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Dáil Éireann debate -
Thursday, 19 Jul 2012

Vol. 773 No. 3

Other Questions

Sale of State Assets

Éamon Ó Cuív


6Deputy Éamon Ó Cuív asked the Minister for Communications; Energy and Natural Resources if he completed an impact analysis of potential job losses in the ESB or Bord Gáis when they are part privatised; if he will publish same; and if he will make a statement on the matter. [35808/12]

The Government has decided to dispose of Bord Gáis Éireann's energy business and some of the ESB's non-strategic power generation capacity as part of the State assets disposal programme. The Government has also reiterated its commitment to retaining the electricity and gas networks, as well as the two gas interconnectors in State ownership as national strategic infrastructure, critical for the delivery of secure, sustainable and competitive energy supplies.

The ESB will remain a vertically integrated utility, positioned more competitively in the all-island energy market and, in due course, in the integrated European market. The sale of Bord Gáis energy will support this dynamic, successful company and its employees to continue to invest and grow while enhancing competition in the energy market for the benefit of the economy and consumers.

I do not envisage job losses in the ESB or Bord Gáis Éireann as an outcome of the planned disposals. The proposed sales can deliver positive outcomes for Ireland's energy markets, the two State utilities and their employees, consumers and business. In this context, it is also important to underline that the Government has successfully negotiated with the troika to ensure that 50% of the sale proceeds will be available for reinvestment under the recently announced infrastructure stimulus package.

Significant progress has been made in implementing the asset disposal programme, in line with our commitments under the EU-ECB-IMF funding programme. Tender processes for the appointment of financial advisers to oversee the sale of Bord Gáis Energy have now commenced. My Department is also progressing priority actions to address necessary legislative, regulatory and financial issues with a view to commencing the disposal process in 2013.

The Minister has reassured me to some extent with regard to the position of the ESB. However, I am concerned in respect of what is happening with Bord Gáis in the context of its contracting work out to a company called Balfour Beatty. The process in this regard does not bode well for the future. I do not understand the technical aspects involved but binding national agreements were made to the effect that jobs would be maintained during the transfer. I am familiar with a well-established private company, M. P. Ryan Limited, in Clonmel, County Tipperary, and I am concerned about what is going to happen to its employees. These people have been treated very unfairly.

I tried to raise this matter as a Topical Issue. Deputy Martin Ferris raised it some time ago. While the Labour Court is examining the matter, the workers to whom I refer are being treated unfairly and are being pitted against the company that is providing the services. Pickets were placed at the premises of the company in Clonmel to which I refer, which had done all in its power to retain its employees and ensure that its various contractual agreements were fulfilled. It is sad when something of that nature occurs, particularly as the workers had good relations with the company and the latter was trying its best to look after them. Honest answers could not be obtained from Balfour Beatty and, as a result, legal advice had to be obtained and the Rights Commissioner Service had to be consulted.

Perhaps the Deputy might ask a question.

I accept this is a delicate matter. However, is the Minister in a position to indicate whether, if further privatisation occurs, assurances will be given to consumers and safeguards will be put in place in respect of both employees and private contractors of good standing whose services have previously been used by companies such as Bord Gáis? I am not stating that these private contractors have a right to retain contracts for ever. I am of the view, however, that where they are in place, contractual arrangements should be honoured. The Minister indicated that a financial consultant will be appointed to oversee the financial aspects involved in privatisation. Will he take steps to ensure that any commitments made and contractual arrangements entered into will be honoured?

The Deputy has acknowledged that no private company has a right to expect to retain any given contract. I presume he also accepts that it is not my job to micromanage matters in respect of contractors which might be recruited by Bod Gáis, as it is currently configured, or by a new privatised Bord Gáis Energy. Management make these calls and companies sometimes win contracts, while at other times they lose them. That is the rule of the marketplace. My concern is to ensure - as stated in connection with the previous question - that whomsoever is recruited for the provision of services by the main company is up to delivering leading-edge services. The quality of the services provided must measure up to best practice. I cannot become involved in the business of recommending one contractor over another or of intruding into the company's micromanagement of contractual engagements.

Energy Resources

Bernard J. Durkan


7Deputy Bernard J. Durkan asked the Minister for Communications; Energy and Natural Resources when he expects gas from the Corrib gas field to become available to the Irish consumer; the extent to which the product will replace the use of imported energy on an annual basis when supplies become available nationally; the degree to which the supply is expected to represent as a percentage total gas use; if all the necessary steps have been taken in terms of compliance with all statutory regulations in order to ensure the earliest possible availability; if he expects the product to be competitively priced on the Irish market; the extent to which he expects this to contribute to economic recovery; and if he will make a statement on the matter. [35716/12]

The Corrib gas field will strengthen Ireland's security of energy supply and at peak production will provide approximately 60% of Ireland's annual gas needs. Completion of the Corrib field development works by the developer is the principal factor that will determine the date for first gas. Pending such completion, it is not possible to definitely state when gas from the Corrib field will become available. The developer is in receipt of all statutory permits relevant to the construction of the Corrib gas project. Works on all elements of the development, with the exception of the onshore element of the Corrib pipeline, are essentially complete. Works in this regard commenced in July 2011 and oversight of them is being undertaken by the appropriate authorities - Mayo County Council, the Department of the Environment, Community and Local Government and my Department - in the context of their respective consents. It is estimated that construction of the onshore section of the pipeline, which includes a 5 km tunnel, which began last year, will take approximately three years. First gas cannot, therefore, reasonably be anticipated before 2014.

With regard to how competitive the price of Corrib Gas is expected to be, Deputy Durkan should note that developers of new sources of gas price their supplies in keeping with the competitive nature of the market. I have no statutory function in the setting of the price of gas. Responsibility for the regulation of the gas market is a matter for the Commission for Energy Regulation, which is an independent statutory body.

In terms of the contribution the development in question will make to economic recovery, as already alluded to, it can be expected that Corrib gas will improve security of gas supply. This is of economic importance in light of Ireland's widespread use of natural gas, including for a significant element of energy generation. In addition, Deputy Durkan may be aware that profits from petroleum production arising from exploration licences granted prior to 2007 are taxed at a rate of 25%. This is the rate that will apply in the case of profits from the Corrib field.

I thank the Minister for his comprehensive reply. Have any lessons been learned from what occurred in respect of this project, particularly in light of its extraordinarily long duration? Is the Minister in a position to indicate what might be expected in the future if further finds occur? The procedures followed in respect of the Corrib gas project were extremely circuitous. Has a new or better way of bringing gas to the market much more quickly been identified? In the context of the statutory and safety requirements - I presume all of these have been complied with - is there anything that can be learned from the process to date which might be of economic benefit to both the Minister's Department and the country in the future?

I published a major Government policy statement yesterday on the delivery of energy infrastructure. A significant part of what is envisaged in this regard involves setting down principles of both community engagement and community gain. Both of those principles are equally relevant in this case. At the beginning of the Corrib project, a good relationship was fostered with the local community. It appears, however, that, under the new arrangement, the company took its eye off the ball and issues that were raised in respect of safety were not handled in as sensitive a fashion as might have been the case. Of course, we have moved on a great deal since then. The State has bent over backwards to ensure, in so far as is humanly possible, that there are no safety concerns. The campaign that emerged has moved from safety concerns to entirely different preoccupations. It has been damaging to the country's international reputation. Deputy Durkan is correct that the industry and the Government must learn lessons from the experience at Corrib. The greatest concern is that, in circumstances where the country has been drilling one hole or two holes on average every year, the impact may be to deter companies from exploration and drilling off our shore and that is not in the best economic interests of the country. Lessons can be learned and I hope we have learned them.

How does the process followed in this jurisdiction compare with competing jurisdictions in terms of the procedure, compliance and the delay between the initial exploration and the final outcome?

Compared to similar circumstances, it took approximately three times as long to bring it ashore in this jurisdiction from discovery of the field to the likely date of 2014. That is not justifiable because a great deal of cost can be written down by the company, a great deal of tax is forgone by the State and a huge bill is incurred by the State in providing security in the form of the Garda Síochána in particular. It does not bear favourable comparison with the international experience but I would also like to think it is a once-off. The experience at Kinsale, for example, is quite different. To go back to Deputy Durkan's original question, I hope lessons have been learned.

Alternative Energy Projects

Brendan Smith


8Deputy Brendan Smith asked the Minister for Communications; Energy and Natural Resources the discussions he has had with the authorities in Northern Ireland with a view to agreeing a joint policy north and south on hydraulic fracturing on an all island basis; and if he will make a statement on the matter. [35821/12]

Officials of my Department have had contacts with their counterparts in Northern Ireland on onshore exploration authorisations in place in the two jurisdictions. The primary purpose of these contacts has been to facilitate an exchange of information on the nature of the activities that have been licensed and their associated timelines. There has also been a sharing of information on the regulatory processes that would apply in each jurisdiction should the promoters of these projects make applications to advance to an exploration drilling phase or beyond.

The focus of these engagements has been on information sharing and not on seeking to agree a joint North-South policy. In the case that a project in either jurisdiction were to advance to the next stage, it would be subject to the regulatory processes that pertain in that jurisdiction. The environmental consideration of any proposed project in either jurisdiction will be subject to EU environmental legislation, including the provisions relating to consultation across borders where there could be a potential negative environmental impact in a neighbouring jurisdiction.

A meeting between authorities both North and South took place in February of this year, which provided an opportunity for a more detailed engagement and sharing of information between the respective regulators, together with a commitment to keep each other informed on relevant developments. Additionally, officials from Northern Ireland are represented among the bodies engaged in scoping the more detailed research to be commissioned by the EPA later this year, on the potential environmental impacts of hydraulic fracturing.

Renewable Energy

Clare Daly


9Deputy Clare Daly asked the Minister for Communications; Energy and Natural Resources if any cost benefit analysis has been carried out to determine the possible advantage of semi-State led development of the world’s best wind and wave renewable energy resource off the Irish coast using EIB loans; and if he will instruct that such a cost benefit analysis be organised. [35738/12]

While offshore wind is already being deployed in a number of EU member states, it is still a very expensive technology to deploy. Offshore wind currently costs in the region of €3 million per MW to deploy compared to the cost of onshore wind which is about half of that. Wave energy technology is still very much at the research and development stage and the commercial and technical feasibility is not yet proven. While there are very promising wave technology devices in development, they are at pre-commercial stages. Hence, it is not yet at a stage where large scale commercial scale development for the generation of electricity could take place.

The national wave energy sector has been supported over recent years through the ocean energy development unit in Sustainable Energy Authority of Ireland, SEAI. Support has included a prototype development fund of research grants to industry, the enhancement of the wave tank test facility in the hydraulics and maritime research centre in Cork and the development of a quarter scale prototype wave test site in Galway Bay. Further work includes preliminary design and survey work on a full scale wave test site off County Mayo.

Ireland has a very small electricity market, with around 2 million electricity consumers. Given the very significantly higher price of developing offshore wind compared to the lower cost onshore, it makes economic sense that we focus on developing less costly onshore wind resources to deliver Ireland's binding EU targets for renewable electricity. It is not the Government's intention that Irish consumers fund offshore wind development through a feed-in-tariff. Wave energy technology is not yet commercially viable and is therefore appropriately supported by research and development funding. This position applies to all projects, irrespective of whether they are developed privately or by the semi-State companies. The best future for Ireland's offshore wind resource lies in becoming an export industry.

The renewable energy directive provides the mechanism by which the renewable value of electricity can be traded. I am working bilaterally with my UK colleagues to create the necessary framework to enable trading between our two countries. Any project development that takes place for export has to occur under the auspices of a legal inter-governmental agreement with the UK under Directive 2009/28/EC. There are currently a number of project developers that have expressed interest in renewable export. The manner in which projects falling under the intergovernmental agreement would be selected remains to be established.

Additional information not given on the floor of the House.

The agreement with the UK will be developed in a way which ensures a mutually beneficial arrangement and to ensure tangible economic benefits for Ireland. If renewable energy power is being exported and consumed in the UK, then UK consumers will have to provide the necessary financial support to make the development commercially viable. These costs will not fall on Irish energy consumers.

The Minister's response is disappointing and seems to contain contradictions with the Labour Party's energy revolution policy proposal. In opposition, the Labour Party had identified the enormous potential of wind and wave power on environmental grounds and in terms of job creation. Some 20,000 jobs in ocean energy, 10,700 jobs in wind energy and 7,000 jobs in construction were talked about three years ago. The basis of the Minister's answer dampens the potential of this area. The question asked whether the Department had carried out a cost benefit analysis and I must pose the question again. We pose the question on the day the National Competitiveness Council scorecard came out and rated Ireland's performance as abysmal in terms of environmental sustainability. We are 24th out of 28 in energy from renewable sources. We have slipped two places since the last scorecard. It is just not good enough and the Government will be judged on this. Private companies are considering this. Why should they be the ones to benefit from it? The geographical conditions are unique and the semi-State sector should make this investment for all the reasons proposed by the Minister when the Labour Party was in opposition.

Deputy Daly is confusing many things in that peroration and, in the process, misrepresenting the policy of the Labour Party then and of the Government now. This matter is attracting enormous concentrated attention. We will proudly deliver on our extraordinarily ambitious target of 40% generation of electricity from renewables by 2020. As I said in my reply, I am in negotiations with the British Energy Secretary with a view to concluding a memorandum of understanding on an international framework to permit trade in renewable energy from this country to the neighbouring island. That holds out the prospect of significant employment. We have a relatively small market in Ireland, amounting to some 7,000 MW on an all-island basis. We may well have the capacity to generate much more provided we have an export outlet. There is no point, however, in generating electricity which we cannot use because storage is a problem. It is a very exciting area and some of the proposals announced in recent weeks by large-scale players in the industry are very interesting. However, they cannot proceed until an intergovernmental framework is in place, which I hope will be the case by the end of the year.

The 40% target was agreed upon when the Labour Party was in opposition. Unfortunately, the figures show there has been some slippage since then. The point is that we have a hugely undervalued potential resource. As the Minister observed, wave energy is hugely expensive. Although its development is essentially in its infancy, it is progressing well and there is no reason that we cannot be world leaders in this area. Why should a semi-State company not spearhead that development rather than leaving it to the private concerns lining up on the wings to benefit out of it, as they will do in the case of the Corrib gas field? This is a resource for the people and something which can stimulate job creation. That is what the Minister's party argued for in opposition - I have read the document - and I would have assumed its policy in government would correspond. Will the Minister respond to my question on the cost-benefit analysis?

The National Competitiveness Council report to which Deputy Clare Daly referred indicates that Ireland is among the countries in Europe most dependent on oil as a source of energy consumption. The latest figures show that in the first quarter of this year, exports increased by some 2.5% while imports rose by 5%. The price of oil, over which we have no control, is a huge factor in that. Does the Government see any potential to address this problem by way of investment in renewable energies? There is a serious difficulty in that oil prices are something over which we have no control.

I commend Deputy Clare Daly on her reading matter. I recommend, however, that at least for the month of August she might apply a more eclectic test to her reading by moving beyond Labour Party policy documents.

I can guarantee the Minister that I will.

I am delighted to hear it. I do not know why the Deputy is complaining about what we are doing in the area of wave energy technology, given that she acknowledges it is in its infancy and is only at the research stage. I do not see how I am supposed to pull a switch and work wonders until such time as the technology is proven. In the interim, we are supporting research in this area by the Sustainable Energy Authority of Ireland's ocean energy development unit. In these times of extraordinary constraint of resources we are managing to keep it going. I recently approved funding, for example, for new facilities at the Beaufort research laboratory in Ringaskiddy, which will support the wave research testing that is going on there.

The potential for the development of an export capacity in this area is very exciting. However, Deputy Daly will have to explain from where, if it is to be done exclusively through the State companies, the huge investment that is required will come. People tend to think of wind energy as nice and fluffy and green and to observe that there is plenty of it about the place. However, there are economic issues at play here and the investment undertaken by the large-scale industry players is enormous. We do not have those levels of resources to work with. This is not to say that I do not foresee a role for some of the State companies as these projects develop. We have thousands of acres of cut-away bog and 7% of our land is under afforestation. In the ESB we have one of the most successful indigenous energy companies anywhere in the world, comparing scale with scale. I would be very partial to that body playing whatever partnership role it can in this process and getting a share of the action. However, the notion that we can source billions in order to fund developments in this area is not realistic. Although I wish it were possible, it simply is not.

I asked the Minister whether a cost-benefit analysis has been undertaken in respect of obtaining loans from the European Investment Bank in order to carry out this work.

Yes, it has. It is only possible to obtain EIB loans for projects which the bank approves and where matching or better State financing is being put up. We are not remotely in that space. We should bear in mind that there is no template here and no intergovernmental agreement in place. If something emerges from our negotiations with Britain, it will be the first such agreement as between any two trading states. If we can, as I am confident we will, develop an export capacity in this area, it will be one of the most exciting developments in the industrial sector in decades. The notion that we can exploit a plentiful indigenous resource and that a neighbouring island has a matching need in order to meet its renewable targets and energy requirement, which would suggest a win-win situation, is a very exciting prospect. We are proceeding with all haste in this matter.

Deputy Mick Wallace is correct in his observation regarding our dependence on oil and our enormous import bill of some €6 billion per annum. What we are discussing here will certainly facilitate our efforts to reduce that dependency, ensure greater reliability of renewables and, in the process, provide cheaper power to consumers and businesses. The Corrib gas field, about which Deputy Bernard Durkan expressed concern some moments ago, will supply 60% of our need at peak, but it will not, unless we are successful off Dalkey, obviate the necessity to continue importing oil. One never knows what might happen and there would be a considerable welcome in the area for a major oil field. In the absence of such a discovery, we must import oil. Our objective is to reduce that dependence and enhance the reliability of renewables.

Deputy Luke ‘Ming' Flanagan has indicated. We have already gone over time, but I like to give an opportunity to Members who turn up for the debate. He may ask a brief question.

The Minister is probably aware of the Bill brought forward by his party colleague and my constituency colleague, Senator John Kelly, to increase the requirement regarding distances between onshore wind turbines and residential properties. Does he consider this proposal a runner and might it have any impact on efforts to reduce oil dependency?

Deputy Pat Rabbitte: Yes. One can only obtain EIB loans for projects which the bank approves and if the State is putting up matching or better finance. We are not even remotely in that space. We should bear in mind that there is no trmp It has obviously come from complaints from people in my general area who are unhappy with the current guidelines for building wind turbines beside people's houses. What does the Minister think of what he proposes, or is he aware of what he proposes?

I am very aware of it. As recently as yesterday, the Minister of State, Deputy O'Sullivan, and I met Senator Kelly and some of his colleagues about his Bill. His Bill has certainly attracted a great deal of support, which I acknowledge. He raised an issue which is a matter of concern for some residents. The Minister of State, Deputy O'Sullivan, and her officials are engaged in further discussions with him in the matter of the appropriateness of the guidelines to which the Deputy referred.

My view is that this issue is better dealt with through more flexible guidelines than through rigid primary legislation. We had some discussion for over an hour and a quarter yesterday about the kind of things such guidelines would have to encompass. A turbine 500 m from one's house, which happens to be behind a mountain, is not exactly intruding on one's house but if it is twirling over one's roof, one has a different view. Many issues have to be taken into account and the Minister of State, Deputy O'Sullivan, who has responsibility for planning in this area, is dealing directly with Senator Kelly.

Radio Spectrum

Seamus Kirk


10Deputy Seamus Kirk asked the Minister for Communications; Energy and Natural Resources if he intends issuing an instruction to ComReg, as he is empowered to do under the acts to lay down the minimum coverage requirements for any new mobile licences; and if he will make a statement on the matter. [35823/12]

The management of the radio spectrum is a statutory function of the Commission for Communications Regulation, ComReg, under the Communications Regulation Act 2002, as amended. ComReg is independent in the exercise of this spectrum management function. In accordance with its statutory functions, ComReg has consulted extensively on its proposals for the release of spectrum rights of use in the 800 MHz, 900 MHz and 1800 MHz frequency bands and the auction has now commenced.

I am advised that ComReg received a considerable number of responses to this consultation process. These were considered prior to finalising the proposal for the award of a number of individual rights of use in the 800 MHz, 900 MHz and 1800 MHz radio spectrum bands. The documents are ComReg Document 12/25 and Decision 04/12 published on 16 March 2012. ComReg's information memorandum for this award process, which is now in the auction application phase, details the processes and procedures ComReg is employing to implement its substantive decisions.

The reasons, analysis and other material relied upon by ComReg in support of its decisions on the minimum coverage and roll-out requirements are set out in section 5.5 of Document 12/25. Among other things, ComReg considered that actual coverage levels are expected to exceed the 70% population obligation by a considerable margin given the competitive nature of the market and the limited risk of roll-back of coverage from the existing levels. It should be noted that the four existing mobile operators have achieved coverage levels exceeding those set out in their current respective licences. For example, for 3G services, Vodafone's coverage covers 90% of the population, 5% more than its obligation. Hutchison 3G, better known as 3, covers 96% of the population, 11% more than its obligation. O2 also covers 90.5% of the population, which is more than its obligation.

Additional Information not given on the floor of the House.

ComReg also notes that coverage continues to be an important competitive differentiator in the mobile telecommunications market. Any deterioration in coverage by any one network would undermine that network's attractiveness to its existing and potential customers. The importance of maintaining the existing levels of mobile telephony and mobile broadband coverage has been raised with ComReg by my officials. While the outcome of the forthcoming multi-band spectrum release process cannot be anticipated, I understand that ComReg is not expecting any reduction in coverage as a result of the process. In all of the circumstances, I do not believe that a policy direction concerning this matter would be appropriate at this time.

I acknowledge what was in the Minister's reply in regard to the extent of the coverage. To what extent has monitoring been done on the quality of coverage in the areas covered? In some cases, there are dropped and missed calls, a lack of service and the signal is below 50%. As a consequence, the consumer may not be getting good value for money. Has any work by done by the regulator, or has the regulator pursued that particular angle?

Yes, there has. As Deputy Durkan suggested, it is of varying quality. There are still pockets where calls are dropped and so on, as he suggested. However, immensely valuable quality spectrum is being released for the first time which will greatly enhance broadband and mobile services and it will make a considerable contribution to improving connectivity generally. Obviously, there are areas of the country, whether for reasons of topography, distance from masts or whatever, where one still relies on a pretty basic service. I hope to address that in a different area arising from the task force on next generation broadband which I chaired with the Minister of State, Deputy O'Dowd, and which comprised the chief executives of the leading telecommunications companies. I hope that the national broadband plan, which we will publish as a result, will give Deputy Durkan some comfort in this area. What we are talking about is not unique to Ireland, these difficulties obtain in most countries in the more difficult rural areas in particular, although not only in rural areas. What is coming down the track will be a considerable improvement.

Written Answers follow Adjournment.

The Dáil adjourned at 6 p.m. until 2 p.m. on Tuesday, 18 September 2012.