I am the current chairman of the Sustainable Energy Association and also run AlliedSolar, a small renewable energy business based in Coolock. Renewable energy technologies include small wind, heat pumps, biomass and solar power. As my own expertise is in the area of solar power, some of my presentation will deal with this area. However, the same principles can be applied to other technologies.
The association was established approximately 18 months ago to represent the renewable energy sector in Ireland. We see ourselves as a conduit for communication between Government bodies, including in Northern Ireland, and installers and suppliers. We have successfully attracted many of the largest players into the association, including Kingspan, Glen Dimplex, Balcas and Potterton Myson. We represent more than 80 companies in the sector.
I wish to speak on three topics: the benefit of green collar jobs to the economy; banana skins that exist for the industry; and ideas that will help the industry to grow. With regard to green jobs, 80% of the cost of our renewable energy solution stays in Ireland. Depending on the sector, some raw materials are imported, such as boilers, solar panels, etc. Generally, the fraction is quite low in cost terms compared with overall installation cost. The Irish costs for distribution, warehousing, wholesale sales, local sales, delivery, administration and the actual installation all come from the installation cost.
The benefit is spread throughout the economy and does not just benefit one geographical area. However, the bulk of the work is undertaken by local tradesmen and their spend benefits the local economy. Companies such as Kingspan, Thermomax, Glen Dimplex and Potterton Myson are manufacturing in Ireland for the export market. The sector is due to experience significant growth as energy prices rise.
Advantages that accrue from supporting renewables have the potential to create thousands of jobs in the short term and the technology and knowledge to generate exports, lower energy costs, improve fuel security and help reduce carbon emissions to avoid Kyoto fines. Sustainable Energy Ireland, SEI, estimates that renewable energy, energy efficiency and research and development programmes under its remit account for 4,375 direct jobs. Our experiences shows that this figure is under-representing the true number of jobs as spin-off jobs in sales, warehousing, distribution, technical support and training are also present.
The biggest threat this industry faces is poor quality installations that do not perform. When this happens, the industry gets a bad name and stays small. To give an example, both Portugal and Greece embarked on a solar water heating programme in the 1970s during the oil shock. Greece maintained and enforced installation standards but Portugal was not so strident. Today, less than 1% of homes in Portugal have solar panels installed with 30% of homes in Greece equipped with a solar panel.
The involvement of SEI and the Sustainable Energy Association, SEA, is vital in this issue. The SEI is doing an excellent job with installation standards. Without regulation, there will be pressure to undercut prices and this will lead to a race to the bottom. Early experience of the issue in the UK was very poor for this reason. To help the industry survive into 2010, it is imperative that the current level of grants are not switched off. Any reduction in grant aid should be gradual, planned and irreversible, and it should not start until oil prices begin to rise.
I will give an example of how not to do things. In March this year the SEI announced a new home insulation grant and invited suitable companies to join the register. In the mean time, these existing companies, with full order books, suddenly found their orders cancelled overnight by customers who wanted a grant. In the end it took about two months for the scheme to be rolled out. Ironically, this did immense damage to companies that the scheme was designed to help. The Northern Irish experience of stopping grants and starting them again has meant that between grant schemes, nothing happens. Companies end up with warehouses full of stock and must either find something else to do, have no cash flow or go out of business.
I can add my personal experience to that. We sell into Northern Ireland and may suddenly find that we have a glut of sales, which means the grants are rolling again. The orders will then dry up overnight, so it makes our business a little difficult to plan as well.
I will comment on some incentives that could help our industry. There should be a rebate on approved products installed by an approved installer. There should be support for carbon taxes as even low levels based on international carbon prices would give an important market signal. A building energy rating component should be built into future property taxes and commercial rates, as that will encourage further energy efficiency and renewable energy spend. The business expansion scheme rules should be changed to include renewable energy companies. There could be 0% interest schemes like the UK's carbon trust scheme, and I would also like to see some proper feed-in tariffs for wind and photovoltaic energy as levels in Ireland are very low.
Offering a 0% VAT rate on approved products installed by an approved installer has a number of advantages. It is technology-neutral and the scheme could be rolled out quickly for new technology without affecting budgets. It would be easy to implement and there is a big incentive for installers to maintain standards since being removed from the list means an installer would be at a price disadvantage.
A €20 per tonne carbon tax would put approximately 5.5 cent on a litre of home heating oil and diesel. This would give an excellent signal of the likely rise in the cost of energy. With regard to property taxes and commercial rates, these could be reduced if a good BER rating is achieved. This will encourage BER assessments and energy efficiency improvements. If a domestic property tax is introduced, there could be a sliding discount depending on the BER level achieved, which would be very helpful and give a very important signal to the market.
Currently, the business expansion scheme, BES, is focused on export-led goods and services in specific industries. As renewable energy offsets imported fossil fuels, expanding the BES definition to include companies involved in the provision and support of renewable energy technologies will help Ireland's balance of payments.
The UK carbon trust is now lending enterprises as much as £400,000 or as little as £3,000 in interest-free unsecured loans. Loans are repaid over a period of up to four years and many boroughs have found that their energy savings more than cover their repayments. Current levels of 19 cent per kW-hour for the first 3,000 kW-hours are still too low to encourage wide uptake of electricity producing technologies. In the UK, rates of 36.6p per kW-hour for small photovoltaic systems up to 4 kW and 28p per KW-hour for systems up to 10 kW are available. With these rates and a good windy site, a small wind turbine could pay for itself in fewer than five years.
The Department of Communications, Energy and Natural Resources is looking to install 6 GW of wind turbines, which will require a doubling of the national grid. Many small, local wind turbines making a profit would help to reduce local opposition to the construction of extra transmission lines. Micro-generation is also a proven means of reducing business overheads and home energy costs and providing a secure source of income.
We are in the trenches and if members of the committee have any ideas on how to support or change the industry, they should speak to us before they are announced. I have a few anecdotes on how we are getting on. My own business is down approximately 40% on last year, although we expect an improvement next year when oil prices start to creep up. Our focus is on surviving this year and getting to next year.
There is a large company in Kerry called Energy Master which went into liquidation last Friday. It was one of the first companies in the sector and it employed approximately 15 people. From a business perspective we have one fewer competitor but it is also indicative of the industry. An early leader in the industry was more or less wiped out. Are there any questions?