, the east-west interconnector will also enhance competition in the Irish electricity market. This, together with the all-island single electricity market should, over time, exert downward pressure on electricity prices.
The east-west interconnector will also enhance fuel diversity by providing an external source of electricity which will reduce our dependency on gas-powered generation. At present, some 60% of our electricity is generated from natural gas, which is primarily imported from the UK. The east-west interconnector will also support the increased penetration of renewable generation, particularly non-dispatchable wind generation in the Irish market. It will allow surplus power to be exported to Britain in times of high wind generation. As a nation we have set ambitious targets of progressively achieving 33% of our electricity consumption from renewable sources by 2020. The all-island grid study shows that even higher targets may be possible. This study also identifies the east-west interconnector as a key enabler for delivering these ambitious renewables targets. It is for these reasons the Government has attached such a high priority to the delivery of the east-west interconnector.
The Bill is one of a suite of important measures that will allow the Government to continue to drive forward its progressive energy agenda. One amendment was introduced on Committee Stage to clarify the powers of subsidiaries of EirGrid. This step was taken with a view to ensuring there is absolute transparency and certainty as to the powers of subsidiaries of EirGrid to carry out certain functions with regard to the east-west interconnector. The amendment was drawn up in consultation with the Office of the Parliamentary Counsel and eliminates any legal uncertainties regarding subsidiary companies. EirGrid has advised that the amendment will help avert any potential delays to the commissioning of the interconnector by 2012.
The Department of Communications, Energy and Natural Resources, along with EirGrid and the Commission for Energy Regulation is continuing to examine all aspects of this project with a view to ensuring all possible steps are taken to expedite the planning and development processes. In the meantime, the Department is continuing to participate in the high-level co-ordination group, which has been established under the chairmanship of the Commission for Energy Regulation to oversee and ensure completion of the project to schedule. I am advised that work is progressing well. This work will be further facilitated by the swift passage of this Bill through the Oireachtas. I again thank all Deputies for their co-operation and assistance in advancing this Bill through the House.
That there are no amendments to the legislation at this stage is an indication that the Opposition, especially Fine Gael, is supportive of this legislation. This support is principally because of the frustration that this legislation was not produced years ago. The east-west interconnector should have been built and be operating by now, providing security of supply, which Ireland desperately needs, and alternative energy to stimulate more competition for power generators in Ireland.
The cost of electricity has increased significantly in the past two to three years. Electricity bills for businesses and households have doubled rather than increased in line with inflation. This is because we have failed to reap the benefits of competition in energy generation in Ireland. We have been at pains to try to put in place competition in the energy market, as we are required to, but we have not had the benefits of that, which is a problem.
Part of the reason for this failure is the size of the energy market in Ireland and the difficulty with attracting large investors to produce energy and to compete with the ESB. We have some competitors such as Viridian and others. That we now have an all-island market has assisted that process. However, we still have not seen the positive price signals that would normally be associated with the introduction of competition into a marketplace. The quickest method, by far, of introducing competitive pricing into the energy market is by interconnection. It is a fact that over the past four or five years electricity prices in the UK have consistently been between 10% to 15% cheaper than here. If one set up a business in Manchester as opposed to Dublin one would be likely to have energy bills that were dramatically smaller than in Ireland. One cannot blame global factors for that; it is a domestic management problem that we have had with our energy industry.
Interconnection is essential and it should have happened by now. I encourage the Minister of State, Deputy Seán Power, in the absence of the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, who is ultimately responsible for this legislation — I understand the Minister is abroad, and I have no difficulty with that — to push this project and ensure EirGrid meets the deadlines it has set. It wants to have this interconnector up and running before 2012. I ask the Minister of State to do all that is possible to ensure this happens.
The interconnector is also vital for the vision outlined by the Government to switch from using carbon based fuel as the raw material for power stations towards a more sustainable, secure source of power generation in Ireland. This requires dramatic changes to the electricity grid and energy security of supply measures when sustainable or renewable sources of energy are not providing power. I refer to wind power. We put a great deal of faith in wind energy as a source of significant amounts of power for Ireland in the future. We are likewise investing in wave energy, which is at a development stage, but by 2011 or 2012 it will be commercially operable off the west coast. However, these sources of power are intermittent. Wind provides power for no more than 40% of the time, which is a good average compared with other European countries. Wave power provides electricity for 50% of the time. In the absence of substantial storage capacity for energy, at plants such as Turlough Hill water is pumped up into a lake when excess power is generated and allowed to flow back down and drive turbines at peak times during the day. In the absence of such capacity, substitute energy is needed. For every megawatt produced by a turbine, it must be ensured, when it is not generating energy, that energy is obtained elsewhere. As Ireland's energy demand increases, it can be met by renewable sources but we must have a fallback position. If climatic conditions dictate that a large area of high pressure moves over Ireland and no wind and waves are generated for two or three days, we would have a stable supply source.
The way to address this issue is storage, successfully spreading the risk from renewables and interconnection. That is one the reasons, from a renewable energy point of view, interconnection is vital. Power can be used as it is needed when sufficient power cannot be generated from renewable sources. The issue is not only about taking energy from the British grid, but exporting green energy in order that Ireland can become a nation that gains a reputation for being ahead of the curve in renewable energy generation, whether that is in research and technology or output. We can become a substantial exporter of green energy through interconnection, initially with Britain and then with the rest of Europe, and a premium could be charged for that because a price premium will attach to that as we move to an aggressive carbon trading system across the EU. The opportunity is there for a new industry to expand and develop and to generate the high technology jobs we need. Ireland has a competitive advantage because of its climate, which consistently provides the necessary wind speeds and wave sizes.
The interconnector involves more than plugging into the British grid and accessing a cheap source of power. While this is important, it is also about facilitating the expansion of an industry, security of supply and providing a broader energy mix. That is why the private sector is planning to build interconnectors and it is anxious to get in on the act. A company is considering building two east-west interconnectors in addition to EirGrid's because it thinks there is a market for them. It plans to have an interconnector between Wexford and Wales built and operating by the end of 2010, which highlights how quickly a project can be undertaken when it is driven. Departmental officials may be sceptical about that, but that is the company's aspiration.
Meanwhile, the House has debated the State building an interconnector for eight years. I recall two years into my first term as a Member the Government discussing the need for interconnectors with expressions of interest being invited from the private sector on how to finance them. Eight years later, we are passing legislation that will provide for an interconnector by 2012. That is how slowly the State has moved on this issue. It is welcome that this is finally happening and Fine Gael supports it. My party is happy to facilitate the swift passage of the legislation, but while it is not too little, it is too late. Let us get this built. The Minister needs to drive this project because EirGrid is anxious to push ahead. However, the company may need assistance getting through the planning process and so on.
I refer to the financing of the interconnector. It is estimated that it will cost €300 million to build. EirGrid is being provided with a borrowing capacity of €750 million, more than double the cost of the interconnector, which presumably will cover other projects down the line. However, EirGrid holds a legitimate aspiration that the State might sponsor part of the cost of the project. Does the Government plan to permit EirGrid to borrow all the money provided for or will it rely on taxpayers' money to partially fund the project in the context of a private operator building an interconnector on an east-west basis that will provide an alternative supply source? The price of energy provided through the interconnectors will be set by the regulator and the EirGrid project will be an extension of the national grid. Given the state of the public finances, I suspect the Government cannot afford to fund this project. I do not expect a reply to this question now but I would like the Minister of State to contact me in writing about how the State intends to assist in the funding of the interconnector because that will impact on EirGrid's borrowing requirements, which will need to be organised quickly as the project proceeds. I welcome the legislation. Let us get on with the project.
I thank the Deputy for his positive contribution. No matter how enthusiastic we are when we enter the House, the wheels never turn as quickly as we would like, which surprises us. I appreciate his support and acknowledge his contribution. I assure him my colleague, the Minister for Communications, Energy and Natural Resources, will press forward with the project to ensure the benefits the Deputy outlined in the context of competition, security of supply and increased renewable generation will be available in the market as soon as possible. The EirGrid project is proceeding well and we will continue to ensure it is expedited.
A final decision on financing has yet to be reached but, once the process to select a tender is complete, we hope to decide on the financial package for the interconnector. The Bill provides EirGrid with the capacity to borrow up to €750 million but that does not mean all the money will be raised for this project. Consideration has been given to an Exchequer contribution but that decision has yet to be made.