I welcome Professor Lewis and Dr. Motherway. As they are familiar figures at this committee, I invite them to make their presentation which will be followed by questions. I compliment them on the reports they have produced, especially the smaller document, which I suggest be sent to schools. It would be interesting for them to have that information and encourage children to influence their parents.
2009 Energy Reports: Discussion with Sustainable Energy Ireland.
Professor J. Owen Lewis
Sustainable Energy Ireland is the national authority on sustainable energy issues. A key part of our mission is to contribute information and analysis to inform policymaking and action. The statement draws on some of our recent analytic outputs to highlight some of the main issues in our energy use trends and their consequences. The reports to which we will refer are Energy in Ireland, 1990-2008, Energy Forecasts for Ireland until 2020 and Understanding Electricity and Gas Prices in Ireland. I will also use some information from the report Ireland's Low Carbon Opportunity.
We welcome the opportunity to engage with the joint committee which we would like to use to discuss the core issues in energy trends in Ireland, their impacts and the actions required. Sustainable energy issues have become more central to society than ever before. We will focus on the issues of climate change and energy security and the next phase of growth in employment based on a new low-carbon, smart economy.
We firmly believe Ireland can address the energy and climate challenges in a way which positions us as a leader and fully exploits the opportunities which arise. Energy demand growth has been linked to economic growth for many years. A recent report, "Energy in Ireland", shows that in the first period of economic downturn certain types of energy use declined. In 2008 it was masked by a considerably colder winter than that in 2007. We expect the 2009 data to confirm a softening of demand in some of the key energy use areas. As economic activity recovers energy demand will grow and there will be consequent growth in greenhouse gas emissions, as can be seen on the screen.
Dr. Brian Motherway
I will focus on some of the sectors we see as key. The transport sector continues to prove the most challenging and has the biggest pressure on overall energy demand, which is particularly worrying given it is almost entirely dependent on imported oil products. In 2008 there was a decline in energy use in road freight, in particular, caused by a significant decline in construction traffic. Aviation energy also showed a similar fall, whereas passenger road energy use remained steady. This does not signify an end to energy growth in transport but, rather, a temporary pause.
We published a report in December on energy forecasting which showed that by 2020 transport energy demand could be as much as 30% higher than 2005 if further action is not taken. Energy use in all buildings was 9% higher in 2008 than in the previous year. The main reason was that 2008 was a colder year and if one corrects the data for that one sees a 3% underlying growth in energy use in buildings. We do not see building energy growth returning to the levels of recent years. Our forecasting indicates that the impact of new building regulations, coupled with the retrofitting of existing buildings, will deliver a steady decline in energy use in buildings.
We highlighted these sectors for several reasons. One is that they account for the lion's share of energy use and consequent greenhouse gas emissions. They also depend most highly on imported fossil fuels and have proved slower to take up renewable resources, in contrast to electricity generation. Importantly, they also represent the main elements of the non-emissions trading sector which, as the committee knows, is where Ireland faces a particularly demanding European Union target of a reduction of 20% in emissions by 2020.
Our energy demand creates challenges in greenhouse gas emissions, security of supply, competitiveness and affordability. In terms of greenhouse gas emissions, on a per capita basis we are among the highest emitters in the world. As can been seen in the chart, two thirds of our national emissions come from energy use, 24% of national greenhouse gas emissions come from transport, 21% from electricity and 21% from heat. In policy terms, the new split in European Union targets to which I referred between emissions trading and non-emissions trading creates particular problems. In Ireland from 2005 to 2008 the non-ETS emissions sector showed a growth of 7% which is in stark contrast to the 2020 target of a 20% reduction.
Transport, heat and, outside the remit of energy, agricultural emissions are the key sources and all will require strong interventions. As far as energy is concerned this is based on substantial energy efficiency improvements and major gains in renewable penetration. In the context of the greening of the electricity supply we see continuing apace, it will also be important to consider whether certain uses of transport and heat can be moved into the electricity domain.
Our dependence on imported sources of energy remains a concern and strengthens the case for diversification into indigenous renewable resources. It is worth noting that our statistical analysis of energy prices which we published recently demonstrated clearly that the countries across Europe which are most dependent on fossil fuels for electricity generation tend to have the highest electricity prices. On the question of prices, there has been much understandable concern in recent years about our energy prices for business and householders. Our recent report examined the data in detail across Europe, in 2009 in particular, and found Irish prices, while still being above the European average, are starting to converge in comparison with 2008. Since the data set we examined was published, recent reductions in domestic prices should ensure we come closer to average prices in Europe for the domestic sector.
We would like to note what we consider to be a number of successes in climate and energy policy in Ireland which have more widely applicable lessons. On renewable electricity, to which I referred, Ireland will achieve its 15% target of electricity from renewable resources this year. For the purposes of comparison, it should be noted that the CO2 emissions which Ireland now avoids through the use of renewable energy are more than one and a half times our total emissions from coal use in the country. The success in renewable electricity has been largely based on the growth in wind energy.
Another area we wish to highlight is car buying patterns. Our statistical analysis shows that the success of the car VRT and annual motor tax changes have stimulated significant changes in new buying patterns. It is notable that when the tax systems were changed in the middle of 2008 to link them to emissions the market share for more efficient car categories grew overnight from 43% to 73% of car sales. This will reduce emissions from the transport sector for some time and is also important evidence of the possibility of driving real change in behaviour through policy actions.
Another area we would like to highlight is energy efficiency action, where market activity in building energy retrofits is growing rapidly. As an indication, in the first month of this year Sustainable Energy Ireland dispersed €3 million in grants to homeowners who wish to upgrade their homes through the home energy saving scheme. We are now in the process of developing all our supports for efficiency in buildings into one national energy retrofit programme which will engage with energy companies, the construction sector and other market actors to deliver much greater scale in efficiency activity in all buildings. In 2010 we expect to support the upgrade of 60,000 homes, within which we will prioritise the fuel poverty sector.
Professor J. Owen Lewis
I will try to highlight agenda items for action. Some of the key challenges we have underlined here include the emissions target in the non-ETS sector, the need to improve renewable energy sources penetration in heat and the need to step up progress in efficiency. The key is the mobilisation of action and investment. Our detailed study of decarbonisation potential in Ireland's low-carbon opportunity was something we discussed with the committee during our most recent appearance late last year, which helps to point the way. We discussed how this highlights particular areas.
It is clear that all sectors and parts of society will be involved in the decarbonisation project. It is notable that in this analysis of 2030 more than 40% of the opportunities save more money than they cost, because energy efficiency reduces energy bills over many years and the total savings add up to more than the initial investment required. The curve is based on conservative assumptions about oil prices, which will be $60 a barrel, and as the assumed future price rises so too do the economic benefits of taking action in all areas. The analysis also reminds us that the challenges are also opportunities for enterprise, export and employment. Efficiency retrofitting is already supporting jobs — 5,000 will be supported directly by Sustainable Energy Ireland programmes in 2010.
Ireland also has an advantage in terms of the new smart economy, in that it is driven by information and communications technology, in which we are strong and well-established globally. The kinds of technology needed to deliver the next generation electricity grid will find global markets. From smart meters, wireless sensing and active grid management to the technology to enable electric vehicles, Ireland has a tremendous opportunity to lead.
Our other great advantage in terms of the smart economy is our renewable energy resource. In the coming decades we have the opportunity to become a major source of energy generated through wave and offshore wind, in particular. Our ocean energy enterprise sector is already active. Through our ocean energy programme some 12 industry projects have been supported with grant aid of nearly €4.5 million. The potential for Ireland to be an exporter of clean energy across Europe is real and substantial. There are also opportunities for the agricultural sector in bio-energy which could be particularly important in developing the renewable heat sector.
The sustainable energy agenda is more central to our society than ever before and at the same time awareness of the issues has never been higher. There is an active debate about the issues and their solutions. As is clear to all by now, we have a core imperative to reduce the negative impact of energy use through greater efficiency and greater use of renewable energy sources. The need for analysis and data to inform such debate is clear and our mission is to continue to enhance these contributions to allow policy makers and all of society to make the best decisions.
We have learned a considerable amount from several successful interventions and we know that energy demand and supply can be transformed. However, the scale and the pace of action needs to accelerate and policies and programmes to address the sustainable energy issues must continue to evolve. As the Government's sustainable energy authority, we are ready to work with all to ensure that such action is timely, well-informed and well delivered.
I thank Professor Lewis and Dr. Motherway for appearing before the committee again and I am sure it will not be the last time we meet this year. It is important that we develop a good robust relationship with SEI and this committee because much of the work we are trying to do is parallel work. The resources available to SEI can be of significant help to us as we push the boundaries in terms of some of the new technologies available and some of the new thinking.
Some questions are dealt with partially in the presentation while other elements are not. On biofuels we are about to see legislation which will require a set percentage of petrol and diesel to have biofuel content by the middle of the year. There is much concern in the industry that we do not have the capacity to produce anything like the quantities required in Ireland so we will import much of that biofuel. That is acceptable in the short term if in the long term the idea is to develop a strong and viable biofuels industry. If we cannot do that in the long term, should we go down this route when there are other ways of abating emissions from the transport sector which Ireland could benefit, as well as from the actual reductions in emissions?
Various countries in the EU have taken differing approaches. For example, the import tariff Germany applies to biofuels coming from Brazil, with which the domestic ethanol industry cannot possibly compete, is at such rate as to make its home produced ethanol viable. We need to do something similar. It appears as if we are following the British model at present which will not provide sufficiently high tariffs to make a potential ethanol industry viable. Have the delegates looked at that and, if so, are they advising the Government on that issue? We have a choice: we can follow the British-Swedish model which is to rely on importing biofuels by and large or the German-French-Spanish model which is more about supporting their own biofuels industries. Given the potential for a biofuels industry here we should certainly look after our own producers for environmental reasons as much as commercial reasons.
I would like the delegates to speak a little more about heating public buildings. I understand we spend about €400 million per year on imported fossil fuel to heat public buildings such as libraries, hospitals, schools and the Oireachtas. There is no reason we cannot make a dramatic shift in terms of combined heat and power plants and fuelling them with Irish-grown biofuels, whether wood, biomass or whatever. Has any work been done in that area given that it is an obvious area to move forward?
On the issue of the roll-out of smart meters, can the delegates give the committee the facts in terms of how many meters are out there? I strongly support smart meters. I honestly believe that if we put electricity smart meters into houses we should put water meters in at the same time, otherwise there will be a double cost. We need to do both. Do the delegates have a role in advising the Government in that regard?
My final question may be slightly unfair but it is in regard to the intermittency problems with wind. More and more scientists and engineers come to me expressing real concern that we are pursuing, with tunnel vision, the move towards reliance on wind power. I have always supported that path. Are we challenging the scientific and engineering communities sufficiently to deal with the intermittency issues around wind? Some of the research being done in the private sector is really interesting. I am not just talking about the Spirit of Ireland project but other projects that deal with pressurised air, for example, nitrogen storage or whatever. If Ireland is to develop in the future a 40% target for renewable energy sources, we will have to deal with the issue of the intermittency of wind. The sooner that is done the better and the sooner we are seen as the first country to do it the better. I challenge SEI to take on that issue. The engineering challenge can be overcome. We should try to do that because it is too easy for wind developers at present. Once they get planning permission and grid connection, which are two big expensive obstacles, they have a subsidised guaranteed price and get preferential treatment on the grid. We should challenge that community that now has significant finance available to it to deal with the intermittency issues that have technical potential solutions. SEI should take on that agenda very strongly.
I welcome the SEI delegates to this meeting and compliment them on the work done in analysis and presentation. They have given the committee much food for thought following a cursory look at the key points, particularly those made today. The delegates mentioned that electricity prices will come down to the EU average. Recently the ESB announced it would increase domestic charges to relieve a certain pressure on the commercial sector. I do not know if SEI has taken that into account and, if so, perhaps the delegates would comment.
In regard to the non-traded sector where there are still major challenges, will the delegates indicate what they consider are the key priorities? Before the guests arrived we were considering the whole issue of a new climate change strategy. This committee should take on that task of seeking submissions. We talk a great deal, but when we look at what works and what does not work we need to be absolutely focused if we are to achieve our targets. In that light, we have talked about offshore wind energy. The ESRI's recent report said we should forget about offshore wind, that it is not necessary, it is costly and we should stick with onshore wind. Perhaps the delegates would comment on that issue.
How do we compare with other countries or trading partners in terms of how we are able to move to new ways of operating? It is welcome that there are certain successes, and we should not underestimate those, particularly in the area of wind energy. Deputy Coveney mentioned the issue of intermittence, which I wanted to mention as well but in regard to the public sector, as a target of a 30% reduction is set out in the Government programme. I do not believe there is a chance in hell of that being reached — the representatives can tell me I am wrong — yet it appears to be an obvious way that we can make a real difference. We can invest in public sector buildings to ensure better energy efficiency. That would make a tremendous difference, even in terms of changing light bulbs. The representatives made the point when we visited the SEI headquarters the difference that has made. They might comment on that.
My last question concerns retrofit schemes. There was a major emphasis in the budget on the new retrofit scheme, which appeared to me to be like the old retrofit schemes combined and repackaged. Sustainable Energy Ireland is the lead agency in dealing with the applications under the greener homes and home energy saving schemes. What will be different? I accept that they cannot pre-empt what the Minister will announce but it appears from the figures that there is not a bigger investment over what happened in 2008 and 2009. There have been some changes over those years. The greener homes scheme got smaller and the home energy saving scheme was introduced but from replies to parliamentary questions I got I was mystified as to how there was such under-spending by the end of the year. One can say that it is running into the following year but these schemes have been up and running for a while and therefore there should not be that kind of under-spending. The representatives might explain that to me. What is the big difference now in terms of the funding for retrofitting post the budget and how do the grant schemes work? Is it that the SEI is spending all the money and that by the end of the year, even though it looks like there is under-spending, it is actually all accounted for or is that money not being processed quickly enough? I fear, not that people do not have the money but that they fear to spend it. We know that because all the evidence indicates that people are saving in a way that they have not saved for a very long time and to unlock that amount of money we need to have schemes that act as sufficient incentive.
What is the picture in that regard? I am conscious that there is always a spin when it comes to energy efficiency schemes. I am not referring to the representatives but in the political sphere. We must look practically at what is happening. I put down a parliamentary question in January. Unfortunately, I do not have the reply in front of me but I recall it stated there was under-spending of approximately €35 million in the home energy saving scheme. That made no sense to me. The representatives might be able to reassure me because I get anxious about that.
Before the representatives answer, I am due to speak in the debate on the Planning and Development (Amendment) Bill in about seven or eight minutes and for what it is worth, I will speak up for wind farm developers in terms of how we can streamline the system. I ask them to excuse me when I leave. I am not being rude. I will listen to their answers on the monitor later.
Professor J. Owen Lewis
Dr. Motherway and I will try to address these issues. Biofuels struck me as being a particularly interesting question because it raises matters of public policy in terms of whether we seek to develop within a protective structure or engage with a globalised market, as we have tended to do for some decades. That kind of question is not for us but is more for the members in terms of that type of decision and whether we seek to develop a protected industry.
In the next two weeks or so a bio-energy task force will report on a broad view of the Irish potential in almost all the bio-energy technologies. I would look to see the areas indicated as our particular strengths. I would have thought those are the kind of areas we should seek to develop but the strategy of seeking to develop Irish industry behind a tariff structure is one which requires some political perspective. Mr. Motherway might wish to add to that aspect.
Dr. Brian Motherway
No. Deputy Coveney stated the issues well in that there are balances between the cheapest routes to meeting the domestic target versus the longer term issues of developing an indigenous sector. Some of those are questions of political prioritisation. I would probably agree with what Deputy Coveney said, namely, that in the short term it is right to have a mandatory target to make progress in that sector that builds demand and confidence but in the longer term we must consider who is getting the economic and enterprise benefits from the growth of that sector, and that makes it a more complex set of issues.
Do we have the freedom to make that choice under competition rules and in terms of trading rules?
Professor J. Owen Lewis
It is implied in what Deputy Coveney told us, if Germany is putting these in. This involves tariffs against third country imports whereas Britain and Sweden apparently are taking another route.
Is Professor Lewis aware of that?
Professor J. Owen Lewis
No.
Dr. Brian Motherway
The issue is a question of interventions on the demand and on the supply side. Obviously, the regulation coming into force here is a demand side measure that mandates a certain use of biofuels. Coupled with that are supply side actions such as financial supports to the sector and so on and, ultimately, a balance in both measures is required in terms of building the demand for use of the biofuels but at the same time supporting the sector that wants to grow and meet that demand.
Professor J. Owen Lewis
We are convinced there is considerable potential in Ireland in particular sectors of bio-energy. We would like to think we should develop those in which we have particular strengths and, where it makes sense, to import material from other countries whose climate makes them particularly efficient producers.
What about international trading rules? The GATT would have some bearing on it, but that is a matter for another day.
We must also consider what is called peak oil, if one believes in it. If there is such a thing as peak oil we will have to find alternative sources of energy, and we must prepare for that possibility. We cannot take those issues out of the equation. If we want to build up an industry to protect ourselves against dependency on imports, we must be able to initially support the development of that industry. Otherwise, we will never build up an industry. That should be stated and understood. Are we anxious to find alternative sources of energy other than depending on Russian gas, for instance, or oil that may not be available to us? All of those issues must be taken into account. It is important that we support indigenous industry initially to develop this area.
Professor J. Owen Lewis
We are of a similar view. We are clear that our energy policy has three legs, not just one. For understandable reasons there has been a particular focus in the short term on the competitiveness aspect of different sources but——
Another aspect I find disturbing is to hear people questioning wind power. I am always cautious about vested interests. There is a growing demand for all types of energy production, including nuclear. It is easy to start making cases and depress our development of a natural resource, be it wind or wave power. I would be horrified to think we would be taking a backward step by not developing potential in both those areas. I would be interested to hear more about what Professor Lewis said in respect of the ocean energy programme. Did Deputy McManus quote someone as saying that we should not be doing it?
It was the ESRI.
Was it the ESRI? Has Professor Lewis contradicted these people?
It was not ocean energy, but offshore wind.
Prof. J. Owen Lewis
It was offshore wind, yes. We also need to attach importance to security of supply dimensions. I have been working in this area long enough to remember statements made in 1974. People said then that they would never again tolerate a situation where we were dependent on imported energy to such an extent, which I think was about 63% in those days. Now we are 90% dependent. It is an extraordinarily vulnerable situation. While everything is stable, it may not impinge on us, but in terms of a responsible energy policy, we must attach value to energy security.
Absolutely.
Prof. J. Owen Lewis
In terms of the discussion with the ESRI, Dr. Motherway and I have sat down with Mr. John Fitzgerald to discuss his views on offshore wind economics. That reflects my point about the three limbs of energy policy. We need to balance the importance we attach to the three limbs and not just focus on short-term competitiveness, especially of depleting fuels. Ocean energy represents a huge opportunity, although it is not without risk. It is still not at a commercial phase and quite a bit of it is at the research stage. We are actively involved in the technology and would like to think we have a coherent national strategy. We have a structure with a steering committee in which the Department of Communications, Energy and Natural Resources and ourselves are now being joined by the Department of the Environment, Heritage and Local Government and the Department of Enterprise, Trade and Employment. We also have an advisory committee structure in which pretty well all the interests and stakeholders, including the industry, are represented. At some stage the Chairman might find it appropriate to invite my colleague, Mr. Owen Sweeney, who leads that area, and me to attend the committee again.
As a nation we are investing reasonably substantially in that area, but that reflects the huge opportunity presented in that technology. In addition, it is very competitive internationally. The Chairman has been of considerable assistance in overcoming some areas of difficulty, such as foreshore licensing, for instance. Since 15 January 2010, that is now dealt with by the Department of the Environment, Heritage and Local Government. There is considerable progress in that area and a strong strategy, which the committee might be interested in reviewing at some stage. Will I return to the questions?
Please do.
Prof. J. Owen Lewis
Deputy Coveney raised the issue of heating public buildings and Deputy McManus referred to the huge challenges facing the public sector. I will try to couple those questions. Deputy Coveney's question concerned the opportunity for combined heat and power and biomass. There are opportunities, but our attitude is always that the first approach must be to minimise demand. In 2009, we did some work with the special exemplary energy efficiency programme where a budget was provided to undertake a series of about 35 actions.
Dr. Brian Motherway
We supported a number of exemplary projects in the public sector, in particular on energy efficiency. The curve we showed earlier, which is still on the screen, reminds us that as regards energy efficiency — while costing less than the long-term savings — the main issue we find, both in the public and private sectors, is that it usually costs first and saves later. With the work we have done in the public sector, we find that our technical understanding of where the savings may come from is developing. We do not share Deputy McManus's pessimism that the target cannot be met. Technically we know that on the pathway to meeting the target, the challenge is releasing those opportunities in terms of financing and implementing them as well as providing the public sector with the expertise to do that. That is where the longer term challenge is, especially in terms of finding alternative ways of financing it through third-party financing where loans to upgrade the buildings are linked to savings and therefore do not cost the building up front.
In the work we are doing now in the expanded efficiency environment, we will concentrate less on proving the technologies, which we think are well established and understood, and more on the delivery model, be it financing or expertise.
Is there much take-up from the private sector in that area?
Dr. Brian Motherway
In the same way as with the public sector, there is an appetite for ways to reduce people's energy costs primarily. If they can reduce emissions and dependence at the same time, they are interested in it, but most come to us starting on an energy cost agenda. In the same way, however, they are saying that their understanding is that if they have €100,000, they could save €50,000 a year.
No, I meant whether the private sector was getting involved in the transformation we need to see in public sector buildings.
Dr. Brian Motherway
It is, except that in the past it has proven complex to bring the partners together and understand who is guaranteeing the savings, who pays and who saves. There has been a role for the State — into which we are putting some effort now — to find ways either by publishing model frameworks and contracts or getting in as a partner in the projects to offer some certainty. As it is a novel way of doing things, much of it has been about who is willing to move first. People are nervous about taking the risk, but clearly there are sources of finance that are now looking for places to go. The solid returns one gets in energy efficiency projects are attractive to such sources of finance. The key barrier is that it is somewhat novel for them at the moment, so that is where we come in.
Given that we are, or will be, producing electricity through the development of wind energy, which could be at a cheaper rate, is the SEI giving any thought to encouraging people in future to change from fossil fuels to electric heating?
Prof. J. Owen Lewis
Yes.
That is important from the viewpoint of forward planning. We have been speaking about the use of oil for heating purposes. If one changes over to gas, it is still a fossil fuel, but there is also a likely scarcity. However, if we are developing a wind industry to the point where people are talking about using wind to produce electricity at various times, should we consider developing some sort of policy on the change-over from oil to electricity?
Prof. J. Owen Lewis
That leads neatly into the issue Deputy Coveney raised about the variability of wind and what kind of things challenge both the scientific and wind communities to address this matter. We have noted that, just as we would look to the electrification of transport to help ameliorate problems in that sector, similarly there is a renewed interest in electricity as a vehicle for space heating. As regards buildings, however, the first thing is to reduce one's demand dramatically.
I accept that, yes.
Prof. J. Owen Lewis
Electricity then offers itself as a very interesting, highly controllable heat source, assuming it is clean electricity from renewables.
Yes.
Prof. J. Owen Lewis
That makes a huge amount of sense. It is further attractive because of the variability issue in which buildings used as stores compliment the variable source. There is a variety of ways for providing storage in a system. It may be as a specialised store, such as compressed air as referred to by Deputy Coveney. It may also be a case of improving the intelligence of the demand side. That is where we have some important opportunities in the smart economy and existing Irish expertise in information communication technology. We have the opportunity to build storage into our system on the demand side as distinct from filling valleys full of water or whatever.
Sustainable Energy Ireland arranged a meeting with the electricity research centre at University College, Dublin last autumn specifically on the subject of storage and electricity systems. Some of the leading international figures in this area examined the spectrum of mechanisms for storing electricity on the supply and demand side. The presentations from the seminar are on our website and available to the committee.
Smart metering is about empowering the consumer and providing information about the energy he or she is using. To my mind it makes more sense to integrate metering so that it is not restricted to electricity but also deals with water and other utility services.
One issue is how smart do we want it to be. Should it be a system that will simply empower the user through the provision of information?
Dr. Brian Motherway
Up to 6,000 meters have been used in the first national behavioural trial. Some home owners, such as my colleague Professor Lewis, have an in-home display that tells them how much electricity they are using while others get monthly web bills. There are approximately another 8,000 meters in homes for the technical trial which examines all the data-handling issues. We are not rolling out meters to every home yet. Deputy Coveney's point about meters for water, and so on is well made and we are installing some gas meters in pilot projects. We are trying the technologies and the consumers' response to them. There are economies of scale when we go for this change in how we meter utilities.
It seems like a very slow process. Maybe the people are not as smart as the meters. I have been on this committee for the past two years. When the Government took power, smart meters were at the core of the first programme for Government and then the renewed programme. However, it seems to be a slow development and now we finally have 6,000 meters in place. People who are paying their electricity bills through Bord Gáis are still not within the scheme. At some point we will have to conclude these pilot projects.
Dr. Brian Motherway
The key question is the pace of technological development. When Ireland ordered its 6,000 meters, no one had sold that many before. The technology is changing every month. The in-home displays were invented and built to meet the needs of the Irish trials. I know it can be frustrating when one sees we are at thousands rather than hundreds of thousands still.
The Italians did it. While it might not have been the best job, they still did it.
Dr. Brian Motherway
I think there is a salient lesson there. The Italians went for a national roll-out of a technology with which they now have regrets whereas, by international standards, Ireland is in the top group of countries moving with technologies that will be future-proof. If one made a decision too early, one could have ended up with the Betamax of smart meters. That is how the Italians are viewed in the smart meter world. Testing at the pace of actually getting technologies out on the ground and proving that they work is a more sensible approach.
Will everyone have a smart meter in their home by 2012?
Dr. Brian Motherway
That is an issue for the Government to decide. Every day we get so much more data on the success of the technologies and consumer responses. When to give every house a meter is a matter for policy.
Would it be feasible?
How much does each meter cost?
Dr. Brian Motherway
They are built to order. The ones we used came to between €40 to €50 per meter. It should be borne in mind that this is not a mass-market product so prices will come down in time. It is possible to imagine that every house will have a smart meter in the future. There are technical and economic considerations to be factored into whether one decides every meter will be replaced in 2012 or over a period.
What about combining two utilities such as water and electricity in the one meter?
Dr. Brian Motherway
I do not think there is such a meter available in large numbers. If one wanted to buy 1 million combined meters, they simply would not be available. That highlights how much we are at the cutting edge of technology.
Professor J. Owen Lewis
May I develop my point on how smart these meters should be? Dr. Brian Motherway made the point that the Italians feel they have gone up a cul-de-sac. An important thrust in our deployment of smart meters was to enable consumers.
Regarding the opportunity inherent in the hot water storage vessels in Irish houses as possible energy stores, it is technically possible to allow the utility to control the temperature of the hot water cylinder to the extent the consumer will not notice. Instead of building pump storage facilities, one could install the electronics to control the temperature range of a hot water cylinder. Then when excess electricity is generated on the grid, it can be used to warm up hot water cylinders across the country. However, this is not a mature technology yet. That is what we mean by bringing ICT and energy technologies together rather than jumping in to buy 1 million meters.
The technology will develop, no matter what we do.
Is research done in this field in Ireland? If not, should we begin?
Professor J. Owen Lewis
We should be do more of this. There is a real enterprise opportunity Ireland in the area of ICT and energy technology.
How can the committee go about getting greater resources into research in this field? It would be tremendous if we could invent an ICT-energy storage product and export it.
Professor J. Owen Lewis
We are coming out of the research phase and it is more the commercialisation phase of getting the technology into households. Dr. Brian Motherway made the point that the scale of the Irish roll-out of smart meters, while not the top figure in the world, is already significant. The political input is important in supporting this.
Will Professor Lewis send the committee a note on developments in this area and how the committee can assist in promoting it? That is the sort of matter with which we as a committee could help. We could draw attention to existing opportunities.
Professor J. Owen Lewis
We are planning a workshop next month with IDA Ireland and Enterprise Ireland on this very topic of smart grids and technologies facing the grid. The Chairman's offer is timely. We would like to tell the committee about this.
We would appreciate that.
Professor J. Owen Lewis
In addition to the retrofit issue, there is also the question about the ESB prices, and Deputy McManus's other questions, and there was one I missed about the other countries, for which I apologise.
On ESB prices, what is presented in our data makes use of an EU methodology. We use data in standardised forms. It reports the position in the first half of 2009 and it does not take any account of the changes to which Deputy McManus referred that ESB may introduce later this year. It is historical.
Dr. Brian Motherway
There have been a few developments since the data analysis, including a couple of domestic reductions in the second half of 2009 and the recent announcement by ESB about future prices. We update those figures every six months and will keep the committee informed of the next update in terms of the comparisons between Ireland and the rest of Europe. There is always something of a time lag in processing the data, but Deputy McManus is correct. Even since our last analysis, there has been a number of changes. Particularly with the diversification of suppliers in domestic electricity, changes are coming more rapidly and becoming and more frequent in terms of tracking the impacts.
Our point is that the analysis is worth looking at in some depth. In some categories, whether higher users versus lower users or electricity versus gas, the situation is quite complex. Some gas users in Ireland pay considerably below the European average price, but clearly in other cases our prices in the past couple of years have been higher than anyone would like, and both business users and domestic users have felt that. It is an ongoing issue.
Professor J. Owen Lewis
Currently, the price to household consumers is below the European average. Dr. Motherway will reply on non-ETS priorities.
Dr. Brian Motherway
Deputy McManus's point is well made, that if one contrasts electricity with the other sectors and uses that as a proxy for the ETS question, our progress has been strong and is something of which we in Ireland can be proud. However, we now need to give more attention to the non-ETS sectors, that is, the use of fuels in heat and in transport. Over the next few years that needs to be a primary focus in terms of how we do that.
The principles are the same as in all sectors. It is all about energy efficiency first. Our analysis suggests that the building stock in Ireland could be considerably more efficient than it is now, and that is a focus of retrofit about which we will speak shortly.
In the transport sector, we already know that car buying patterns are changing, and that will have an impact. We are doing some work on energy efficiency in fleets which is proving successful. We have done work with coach fleets and freight fleets in haulage companies on energy efficiency in existing vehicles showing savings of the order of 20% in energy costs almost overnight just through behavioural and maintenance measures. It shows that there are still easy opportunities out there to give short-term gains, and that needs to be coupled with a long-term focus which, we very much believe, that the core of road transport in Ireland should be led by electrification.
In the context of the greening of electrification, and Professor Lewis's previous comments about storage and matching supply and demand in the long term, and also the opportunities for Ireland as an ICT oriented country and as an island of only a certain size with only certain journey lengths, we would seem the perfect place to lead the world on electric vehicles and we very much support that agenda.
In the context of heat, I will answer Deputy McManus's question about retrofit and related efficiency programmes. Looking back, the home energy saving scheme was launched in March last and we built up supply——
Professor J. Owen Lewis
It was April.
Dr. Brian Motherway
In the first eight months of running in 2009, we offered grants worth close to €45 million to approximately 40,000 homeowners. We offered grants well beyond what has been drawn down so far. The simple reason is that a person offered a grant tomorrow has six months in which to take it up and if one offers it to a person in November, it may be March or April by the time he or she takes it. At end of year or at any given point, there will always be a big difference between how much money we have offered in grants and how much has been spent because much of it is what we would refer to as live offers.
In addition, in 2009, in the context of building momentum, we saw some people who might apply for a grant to do four things in their homes and when they finally asked for the money they had only done three or maybe two, and that might be in the context of the economic environment in 2009.
On the figure we mentioned earlier, in the first four weeks of this year we paid out grants of €3 million in that programme and the momentum that we saw building across 2009 will deliver much higher scale and much better pace in 2010.
Was the under-spending of €35 million for that scheme correct?
Dr. Brian Motherway
No, that includes other aspects. The under-spending in the context of home energy saving was a little under €30 million, but the key issue is the difference between grant offers that have been cashed in versus cheques to people who delivered them. It is in the nature of such a scheme that there is always a time lag between us offering a grant and somebody drawing down the money.
How many houses were covered by the home energy scheme in 2009?
Dr. Brian Motherway
In 2009, we offered grants to approximately 40,000 homes.
How many houses were covered?
Dr. Brian Motherway
Approximately 19,000 homes received money, but there are many more — for instance, some of the ones who drew down the money in January — who would have done the work in December and November.
They would be some of those 40,000. With all due respect, it would be useful to have that kind of information. We keep hearing the 40,000 figure, but it is more accurate to say 19,000 with more in the pipeline. I appreciate Dr. Motherway giving that information. What is the projection for 2010?
Dr. Brian Motherway
If I lump in the home energy saving scheme with the work on fuel poverty because there is always a balance between the two of those, our projection is that we will deliver upgrades to 60,000 homes in 2010.
I am not trying to put Dr. Motherway on the spot, but I am trying to figure out what works and what does not. The fuel poverty scheme is different because people do not have to pay for it. One can manage that and plan out. This is very much up to the individual householder and it cannot be planned in the same way. Leaving out the fuel poverty, therefore, how many houses will be dealt with under the home energy saving scheme in 2010?
Dr. Brian Motherway
Taking Deputy McManus's point that we must estimate because it is a matter of demand, we think it will be approximately 35,000 homes in 2010.
Will they be done in that period?
Dr. Brian Motherway
Yes. If we are back this time next year, I will be telling the Deputy that there is a lag between the next few tens of thousands to whom we have offered grants who have not drawn down.
Is that 35,000 comparable with the 40,000?
Dr. Brian Motherway
No, it is comparable with the 19,000. Some 35,000 will be delivered and completed in 2010.
Great.
It would be helpful if Dr. Motherway stated briefly how somebody goes about applying and getting a home improvement grant in respect of a retrofit because I am convinced that many people do not know how to go about this. While we have him here, I ask him to set out the basics.
Dr. Brian Motherway
We are happy to do that because we are quite proud of the system we have built. We get comments from many homeowners stating that it is a simple and friendly system.
Simply, we encourage people, when they have web access, to apply over the web. One need not do it that way, but it is the quickest and most efficient way. On our website one is directed to where one wants to go. The applicant states which measures he wants to take, replies to one or two questions about the type of home, name and address, and basic details, and then picks who will do the work. The applicant must pick from people who we have approved, and within an hour of having done all that the applicant will get an e-mail from us approving the grant. It is all automated and web-based. If one fills in all the boxes and the chosen contractor is on the list, one will get an offer within an hour which states that the applicant has six months to do the work and we e-mail a short one-page form to fill in when the work is done. When the form is signed by the applicant and the contractor and sent back to us, we will pay the money directly into the former's bank account.
What percentage of the cost does SEI cover?
Dr. Brian Motherway
It depends on which grant a person draws down. Broadly speaking, we pay between 30% and 35%.
Professor J. Owen Lewis
There are different grant amounts. It depends on whether it is for external wall insulation, cavity wall insulation and so on.
Therefore, it is approximately 30% to 35%.
Dr. Brian Motherway
We also provide support if people want to have a building energy rating survey carried out before and after the work is done. This allows someone to be in a position to state the rating for the house used to be F but is now D2 for example.
What is the average cost of having work carried out?
Dr. Brian Motherway
The average grant is approximately €1,200. Most people have some basic works carried out, namely, attic insulation and upgrading cavity walls and boilers. If they do all of this, provide for external wall insulation and opt for the gold package, they might spent €10,000 to €15,000, of which we will give them approximately one third. If they want a more basic package at the outset and merely wish to upgrade the attic and cavity walls, they might spend €3,000 to €4,000, of which we will also provide one third.
If a person does not have access to the Internet, how should he or she go about making an application?
Dr. Brian Motherway
A freefone number is provided in our literature which people can use to contact us and we will post out the forms to them for completion. This method takes a little longer because it involves using the postal system. What is happening — this also occurred in other schemes — is that demand is being driven by the contractors who are continually engaged in attracting business. I see vans on the roads every day with signs proclaiming "I will do work on your home; my business is grant-aided and I will help you fill in the forms". We encourage contractors in this regard.
Are there differences in the prices being charged by various contractors? Might certain contractors charge €4,000 for a particular job, while others might only charge €3,000?
Dr. Brian Motherway
Absolutely. We encourage people to obtain a couple of quotes. By fixing the grant amounts, people benefit from the savings they make. That is important.
Given that it approves applications, does SEI not insist on a certain maximum price? I would be guided by the fact that SEI recommended particular contractors. Why would there be such a great difference in the prices charged by certain contractors compared to those charged by others?
Professor J. Owen Lewis
Competition.
Is it owing to competition, efficiency or some other factor?
Professor J. Owen Lewis
The market is extremely competitive. The position on the warmer homes scheme is similar.
I am asking these questions because they are the ones ordinary people pose.
Professor J. Owen Lewis
It is interesting, in the context of the warmer homes scheme, to consider what we would like to believe is value for money. We were able to carry out works to a greater number of houses than anticipated because the average cost was lower than our initial estimate. Prices went down and we were subsequently able to increase the number of houses to which work was carried out. This resulted in better value. That is the reality of the market.
I thank Professor Lewis.
Dr. Brian Motherway
On the retrofit scheme, the main vehicles for achieving efficiency are the existing grant schemes which are all open for business. People are making applications each day. During the icy spell, when people were feeling the cold to some degree, we received 1,000 telephone calls a day from those who wanted information on grants to upgrade their buildings. The intention is that over time we will move to a larger scale retrofit scheme which will be driven by, for example, using energy supply companies such as the ESB and Bord Gáis which are actively offering services in this regard. There will come a time when we may not even engage directly with individual home owners but may instead engage with the energy supply companies which will carry out the work. This will create efficiencies and scale but it will take time to deliver.
When will an announcement be made in that regard?
Dr. Brian Motherway
Much more will be announced during the course of this year. Certain changes will also be introduced during the coming months. In our discussions with the Department and the Minister who will make the final decision we have indicated that we hope to complete a transformation from the way we do things to a different way of operating, which will be on a larger scale basis and leveraging market actors.
The Deputy inquired about people having the money to have work carried out. I reiterate what I said about public buildings. We are looking at ways in which banks might provide loans to make up the part of the cost which our grants do not cover.
There will be changes this year. We will begin to alter the way we do things. We are involved in discussions with the energy companies and some of the financial institutions on how we might proceed. For now, we are encouraging people to continue to participate. We provide many supports such as the home energy scheme for efficiency upgrades, the greener homes scheme in terms of renewable heat sources, etc. Our work in the fuel poverty sector is more direct in that we pay for all of the interventions made. All of our schemes are running at full tilt and we expect them to be much larger in scale this year than in 2009.
In so far as we can estimate at this point and according to demand, we hope, through the home energy savings scheme, to pay grants in respect of upgrades to 35,000 homes and to pay directly for the upgrading of approximately 25,000 homes in the fuel poverty sector. In addition, we will also carry out work in the renewable heat source sector. We are involved in discussions with local authorities on how we can work with them on some of the houses they own. This is aimed at accelerating the pace of intervention in local authority housing.
Professor J. Owen Lewis
The cold snap was an extremely powerful marketing tool for us. I would like to believe many of the 1,000 people who telephoned us each day during the cold weather did not have snow on their roofs. If their neighbours' roofs did have snow on them, they realised that this was due to the fact that these roofs were insulated. If people did not have snow on their roofs during the cold snap, they need to have their homes retrofitted under the home energy savings scheme.
I imagine they were more conscious of the fact that the rooms in their homes did not adequately heat.
I thank our guests for attending. It is always a pleasure to have them come before us because they provide so much information. This is an ongoing process and I hope it will not be too long before we invite them to come before us again. I was particularly interested in what they had to say on the need for further progress in respect of renewables, especially wave and wind energy. l was also interested in what they had to say about the progress made in the development of wave power projects. As far as I am aware, there is no intermittency in the ocean waves which strike the west coast.
Professor J. Owen Lewis
At some point in the future we could come before the committee again in the company of Eoin Sweeney to provide members with a briefing on that matter.
Perhaps we will invite our guests to return at some date later in the year to provide such a briefing.
Professor J. Owen Lewis
We will do so at the committee's convenience.
I thank our guests, to whom we are much obliged.
The joint committee adjourned at 4.30 p.m. until 2.30 p.m. on Wednesday, 17 February 2010.