JOINT COMMITTEE ON COMMUNICATIONS, ENERGY AND NATURAL RESOURCES debate -
Tuesday, 14 Jul 2009

Job Creation in Alternative Energy Projects: Presentation by Irish Wind Energy Association.

Chairman

I welcome our guests from the Irish Wind Energy Association, IWEA: Mr. Michael Walsh, CEO; Ms Caitriona Diviney, chief operations officer; Mr. Paddy Teahon, president and someone who is well know to the committee; and Mr. Stephen Wheeler, the IWEA's chairman and Airtricity's general manager. I also welcome Ms Ferga Kane, senior manager in Deloitte's specialised finance advisory services. The committee has invited our guests to discuss the report entitled, Jobs and Investment in Irish Wind Energy — Powering Ireland's Economy.

Before we begin, I draw everyone's attention to the fact that members of the committee have absolute privilege, but that the same privilege does not apply to witnesses appearing before it. The committee cannot guarantee any level of privilege to witnesses appearing before it. Under salient rulings of the Chair, members should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I understand that Mr. Teahon will open proceedings.

Mr. Paddy Teahon

I thank the Chairman. It is a pleasure to be in attendance, as it brings back memories. The Chairman did the first part of what I was going to do, so I will get the positioning right. Starting at the near end of the table, I wish to introduce Ms Diviney, Mr. Walsh, Mr. Wheeler and, at the far end, Ms Kane from Deloitte. Before I ask Mr. Walsh to make a presentation on behalf of the IWEA, I wish to say a special word of thanks to Mr. Eoin Faherty, clerk to the committee, for working with us in organising this meeting. He was helpful and positive.

Mr. Michael Walsh

I thank Mr. Teahon. I also thank the committee for the opportunity to make this presentation today. The IWEA believes that renewable energy is a wonderful resource and that Ireland can be a world leader. For a long time, we have been seeing its benefits in terms of reducing CO2 emissions, increasing energy security and creating an export industry, but we are present to discuss its job creation potential. We have been aware of it for some time. Over the past six months, we have worked with Deloitte to try to quantify the industry's potential to meet Government targets during the next 11 years.

The IWEA has more than 400 members from various sectors and is the largest renewable energy representative body. Our members comprise wind farm developers, turbine manufacturers, legal firms, banks and small local businesses. I am highlighting these facts because they are pertinent to wind energy's job creation potential. It is not a matter of jobs only being created in large development companies like Airtricity, but in small local businesses, legal firms, supporting businesses and expert consultancies. As Ms Diviney will identify in more detail, the report shows that by developing a vibrant sector we will create jobs in a range of industrial sectors that are necessary if the supply chain is to be supported. We wish to emphasise the importance of creating the conditions that will allow the chain to develop and encourage Irish companies to invest in the capability to create these jobs.

The pillars of energy policy — security of supply, economic competitiveness and environmental sustainability — are well known and I will not dwell on them for long. Renewable energy, in particular wind, ticks all of the boxes. Harnessing indigenous renewable energy is a rational response and is consistent with what we have signed up to in the EU energy policy under various renewables packages and directives. It would reduce our CO2 emissions and increase our share of energy from indigenous sources. It is consistent with the national and European policy frameworks.

The country has put a great deal of work into debating energy policy and considering the available options. Much of that debate has been well informed and a considerable number of detailed studies have been undertaken, including the all-island grid study and other work by the regulators. It has set us on a solid path. Our key message is that we must start taking action if we are to move forward, given the policies developed in recent years.

While public policy is positive, several barriers must be overcome at the next stage. Having decided that we will have an energy target of 40%, we need to consider the next level of policy framework and what must be put in place to reach the target. We wish to emphasise a number of key aspects, including planning. Sometimes, there has been a discrepancy between national policy and local implementation. As the planning and development Bill will be a positive step towards resolving some of those issues, it is important that it continue to be drafted throughout 2009.

Grid delivery will be the largest determinant in whether we succeed in meeting our energy targets in the next ten years. We are supportive of the various initiatives being undertaken by EirGrid, the ESB and the regulatory authorities. We encourage others to help in the framework's development to create an environment in which such projects can move forward.

The commercial framework is all-important. We are seeking stability and predictability in terms of market arrangements, support mechanisms and transmission access rights. That certainty would allow people to make private investments.

I will hand over to Ms Diviney, who will discuss the details of the Deloitte report.

Ms Caitriona Diviney

Before considering the study in detail, it is important to know where we are today and where we will need to be by 2020. The IWEA has carried out an analysis of the most recent demand reduction and what megawattage must be connected to meet the 2020 targets. That megawattage is currently set at approximately 6,250 MW, of which some 1,077 MW has been installed and some 1,450 MW is contracted for grid connection under gate 2. A further 3,900 MW has been identified for gate 3 as awaiting grid connection. The connection offers will be sent at the end of this year and will take approximately 18 months to issue.

The combination of this megawattage will bring us to our 2020 target, but it is important to note that more than 4,000 MW, a number that is increasing every day, lies outside gate 3 and is awaiting grid connection. It is an opportune time for our office to consider our post-40% vision.

The study focused on jobs and investments in the wind energy industry up to 2020. It was the first major study to be compiled on the opportunities operating in the island-wide industry. We commissioned Deloitte to conduct the study and it was launched on 15 June, which was global wind day. The study found that the island's wind energy sector is capable of supporting more than 10,700 jobs, including more than 7,000 in the construction sector. It will attract more than €14 billion in investment. However, only 35% of investment would be retained in the local economy because the turbine manufacture and installation aspects would go overseas. As such, €5.1 billion would be retained, €4.3 billion of that in the Republic.

The study also found that employment numbers are widely dispersed, focusing mainly in Connacht and Munster where our strongest resources are. It also identified other opportunities that could not be quantified at this point. Work is ongoing and research has been carried out in that respect. There are many opportunities in grid development upgrade works in the Republic and the North, such as in terms of grid 25 and the delivery of infrastructural upgrades.

There is major potential in energy exports linked to our development of interconnectors between Ireland and Wales. There are also major opportunities in the integration of ICT and energy, linked to smart metering. Much research is being carried out on storage. We must be thinking about post-40% and there is much research on pump storage and compressed air storage. There is an opportunity there and in demand side management and electric transport. There are many initiatives in respect of this by the ESB and other parties. These are at the early stages and cannot be quantified in this study.

The study identified several challenges and highlighted solutions required to meet the 2020 target and realise the opportunities identified. Grid availability is one of the main issues. Typically, grid access is limited in areas where we have a high wind resource. Getting significant grid into these areas could take seven to ten years to develop. The provision of grid is one of the largest obstacles facing wind energy developers, a point recognised by the study.

The shortage of experienced personnel is another area of concern. The pool of experienced people available is limited and, as a sector in Ireland, it is quite young. As the sector develops in other areas we will have issues in retaining and attracting experienced personnel. The study identified training and development of our local resources as something we should focus on. The lack of awareness of opportunities was identified, particularly in the secondary education area, where people were not aware of the opportunities despite great interest in the green economy, wind energy and other renewables. The low number of students in courses such as electrical engineering and electronic engineering is having an impact on the sector and must be addressed as we increase development.

A financial framework is a major issue. In the current financial climate finance is hard to come by. The current financial framework is such that most of the risk is allocated to the developer. The study identified delays in connection and changes to the regulatory framework as causes for concern. Offshore operations are another issue. Given the location, there are unique challenges that apply to offshore but not onshore. These include weather, access and the tidal stream. These make the projects more difficult. The study identified issues with respect to planning and its complexity that cause delays and should be addressed. That is a summary of the key findings.

Mr. Michael Walsh

I will conclude by giving an illustration of the points made by Ms Diviney and showing their importance. We have done a significant amount of analysis on the current pipeline projects in Ireland and how we see them developing year by year on the assumption we will meet our 2020 targets. I have provided members with that graph. It is interesting if one considers the capacity added year by year. We see a low level of activity for the next few years, with a potentially good year in 2012. We see this being backloaded to the end of the decade, 2018-20. We see a major change in the industry at that point. There are two major impacts of that. It is a very risky way of doing it. If one is serious about meeting 2020 targets, waiting until the end to put in almost half of the capacity is not a prudent way of doing it. If one has a crane hire company and is considering buying a new crane and hiring ten extra people to work on it, looking at this graph one would decide that the business will not be there until 2018. People will not invest in the supply chain in Ireland against that backdrop. Our core argument is that we have made the policy that we will have 6,500 MW of wind in Ireland in 2020. Having made the decision, we should schedule the roll-out in such a way that the investment can come into our economy quicker and that Irish companies can have a more predictable stream of business rather than a big surge where one tries to treble the size of an industry in the last three years. That will result in bringing in capacity from abroad to meet services in the supply chain in Ireland.

A steady increase would be more prudent. Based on 2009, if we can deliver approximately 10% more each year for the next ten years it will represent strong growth in the industry and will allow Irish companies to grow at that pace, invest in their capabilities, hire more staff and allow us to meet our targets in a more robust fashion. We must address the financial topics to which Ms Diviney referred. Regarding planning, the current Bill in draft is a welcome progression towards that but we think it urgent that it is enacted this year. We are familiar with the financial crisis.

Grid access rules are crucial. People must be able to depend on getting grid when they want it. They must be able to sign a contract with EirGrid or the ESB that will give them a guarantee that the grid will be available when the project is completed. There is no point in having a wind farm sitting on a hill with no line to connect it. A private investor cannot bear that risk.

Grid delivery is essential. We referred to the necessity to develop the infrastructure in areas of Ireland that we must resource. This is necessary for the wind sector but also to supply demand in these areas and to continue to attract high tech investment in the country.

We must develop our supply chain. That is where jobs are created. Many Irish companies do very well abroad but we must have the domestic market to allow them to invest. We must also maintain community acceptance throughout. Everyone in the industry must keep focussed on this. It must be done in consultation and collaboration with local communities.

We will consider the recommendations of the Deloitte report, consider the recommendations and the potential and consult among our members and other stakeholders in the next few months. We will develop a prudent road map to meet 2020 targets and to allow us to realise the full benefits of that. We aim to have it completed by the autumn so that it can provide an input into the development of the national renewable energy action plan. Ireland can be an international leader.

Now is the time to act. It is important not to re-examine decisions already made. There will be a global economic recovery in the next few years and it is important to take action that will put us in position to take the opportunities in the next few years.

Chairman

I thank the delegation for the presentation. I invite members to pose questions.

Deputy Liz McManus

I thank the delegation for its comprehensive presentation. I hope the committee might have further discussion on the Deloitte report because it concerns a major area in energy policy. A commitment has been made by the Government on the 40% target for production of electricity, which is very ambitious. The Labour Party supports this position but it would be foolish to underestimate the difficulties that arise as a consequence of the major shift.

The first point made by the delegation concerns the projected number of jobs. How many jobs are in the industry at present? None of us expects to see a large number of manufacturing jobs in the capability we have to create downstream jobs. Does the delegation have ideas in respect of ICT and software development jobs?

The EirGrid network is becoming more and more critical. Mayo County Council made a presentation to the Oireachtas Joint Committee on Climate Change and Energy Security. A wind farm at Bellacorick has gone through all the hoops of planning permission but, because the grid is insufficient, the whole project is stalled. That is a good example of the concerns I have. EirGrid states it is in a position to develop the grid but serious concerns are raised about where that capacity will be provided and whether it will be provided quickly enough. Will the witnesses give the committee a further assessment on that?

The planning Bill was mentioned and the Government has been much criticised for not producing a new Bill to deal with offshore wind. The relevant legislation is the Foreshore Act. This seems to be a difficulty and I ask the witnesses to comment on it.

The message I received from the presentation is that we need an integrated approach. So many elements were referred to, including third level colleges, that the idea of a wind tsar becomes more compelling. If that is not the solution and we do not have that structure in place for delivering Government or public policy how do the witnesses envisage these needs being met?

With regard to the financial framework, as this is a growing area is bank lending an issue for developers? I remember that in the past when I raised this question people stated that the acquisition of turbines was a bigger problem because of the worldwide shortage. Is this an issue in the current economic climate?

With regard to offshore versus onshore, my impression as an outsider is that offshore wind is a great idea but the costs of implementing it and providing turbines offshore are phenomenal and the conditions for creating a lot of offshore wind turbines are quite challenging. The graph provided outlines how the Irish Wind Energy Association wants to see capacity building up on a regular basis rather than being back loaded. What balance is there in that projection between offshore and onshore? One of the difficulties one has in examining these new technologies is to separate the notional and aspiration from the practical and that which will deliver; we have to keep our eye on that all the time.

Deputy Joe McHugh

I welcome the delegation. It is important that we have an ongoing debate on this. There is no mention of gate 4 and I would like some insight on when the delegation envisages it opening up. Ms Diviney mentioned the debate on the Wales to Ireland interconnector. Is connecting Donegal to Coolkeeragh in Derry being explored? A 6 km or 7 km 110 kV line would link us to the Northern Ireland grid and ultimately to the UK grid. What is the view of the delegation on this in light of the fact that the ESB owns 75% of Coolkeeragh station in Derry?

Is the prudent roadmap of 6,250 MW until 2020 an underestimation and too prudent? Are we discussing self-sufficiency or are we considering the big plan of being in a position to export energy by 2020? Two weeks ago I was informed that the UK exported 1,000 MW of energy to France when its nuclear energy plants were not in a position to cool down because of inland rivers and waterways overheating. There is a possibility that France will need 8,000 MW this summer. In light of this is the estimation that we will only produce 6,250 MW by 2012 too prudent? Are we considering that in the long game we may not have a Wales to Ireland interconnector? Are we considering the fact that we will not be in a position to export? I do not understand this but as the witnesses are from the sector perhaps they can inform me.

One morning a couple of weeks ago the UK exported 1,000 MW of energy to France, where 8,000 MW will be needed this summer. Paris could be lit up by 8,000 MW and we are aiming for 6,250 MW in 2020. Perhaps I am missing something and I ask the delegation to enlighten me. I do not believe that the prudent roadmap is the way to go. We should be completely bolshie in this sector; we should be ridiculously ambitious. We know the fossil fuel argument. We know we will be in a position to export green energy, for which there is a phenomenal demand from the private sector. There is a phenomenal demand in my constituency for people to build wind turbines but they are concerned that they will not be connected to gate 4. They are also concerned about their own investment; they have their own cash to invest but they are concerned about the long term. Perhaps the witnesses will enlighten me on the long-term strategy.

There seems to be a ridiculous amount of bureaucracy involved in establishing a micro wind energy generator system in this country. I know the witnesses do not want to discuss the politics and bureaucratic tiers and process of it but from my investigation of countries such as Germany the same red tape does not exist there. We have an opportunity for great advancement through initiatives by the public to advance the green energy sector but it is being dragged down. I would like to be enlightened and I know I will be. I am not stating that the Irish Wind Energy Association as an organisation is being prudent in the job it has to do, but that the psychology of the country should be to be bolshie and over-ambitious rather than being overtly prudent.

Deputy Jimmy Devins

I also welcome the deputation. We would all support the use of natural resources, and coming from the west of Ireland wind is something we have in abundance. My brief questions are designed more to help develop the sector than anything else. There has been a plethora of new developments in wind farms along the west of Ireland. Some years ago there were great difficulties in obtaining planning permission. Is this still the case or has this road been eased?

The potential shortage of personnel was mentioned, particularly in engineering. Throughout industry there is a crisis in engineering and in students studying engineering after the leaving certificate. Do the witnesses feel there should be a much more proactive role employed in getting people to study mathematics at second level such as bonus points so they can continue on to study engineering? We can kick around this problem as long as we like but unless we deal with it comprehensively then not only this sector but throughout industry we will be faced with a huge problem in three or four years' time.

Deputy Mattie McGrath

I too welcome the delegation. Some of my questions have already been asked. How complicated and bureaucratic is obtaining access to the grid? Our county development plan included zoning an area for wind development. What impact is that having on wind development? Many economists have said there will be an over supply of wind energy in the near future, although I do not agree. Will the delegates respond to this?

Chairman

We talked about targets but are those set for 2020 achievable? The delegates mentioned front loading; how can this be front loaded, rather than be allowed to run on until 2018, 2019 and 2020? Renewable energy for transport was touched on in the presentation and much work is being done abroad on cars, buses and so on; should Ireland do more in this area? I read a report by the Irish Academy of Engineering two weeks ago in the business section of a newspaper and it poured cold water on the idea of investment in wind energy. I was disappointed by this because I support the work of the delegates. The report said investment in wind energy should be deferred because of the economic downturn; will the delegates comment on this? The Irish Wind Energy Association representatives said they would contact fellow members over the summer; could they return to this committee in the autumn with a report?

Mr. Michael Walsh

I will direct traffic over here, if I may.

Chairman

Mr. Walsh can refer to his colleagues at any stage.

Mr. Michael Walsh

I will begin with Deputy McManus's comments; we were very encouraged by all of the comments and questions we received as they indicate the debate in Ireland in recent years on this matter has been very well informed. We are delighted to make a contribution to the debate. The first question on the number of jobs in Ireland relates to a European wind energy study.

Ms Caitriona Diviney

It was conducted in late 2007 and it is estimated that 1,500 people were employed in the sector at that stage. No study has since been conducted to bring the figures up to date; they have increased somewhat.

Mr. Stephen Wheeler

The figures relate to direct employment in the renewable energy business and do not include support staff.

Mr. Michael Walsh

On the up-stream and down-stream jobs, we identified this matter in some sectors in the current report. We were conscious of being conservative in the report because it is easy to produce big numbers and then face criticism; we took a prudent approach to quantifying numbers. We sought the minimum number of jobs required to meet the target in Ireland. A number of exciting opportunities exist in Ireland in areas such as IT software. We can become world leaders in integrating renewable energy, getting communications technology right and co-ordinating the markets relating to smart metering and wind turbines; this is all very IT intensive. We have a great opportunity that we can avail of and if we do so we can sell high-value expertise to other countries. We have not quantified our potential in the sector in this report but I think it is limitless. Given the IT expertise in Ireland and our energy targets, if we allow the supply stream to develop and introduce projects here there is a strong environment to allow us to get ahead of other countries in this area.

The wind farm in Mayo that stalled because of the grid was mentioned and two members mentioned other projects; unfortunately this experience has been replicated all around the country. At the moment, between what is in gate 3 and what is not included, there are applications for more than 8,000 MW to be connected to the grid from wind farm projects. All of these projects are on hold until they get a connection offer. When they get offers it is expected that many will be for connection in the second half of the next decade and that is why we think the development pipeline will be back-loaded. This is a serious issue that we are keen to tackle through our roadmap; it is not a desirable state of affairs and it is important we get the access rules right. The grid must be developed.

Deputy Liz McManus

Can this be fast-tracked or is Mr. Walsh suggesting we must live with things as they are?

Mr. Michael Walsh

No, a few things can be done. Grid 25 is a very encouraging strategy and EirGrid is doing much positive work in this regard; we would like to see this enter the next phase and move from being a strategy to being a specific plan. We want the specific plan to get general support from the industry. We hope this can be developed on normal industry timelines, based on what has been achieved by private developers and using industry best practice. EirGrid is trying to do this by examining initiatives and it is sharing information with us because we have a good relationship. It will be necessary to sign contracts and give guarantees on the timelines, rather than say "you can connect in 2016 if we manage to build a grid". If they say "you can connect in 2016 and we will worry about developing the grid" people will make investments from 2012 onwards because they will have the commercial confidence that the grid will be available when it is required. There are ways to do this and there is no need to reinvent the wheel. We must get grid 25 up and running and introduce best practice from the private sector. EirGrid is actively examining this area and it will need support from everyone, particularly local representatives. It will be important to get the necessary buy-in to deliver these projects on time.

Mr. Paddy Teahon

The Deputy referred to a wind energy tsar. There is a difficulty in implementing policies and this is not unique to wind energy. One may get nice publicity on launching a policy but implementing it is a day-to-day process. It would be interesting if the committee, in its further reports, highlighted this issue; it is a question of keeping a finger on implementation issues. Mr. Walsh made the point that EirGrid has a very nice strategy but it needs an incentive to commit to the grid. At the moment this all relies on EirGrid's will and the developer must take a significant risk. If the incentive was changed through a wind energy tsar, or the like, to keep the focus on day-to-day implementation it could make an important difference. One may create publicity but people must deliver on a day-to-day and week-to-week basis.

Mr. Michael Walsh

I was going to come to the matter of a wind energy tsar. We examined the potential of the renewable energy development group, REDG, in our roadmap. Among our membership we have debated how it can be given more significance and whether a wind energy tsar should co-ordinate that group's activities. A wind energy tsar should have a mandate to get proper reports from the various bodies that have a part to play in this and co-ordinate their activities. The tsar would use the forum of the REDG and give it teeth so it would have the authority to make this happen on a day-to-day and week-to-week basis. It is a welcome idea that we feel should be progressed. The next question related to the need for an offshore Act and perhaps Mr. Wheeler or Mr. Teahon would like to comment.

Mr. Stephen Wheeler

The Minister is correct on a number of fronts about offshore wind energy. If we consider the potential for offshore in Ireland — I am sorry, I meant Deputy, not Minister.

Deputy Liz McManus

That is all right.

Mr. Stephen Wheeler

I suppose we are looking to the future.

Chairman

Maybe 2020.

Mr. Stephen Wheeler

Maybe sooner.

There is major potential for offshore projects, particularly on the east coast, but there are a number of obstacles blocking them. One is the lack of a planning Act and the fact that to get offshore projects through planning is an incredibly difficult and arduous job which can take a number of years. There are still a number of projects which have been in the planning process for several years. Thus, rationalising the process for offshore projects from a planning point of view is definitely required.

The other key point mentioned about such projects is the expense. There is no doubt they are expensive, possibly twice the price of onshore projects at the moment. Deputy McManus made the point about our ambition. Offshore energy gives us a major opportunity for export and the possibility of exceeding our current 40% target. There is a major resource — predominantly on the east coast, as that is where conditions are most favourable for such projects — which could allow us to become a leader in exporting renewable energy. We need to consider not just what is required here domestically, both North and South, but also the possibility of hooking up with the UK and France.

A question was also asked about interconnection and the potential to export to France. A number of studies are being carried out at the moment in this regard. I see the east-west interconnector to the UK as a starting point for further interconnection with the UK and also with France. As people know, wind does not blow all the time, so the peaks and troughs must be managed. The possibility of transferring the load when the demand at home is not so great and passing it to the UK or further afield to France presents a major opportunity for Ireland Inc.

Another question was about financial lending. I remember talking to the committee around 18 months ago when turbine supply was a major issue. That is a moving target. Recently we have seen a softening in the US market for turbine supply. The big economic units such as the US, China and Europe determine the supply-demand balance for turbines. The market for turbines has softened now——

Deputy Liz McManus

Why is that?

Mr. Stephen Wheeler

It is because demand in the US is coming down.

Deputy Liz McManus

That is what I am asking; why, if the US is trying to develop renewable energy, has it gone down?

Mr. Stephen Wheeler

With the economic recession there are major plans to stimulate the development of renewable energy, so we will soon see a rise in the US, which will have an impact on the rest of Europe. At the moment it is softer, but the acquisition of turbines will again, in 12 to 18 months' time, become a problem. If we as a nation are not fully behind what we are trying to deliver, the big suppliers of turbines will look at Ireland and wonder how serious we are in this regard and why they should take it seriously.

The other key issue about which the Deputy asked was the financial market. Eighteen months ago we were in a very different place from where we are now, and in those days one could attract finance for projects. At the moment, however, one of the greatest challenges facing our members is securing finance for their projects. It is virtually impossible. I do not know of any projects which have reached financial close, that is, secured finance in the last three months. This difficulty will have a significant impact on what we deliver this year.

Chairman

Is that because the banks are slow in lending to the sector?

Mr. Stephen Wheeler

There is a general feeling that the banks are quite slow in lending to all sectors at the moment.

Chairman

So it is not just this sector.

Mr. Stephen Wheeler

No, but it is having an immense impact on our sector.

Mr. Michael Walsh

What we are hearing anecdotally is that when projects are in discussions with banks the banks are seeking much more onerous terms than they would previously have sought. Projects that may have stacked up a year or two ago based on what one might have expected from the banks do not stack up based on the current conditions. For obvious reasons the banks are considering their own risk control processes, margins and so on, and that is having a knock-on effect on viability and whether people can go forward and close financially with a bank. It is much more difficult now than it was a year ago.

Ms Ferga Kane

The dividends completed by the banks have become much more extensive and they are seeking more information and guarantees from the developers. In addition, because of the issue of liquidity, which obviously affects all sectors, they are much slower to make decisions; it is taking much longer to bring proposals to credit committees and these committees tend to send things back for further review. This is all being put back on the developers and they are having to spend more money to make the banks comfortable. It is going around in a circle because the developers must spend more money to get money, and the banks are not coming to the table.

Mr. Paddy Teahon

At one level it is understandable; people who work in banks have seen what happened to people who took bad decisions in the past and there is therefore a risk-averse culture. Everybody feels he or she does not want to be the person whose investment goes wrong. It is arguable that given where Government policy is in terms of affecting the banks and the financial sector, the message needs to come from the policy side. Although we want to avoid decisions that make no sense, we want to see people taking decisions that do make sense, and wind energy does make sense.

To return to the issue of offshore wind energy, it is instructive to see what is happening in the UK at present. Given that the technology has advanced and it now makes sense to develop offshore energy, and because the UK has a real requirement for renewable energy, it has announced a system based on renewables obligation certificates or ROCs, under which it has effectively doubled the price it is prepared to pay to get that investment under way. Given that, as Mr. Wheeler said, the process takes time, it makes sense to do things this way. If the Government put the conditions in place today it would be five years before any energy was obtained, particularly offshore energy. This goes back to the same point; there is no magic about how one develops a resource such as this. It is down to the grid and having the price and the supports.

It is all about implementation. Nobody can argue with the policies, the direction we want to go is the right one. It comes down to a day-by-day, week-by-week system whereby the incentive for the public organisations in particular is such that they are taking action rather than comforting themselves by thinking they do not want to get caught. It is about what Deputy McManus and others have said. That is the most important thing at this time.

Deputy Michael D’Arcy

I am sorry I was obliged to leave the meeting briefly.

The witnesses used the term "local acceptance", although I would use a different term. There is always local resistance. As an energy association, has the organisation pitched itself as well as it should have? Whenever there is discussion about the construction of a wind farm, there is always some sort of resistance, in some places more than others. I live quite close to a large wind farm in Ballywater, just south of Gorey, and I know from speaking to friends who live close to it that it has little impact on their day-to-day lives. However, the moment a wind farm is proposed, a resistance crew is up and running, talking about flicker, noise and other difficulties. Such stories get around the community rapidly, so whoever is promoting or developing the wind farm is immediately on the back foot. The association has not sold itself particularly well to communities in whose areas where a farm may be developed.

Mr. Michael Walsh

We are very conscious of that. Our members constantly ask us to work harder on that issue. It is a fair comment. The Deputy's experience near Ballywater is instructive. We encourage people to visit wind farms. For global wind a couple of weeks ago we arranged for six wind farms to be opened to the public. Those who visited and saw how they worked were positive. This will be a big sector so we want to encourage best practice and responsible development among our members.

We do not get involved in individual projects but try to promote best practice across the industry. Mr. Wheeler could talk about the concepts that individual developers use in communities and how they can help. Following the Deputy's point we will consider how the association can do a better job.

Mr. Stephen Wheeler

Before I talk about specifics, as an industry as well as an organisation we must improve how we interact with the community. We have 370MW built North and South so there are very few wind farms on the island.

We recently opened a wind farm in Limerick, Tournafulla. Almost 1,500 people were present on the opening day. That project took ten years from development to building. There were several delays but throughout the process we worked closely with the community. In building a wind farm one becomes a member of the community, one is asking the community to accept one for between 20 and 50 years. That engagement is key. It is important to have open nights, to keep people involved throughout the planning process and deal with the complaints or objections, such as those the Deputy mentioned of flickering televisions or noise. When one opens one's doors fully people see the farm as progressive and as bringing jobs into their areas. Then they realise that there is not too much noise and that it is easy to deal with the television flicker. We are doing a great deal but there is much room to improve if we are to reach the 6,000 MW target. We are not being too prudent. That is a big target and there are obstacles. Unless the community is totally behind us we will not achieve it.

Mr. Michael Walsh

Deputy McHugh said there was no mention of gate 4. Gate 3 took a long time to design. There was a great deal of consultation and debate and it is running now. It must be completed on time. The projects need meaningful offers, as Paddy Teahon said, that give a clear sense of the timing and cost so that they can decide whether to go ahead. That needs to happen immediately and it is in train.

It is important that gate 4 happen soon afterwards. I do not think it will happen this year but the preparation needs to start maybe in the early part of next year. There should be an early announcement that it will happen in a reasonable timeframe and that other gates will follow. This is necessary because we get a glut of several thousand megawatts of projects applying in a short space of time if people think a gate will close. That means that the best projects, with the best wind speed and so on do not come through. People need to see with certainty that the projects in the pipeline get offers with the information they need on which they can decide and that other people get follow-on offers soon. I am keen to see gate 4 move quickly but it is important that gate 3 is properly processed first.

More interconnection with the United Kingdom is welcome but the Wales-Ireland interconnector is a start. It is important to examine our export potential within a proper export strategy for offshore wind. Rather than build a series of interconnectors we need to consider the proper strategy for a grid between Ireland and the United Kingdom and further into Europe. Work is being done in the Isles and on other European projects. Ireland has a real opportunity to take a leadership role in those debates, based on our best interest and to influence their direction to the provision of an offshore infrastructure——

Deputy Liz McManus

Who should set out this strategy?

Mr. Michael Walsh

The Great Britain and Ireland Council set up under the Good Friday Agreement is engaged in a process to see what is appropriate. The Scottish Parliament is taking a leading role in that process. We should become more actively involved in it. It is welcome and we would like to see it progress with more urgency.

Grid 25 is a strategic development for the Republic which is welcome. Northern Ireland is consulting on a strategic energy framework. It does not have a specific target for 2020 but expects to copperfasten it in the autumn through its strategic energy review. When that happens Northern Ireland will have a better idea of its network requirements. We are not directly involved in this process but my understanding is that once that has been done there will be a strategic examination of the grid in that part of the island to provide the best solution for Donegal, Derry and Tyrone and to have a North West grid strategy that will meet the overall needs of the area. That is the most economic way of proceeding rather than developing separate strategies for one geographical area. The electrical system is connected. Deputy McHugh is right about the way to go. That is the intention when the Northern Ireland energy review moves to its next phase.

The 6,250 MW is our estimate of wind installation by 2020. A similar conventional plant will also be installed by then, making a total capacity of approximately 12 GW. The French need for 8,000 MW is a strong demonstration of the opportunities we are discussing. That will largely be met by other European countries. The United Kingdom will give approximately 2 GW, a quarter, if it has the capacity. This illustrates the need to have the capacity in Ireland to supply it and the infrastructure between Ireland, the United Kingdom and mainland Europe to deliver the product to the market.

The 40% target is progressive. We need to make sure we put in place a series of detailed policies to ensure that we can achieve that. There is a danger of trying to adjust the strategy and ending up doing this in a rush. It takes a long time to deliver energy because it is capital intensive. There is a long supply chain, projects have a long timeline to develop. Implementation is the priority. We must put in place the measures to ensure we achieve the 40%. The committee on climate change and energy security has started discussions about what is necessary for 2030. That is timely. Once we have measures in place to meet the 40% we can think about the next step.

The comments about our need to be more ambitious are enlightened. We should be sure about the direction we want to move in. There are huge opportunities in micro wind energy generation in Ireland. We get eight to ten queries a day in our office about this and we are talking to Sustainable Energy Ireland and others to try to provide better quality of information. We have no formal role in the area but we have collated a great deal of information and are trying to make it easier for people to understand what is required and what needs to happen. We will work with Sustainable Energy Ireland to make the information more accessible to people.

It is a vibrant sector, we have already seen announcements on manufacturing in Ireland and there is potential for more. We are clear that this must be done properly. It is important to give out good quality information so people do not end up erecting expensive turbines in unsuitable sites that will cost them money in the long run.

Safety is also very important. On the big industrial sites, developers are well-versed on safety requirements and it is important that good practice is also used in the installation of micro wind turbines. This has a huge future in Ireland and it is important we do it properly.

Mr. Stephen Wheeler

There are several challenges on the west coast. Projects that have planning permission that will expire soon because of delays, usually in connecting to the grid, are a major problem. This is related to the planning Bill — one of the key messages for us to get across is that the planning Bill is vitally important. The number of projects fast approaching expiry that will lose permission where it is unlikely they will get a second permission is huge. That is a major concern for our members.

Is it difficult to get planning? Like every process there must be a balance between the needs of the country and the environment. Over recent months, planning has not got easier but it has not got more difficult. When we are making submissions for planning permissions the level of detail required to ensure the environmental balance is being met has gone up but it is not more difficult.

Mr. Paddy Teahon

To underline one point, it is important to separate the short-term implementation issue and the strategy. Focusing on short-term implementation means there is no time to do the strategy. Arguably, Ireland has had wind energy resources for decades but we made a basic mistake by not pursuing it more intensively about 20 years ago with the result that we did not have the capacity to avail of the type of investments made in developing turbines or other areas.

We are now at the point where wind energy is becoming a significant mainstream industry. If we look at the rest of the world, the US is putting major resources into the sector while China is spending double what the US proposes. There is a danger that we will be sidetracked. We have a resource that makes huge sense to develop as mainstream. Significant investment is needed but there is also significant potential for jobs, which we need at the moment.

Irrespective of that, we must not be sidetracked. Ireland did not have the financial or demographic resources for major developments such as offshore wind. Other countries have put huge amounts of money into this and we are now at the point where the technology means it makes sense for Ireland. Maybe in 50 years time storage will be equally advanced because other countries with huge resources will pump money into them and perhaps then there will be an opportunity for Ireland.

Mr. Michael Walsh

The shortage of engineers has been signalled in much of the commentary over the past ten years. The role of second and primary level education is vital.

Ms Caitriona Diviney

Last week we agreed to take part in the Green Schools programme and we will work closely with them on that in the coming years. It is vital to get in at this stage. On global wind day, all the wind farms were open and many of the operators had career advice seminars for the young people who visited. We got good feedback from that and we will look at how we can develop that aspect.

Mr. Michael Walsh

We are keen to work with the second and third level sectors to stress that there are opportunities in these areas and that people need to pursue subjects like mathematics to be able to avail of the opportunities. There is huge enthusiasm among young people surrounding the green economy. We are keen to help them to understand the relevance of something like maths to the green economy, so that those interested in working in the sector have the guidance they need to take them in the right direction for a career they would want.

Deputy McGrath asked about grid access and the related bureaucracy. The problem is that an application takes so long between submission and getting an offer. The people who applied in 2004 are likely to get an offer for access next year. Some people who applied last year do not even have a timeline for an offer. It is by necessity a complex process but the length of time an application requires presents a difficulty.

Ms Caitriona Diviney

There was a question about zoning for wind farms in county development plans. We have worked with many local authorities, discussing the county development plans, many of which are up for review, as are the retail planning guidelines. We have played a major role in all of those consultations and met many individual authorities. Authorities are changing their views. They are seeing the benefits to their local area of wind development. Many lf them are being very open about sharing their thoughts with us on how they would like to welcome the development of wind energy and how it can be facilitated. Zoning is still important. Areas of outstanding natural beauty and current designations must be taken into account, but authorities are considering how wind development can work in line with those designations and there are positive developments in that area.

Deputy Noel J. Coonan

I apologise for being late for the meeting and missing some of the presentation. I welcome the representatives from the Irish Wind Energy Association and thank the delegation for its presentation.

I disagree with much of what has been said and I have concerns regarding areas also highlighted by the association, particularly planning, finance and the grid. There is a public perception that wind energy is the preserve of the mega rich. I do not believe an ordinary individual or company has the facility to invest directly in it, whatever about indirectly. Jobs are created in the construction phase but after that, job creation is minimal. The jobs that are created are not local because workers are brought in by major contractors. Communities are legitimately concerned. If they were more involved and benefited more from them, wind farms would be more acceptable to communities. There is also a perception that they are located in isolated regions or on high ground but recently there has been a spread of them onto flatlands.

There is a huge wind farm where I live. Such farms can be seen for miles around and can detract from the natural beauty of an area. There is a price to be paid locally. I am not suggesting that wind farms should not be developed. However, we cannot take our eye off the planning issue, the reality that jobs are not created locally, and that there is very little benefit to the local community. Very often the company that seeks planning permission to put up windmills sells on to another company, despite all the promises and commitments made at the planning application stage.

In terms of the grid, I note the association passed over the financial situation. I did not hear predictions as to when the recession will end or when we will see the bounce from the Wind Energy Association. Perhaps the association would explain the delay in connections to the grid. Has the ESB or Eirgrid the infrastructure in place to allow connections? We have been informed by the ESB and Eirgrid that they experience difficulties in storing electricity at times of high demand while at off-peak times it often has to be switched off as there is nowhere to store it. Is the association happy with the situation? We have heard much about policy this morning. Mr. Teahon outlined his unhappiness over the slow development in the wind energy sector. We agree with him that we have missed opportunities over the years. Mr. Walsh expressed concern about the educational policy. The association has given us food for thought to put to the Government regarding failure to implement policies over the years. These are some of the issues I am concerned about. I am especially concerned as to whether the ESB can make the necessary investment in infrastructure. Micro energy needs to be developed. The association commented that wind energy is very capital intensive but it had not really got involved in micro energy. If there was more emphasis on micro energy within the community the bigger wind farms might be more acceptable. In responding perhaps the association would give us an idea of the average size of a wind farm in Ireland and the average investment required. Is it true that a turbine can cost anything upwards of €1 million? That is the public perception, that it is very expensive and exclusive to the mega rich.

Could I tempt the association to comment on the interconnector, particularly the one from the North to the South? Given that the debate is raging, does the association believe it should be underground or would it be happy with the proposal as it is?

Chairman

Before we hear the reply, it would be unfair to ask individuals to comment on that. It is an issue that is being widely debated.

Deputy Noel J. Coonan

I do not believe it is unfair. It is a matter of public concern. We are talking about power, about wind energy.

Chairman

This is alternative wind energy.

Deputy Noel J. Coonan

I asked only for an opinion. I do not know why you are protecting them.

Chairman

I will leave it to the individuals themselves, but it may be unfair to ask them. A number of issues have arisen in regard to planning and access to the grid.

Mr. Michael Walsh

I will try to answer all the questions as best I can. I will follow up on Mr. Wheeler's earlier comments on the importance of planning. The Deputy's concerns are well put. It is important that the planning process on individual projects looks at them on their individual merits and makes sure a project is suitable, not just in terms of its role in national policy but also in terms of its impact on the local environment. What the layout is, whether it blends into the landscape well and whether there are alterations to be made can be the subject of very constructive discussion between developers, the local community and the planning authorities. We would never say such discussions should not take place. They are important, and it is important that concerns are addressed.

On the issue of cost, our rule of thumb is possibly slightly on the high side at the moment. We estimate that it is approximately €2 million per MW to develop a wind farm in Ireland. A large development of may be 20 MW to 30 MW would cost €40 to €60 million, depending on the size. The most common turbines in Ireland are around 2 MW so we are talking of €4 million per turbine.

On the comment that development of wind energy is for the mega rich, our experience in Ireland is probably a little different from that in the rest of Europe. It is instructive that we do not have five members but 400 which shows the spread of people who have got involved. Different ways of using the BES funding and debt finance means that many local landowners and co-operatives have been getting involved. I agree with the Deputy's point on giving local people the opportunity to get involved directly. In looking at the road map earlier, one thing we looked at was how we can make it easier for people to get more directly involved in wind projects, how community wind farms can be encouraged, and ways for local people to participate more directly. I agree it would be difficult to tell someone we wanted to build a big wind farm two miles away from his or her house but that we would make it difficult for him or her to develop micro wind energy generation in his or her own garden. People must be given the opportunity to participate directly where they wish to do so.

I do not agree with the Deputy's point on local jobs. This is an area where we are seeing a large number of jobs created locally in areas where projects are being developed. Much of the construction needs, of necessity, to involve local contractors and local expertise. The logistics mean there are advantages in using local people. Mr. Wheeler may have more direct experience in this regard.

Mr. Stephen Wheeler

From construction there is heightened activity on the site. A typical wind farm may have 40 or 50 people on the site during construction peak time. During the subsequent operations there could be between five and ten people, depending on whether major maintenance is going on at the time.

Deputy Noel J. Coonan

What size farm?

Mr. Stephen Wheeler

I am using, for comparison purposes a 20 MW or 30 MW wind farm. There would be a maximum of 40 people on site at any one time during construction. Afterwards there would be local operators, people coming in to maintain the project. There could be ten people on the site when large overhauls on the gearboxes are carried out. This would include crane operators to take down large parts. There is an illusion that there will be no more jobs once the construction has taken place. I do not agree with the Deputy in that regard. These projects will be there for the next 15 to 25 years. Scheduled maintenance is done on a regular basis where there are many people on the site. There are also other activities and there are community liaison officers.

A question was raised about community involvement in the wind farms. On a typical wind farm, apart from the rates paid to local landowners who have these turbines, there are also many developers who get a community benefit, where a portion of their revenue from the wind farm is given to the community and invested in local charity needs. That seems to be a huge success to date and it is welcome.

Deputy Noel J. Coonan

If and when it happens.

Mr. Stephen Wheeler

It happens on the majority of wind farms. I can only speak for those in which I am directly involved. It comes back to the question that community is key. These wind farms will be there for 20, 30, 40, and 50 years and have to be part of the community.

Mr. Michael Walsh

We agree with the Deputy's comment. It is vital that this is done in a way that the community gets a chance to participate and that their concerns are well founded. What is needed is a collaborative engagement where people can talk and have their concerns addressed. We have a role to play in providing more general information and helping people to understand the more general association across the country. In regard to the planning process, it is important the local individual concerns are discussed and met properly. I would not disagree with any of that. It is also important that this is done in a constructive manner and that we move forward and are not paralysed by individual issues. We must engage properly and help bring the community with us.

Deputy Noel J. Coonan

We would all support those sentiments.

Mr. Michael Walsh

As Mr. Teahon said earlier it is about implementation. We have decided the strategy. There are ways of doing these things and we have got more experience now. When we talk about jobs and expertise outside construction, many of those jobs come about from doing an EIS properly, doing the architectural survey properly, engaging properly with the community. These are all skilled jobs that take expertise and are developed over time. If we continue to develop wind farms at a steady pace and grow them every year, companies investing in that capability will get much better at it and one will become better at engaging with community concerns. The issue of television signals was mentioned earlier. As an industry we are getting better at understanding the problems and the solutions. When the issue emerges now it is solved quickly whereas heretofore it may have taken more time to have that conversation. A new member joined our association last week. That person's speciality is about analysing television broadcast signals and where there will be an impact so that the wind farms can be designed to impact on a smaller household and targeted solutions can be used in those households. That is evidence of the kind of expertise that is developing in the industry. With that expertise there are opportunities and high quality jobs.

One of the questions was whether the grid is adequate. Historically the grid was developed to meet a power system based on a small number of large fossil fuel plants at various locations around the country. When Moneypoint was built in Clare there was a need for a grid upgrade. Two large lines were built for that as a new energy source coal came into Ireland. That transition was a move away from oil, following the oil crisis in the 1970s, when we brought in a different fuel source which at the time was coal. Coal then took over as being our dominant energy source. We moved to gas during the past ten years and in the next ten years we will move towards wind. With each move, there is a need to develop the infrastructure to meet the resource. The present infrastructure was designed to meet our needs up to now. Given the Government White Paper and the strategy to move towards 40% wind energy, there is a need for an investment in grid. That is what the grid 25 policy is doing. The network in place is not suitable for 2020, hence the need for the investment plan and investment in grid in the future.

On the North-South debate and whether the transmission lines should be underground or overground, there have been expert opinions. When we look at grid 25 and what is needed, it is clear to us that it will be necessary to build overhead transmission lines in Ireland over the next ten or 11 years. Where it is possible and economic to do so underground, that is useful but will not be the answer to what we need. It will be necessary to build overhead transmission lines. My understanding of the North-South line, because of its length and capacity, is that it is not feasible for that one to go underground. That is my understanding, based on briefings from EirGrid. It is clear to us that underground lines are not the answer across Ireland, we will need to build overhead transmission lines to meet our energy targets. We will probably experience supply shortages in key areas if we do not reinforce the transmission during the next five to ten years.

On the prediction of when the recession will end, across the world there are probably many concerted efforts being taken by governments in Europe, the US and China to move out of it. The real danger for Ireland is that the economy kicks in next year and that oil prices will go through the roof. We have seen an unprecedented drop in demand for oil. That could increase very quickly and if we are not set up properly in the next year or so, we could be exposed to the risks of an upturn and get caught on the way up as well as on the way down. We need to be very careful to avoid that.

Mr. Paddy Teahon

It will be in 2011, it is worth making that point. Let us face the issue, the property sector — I speak as one who does a certain amount of work with Treasury Holdings — developed beyond anything that was reasonable. When we get to 2011, there is a need to find sources such as wind energy that will provide the investment and the jobs that would make no sense to provide through the property sector as we did.

As I have the floor, I should say to the Chairman that he has given us much of his time for which we are very grateful and for which I thank him. If it makes sense, we would like to avail of the invitation to return in the autumn whenever it is suitable from the committee's point of view. This has been a very useful engagement in terms of the issues that surfaced.

Chairman

I thank the organisation and the individuals for the presentation. I think all members found it worthwhile. Deputy Coonan succeeded in drawing the delegates into a debate on underground versus overground transmission lines but they clearly set out the roadmap they wish to see. As Mr. Teahon rightly pointed out, he does not want to see distractions in the way which are clearly popping up every now and again. The proceedings of today will be forwarded to the Minister for Communications, Energy and Natural Resources and, in view of the planning issues raised, will also be forwarded to the Minister for the Environment, Heritage and Local Government.

On behalf of the members I thank the delegates and look forward to seeing them in the autumn. We will liaise with the clerk.

The joint committee adjourned at 1.40 p.m. sine die.