I welcome the following: from Calor Gas, Mr. Michael Kossack, CEO, and Mr. Tom O'Carroll, head of corporate communications; and from Bord Gáis Energy, Mr. Henry Smyth, head of new energy and technology, Mr. Cathal Gallagher, engineering manager, and Mr. Pat McCabe, business development manager. Members are reminded of the long-standing parliamentary practice to the effect that they 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 advise delegates that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or an entity by name or in such a way as to make him, her or it identifiable. I invite Mr. Kossack to open proceedings.
Microgeneration and Micro-CHP: Discussion
Mr. Michael Kossack
I thank the Chairman and members of the joint committee for inviting us to discuss microgeneration. We will show the reason rural Ireland will play an important role in achieving the country's 2020 energy targets and the important part microgeneration can play in this regard.
Before discussing the details, I will briefly outline some facts about Calor Gas, as members may not be familiar with the company. It was established 75 years ago in Ireland to bring cleaner and more efficient fuels to rural customers. This remains our focus and the vast majority of our business continues to be done in rural areas outside the natural gas grid. Ours is a successful company which employs 250 people directly and several hundred more indirectly. We have not laid off many staff during the recession and will invest more this year and next than we did before the crisis. We believe very much in this country.
The company is a subsidiary of a family-owned Dutch company which is the largest supplier of LPG in the world. The product we sell is LPG, a rural fuel. As members can see on the chart being displayed, LPG has significant advantages with regard to CO2 emissions when compared with other fuels used outside the grid. The CO2 emissions are substantially lower when compared with those from oil, coal or peat, apart from the product's other benefits. In the rural context, using LPG can play an important role in reducing CO2 emissions.
From a brief look at the natural gas grid on the slide being shown to members, one can see that vast parts of the country are not covered by it. In fact, approximately 50% of houses in Ireland do not have access to a natural gas supply and these are the areas in which the use of LPG plays an important role. The interesting point is that approximately 70% of the houses outside the grid were built before 1990, which means their insulation is relatively poor and, therefore, their energy efficiency is also relatively poor, with CO2 emissions being relatively high. However, 90% of such houses have central heating, which constitutes a substantial improvement in the past decade. Most of them are heated by oil and many of the oil systems will require replacement in the near future, as many are old and not very efficient and, consequently, emit a lot of CO2.
We would like to show members how LPG and microgeneration could help in the future to improve the CO2 footprint of rural communities without putting pressure on Government budgets, while at the same time helping consumers to save substantial amounts of money.
Mr. Tom O’Carroll
I wish to outline briefly to members what micro-CHP is, its advantages with regard to Ireland meeting its 2020 commitments, the case for it in respect of national adoption and what Calor Gas needs the Government to do to make this happen. When one talks about microgeneration, essentially one is talking about combined heat and power generation in the locality in which it is consumed. In other words, it occurs in a business, household or industrial premises in which consumers generate their own electricity at the same time as producing their own heat. In this context, microgeneration offers the possibility to increase the electrical energy efficiency of a typical household by 55%, while at the same time reducing the CO2 emissions associated with the household by 40% and the fuel costs of a typical rural household by 30%, that is, the combined heating and electrical costs.
The slide being shown to members demonstrates diagrammatically what happens in respect of traditional versus localised electrical generation and transmission. In a centralised power station one experiences both generation and substantial transmission losses through the grid, with the consequence that approximately 55% to 60% of the energy input is wasted by the time the consumer uses the electricity. However, if the power was generated locally, the efficiency rates could be between 80% and 90%.
I will now show members a brief video that will explain the process behind some new technology being developed with fuel cells for domestic-scale combined heat and power microgeneration.
The joint committee viewed an audiovisual presentation.
Mr. Tom O’Carroll
The presentation gives members a reasonable indication of what a fuel cell boiler can do for a typical household.
What would be its kilowatt output?
Mr. Tom O’Carroll
Typically, it would be 1 kW; consequently, the fuel cell would meet approximately 85% of the electrical requirements of a typical house over a year. There would be a requirement to import at certain times and an ability to export at other times.
The next slide shows a graph that demonstrates the relative position of the fuel cell boiler in respect of CO2 savings per unit capital investment when compared with other technologies. Members can see that the horizontal scale on the graph shows CO2 savings per unit ranging from zero to four tonnes per annum, while the vertical scale shows capital costs running from zero to €20,000. As members can see, the typical condensing boiler in use today already fares quite well compared with items such as heat pumps and biomass boilers and very well when compared with solar power panels. However, the fuel cell boiler is to introduce the next generation of technology and improve the position further.
Does this take into account the carbon emissions associated with the transport of fuel, manufacturing and so on?
Mr. Tom O’Carroll
It would not. If one talks about materials such as biomass, for instance, most of the projections associated with it show reasonable savings but only provided there was no substantial transport of the fuel. If one takes fuels such as LPG, the transport costs associated with getting the fuel to market are relatively small compared with overall CO2 emissions. If one then compares it with what happens with electrical generation, in respect of which we showed savings of 55%, the calculations also do not take account of the transportation of the fuel to the power station in the first place.
What are the capital and running costs of a fuel cell boiler for an average household and what is the payback time?
Mr. Tom O’Carroll
We will come to the business case later which will show the savings to be made. The projected capital cost is about €5,000 or €6,000 when it comes to market, but that is expected to decline over time. The initial installed cost of between €5,000 and €6,000 will decline. It is in the period of initial development that it will particularly need support. We are projecting a saving of about 30% for the typical rural household which would be of the order of €750, provided we receive the right supports for it.
Is it available to the consumer?
Mr. Tom O’Carroll
It is not available for consumers. It is on trial using natural gas in the United Kingdom. It will be available using natural gas next year. The LPG version is being worked on. We expect that to happen in 2012, or possibly 2013.
Let me give some indication of the supports being provided in other European countries for combined heat and power, CHP, and particularly micro-CHP systems. In the Netherlands they have opted for a straight capital subvention of €4,000 per installed unit, which we think is a little flawed as the incentive rewards the installation rather than consumption, which is where the CO2 saving is made. There is a more comprehensive structure in Germany which has a generation and feed-in tariff. The system rewards customers for generating their own power by giving them assistance for each kilowatt hour generated and additional assistance for each kilowatt hour exported. In addition, there are capital grants. Critically, the German system recognises gas-fired combined heat and power systems on the same basis as other renewables. Anything associated with government policy to do with renewables will recognise gas-fired CHP systems as meeting these requirements. In Great Britain they have recently announced a generation and feed-in tariff where 10p sterling will be paid for every kilowatt hour consumers generate for their own consumption, with an additional 3p being paid for every unit exported. This system, critically, is guaranteed for ten years from the date of installation.
In the documents supplied to the committee we have brought forward a business case for the support of micro-CHP systems in Ireland. I am not proposing to go through the details, but I will direct members towards some the highlights and we can answer questions later. We suggest that in rural areas, with the right support, we could have 100,000 micro-CHP units installed in the next ten years. This would result in a 1.6 million tonnes CO2 reduction and €358 million in savings to the consumer. The cost of the feed-in tariff which we have assumed would be on the same basis as that in the United Kingdom would be €46.6 million per year at the end of the ten year period. We would see this being raised through a public service obligation levey. It would create 200 additional jobs directly in the LPG industry, with a further 200 indirect jobs associated with it.
With regard to the Exchequer, this would create a positive net situation. The installation of the units would raise €81 million in VAT associated with the installations and result in carbon credit savings of €32 million. We are assuming a capital grant of €700 per unit, which would give a cost of €70 million, thereby giving a net balance over ten years of €43.3 million to the Exchequer.
This is a credible solution to meet rural Ireland's future energy needs. The things we are looking for are important. The national energy policy should actively support the roll-out of CHP systems, for example, under the national energy efficiency action plan 2009 - 2020 and the national retrofit programme. CHP systems, as is the case in Germany, should be recognised on an equal basis with renewable energy systems. The current capital grant of €700 which applies to boiler replacement associated with proper controls should also apply to micro-CHP units. An attractive generational feed-in tariff should be put in place as quickly as possible to facilitate this roll-out and the tariff should be no lower than what is available in the United Kingdom today.
I call Mr. Smyth of Bord Gáis.
The joint committee viewed an audiovisual presentation.
Mr. Henry Smyth
I thank the Chairman and members of the joint committee for inviting Bord Gáis to talk to them. I will give an overview of where Bord Gáis is. As I am sure members are aware, it has gone through a transformation in the last two or three years, changing from a gas company to an energy company. That development has been brought about through developing a balanced portfolio of generation and supply technologies. The portfolio is based on the three pillars of Government energy policy - sustainability, competitiveness and security of supply. I will touch briefly on these and refer to home services and micro-CHP units.
Let us look at the column on sustainability. In recent years we have invested heavily in wind power production. Earlier this year we acquired a company called SWS and now have over 200 MW of operational wind power in Ireland and another 400 MW being provided for. Last week we commissioned a 440 MW combined cycle gas turbine power plant in Cork. It is the most efficient power plant in the country. We are developing a number of flexible power stations which are being developed to balance intermittency in the production of wind power. The plants we are developing will be the most efficient flexible power plants in the world when they are developed.
We have done a lot of work in the production of biogas. A number of months ago our CEO launched a report which showed the potential to have up to 7.5% of all gas usage in the country accounted for by methane or biogas. We are active in the area of ocean energy and there were some announcements in the last week or two. We have made an investment in a company called Táin Energy in the area of wave power. Imminently, we will make an investment in the area of tidal power. Interestingly, particularly with regard to micro-CHP systems, in the last two years we have been rolling out a home services product, going into homes and providing services to make them more energy efficient. Mr. McCabe will talk about that aspect.
With regard to competitiveness, we are regulated in respect of the majority of our supply, certainly at domestic level, which keeps costs at a particular level. A dual fuel offering with electricity and gas is helping to push down our costs.
With regard to security of supply, we will be investing over €600 million in upgrading and maintaining our gas network to keep it operating at a European best practice level. We are also developing, jointly with GDF Suez - Gas de France Suez - a multinational company, a gas storage facility in Northern Ireland.
The next slide shows where we are active throughout Ireland in wind power generation and conventional power generation. I refer to high efficiency open cycle gas turbine power plants.
Mr. McCabe will give an overview of what we are doing with regard to home services, a key area in the roll-out of microgeneration systems.
Mr. Pat McCabe
I thank the Chairman and the members of the joint committee. The slide I am showing may look a little messy. However, I want to discuss it in some detail because every arrow depicted represents an opportunity to improve efficiency in the home.
I have taken on the task of developing a product roadmap and strategy for our home team business which are based on a number of key fundamentals. The first is that any product produced needs to make commercial sense for the customer and Bord Gáis Energy. We need to be able to generate a business case for whatever we do. We want to bring products to the market that customers ultimately will want to buy and we need to make it as easy as possible for them to buy them. The third element, which is fundamental, is that we need to ensure our strategy and focus are aligned with the retrofit programme, as defined by the Government, in the next ten years. The selection of any product needs to fit with Bord Gáis Energy's brand. To that end, we have asked customers what they want and expect from Bord Gáis.
We recognise that, from our brand perspective, we are not builders or contractors. Going to homes and carrying out works such as external insulation and being intrusive in customers' homes would be difficult for us. We focus, therefore, on developing our own capabilities in respect of what we can do to enhance our credibility in the energy efficiency space.
With regard to payback and lifestyle choices for the customer, it is very important that when talking to the customer he or she understands the need to improve efficiency and that it makes commercial sense. Since the end of 2009 we have devoted significant time and effort to developing a new business strategy to promote energy efficiency in the home. We selected a third party vendor to carry out the work on our behalf. We are working very closely with a company called Sierra Communications, a third party provider. We recruited a team of home energy consultants who comprise the consultative sales arm of Bord Gáis Energy. They go into one's home to assess and advise on one's energy needs and ascertain what is most appropriate for improving the energy efficiency of one's home with a view to obtaining the maximum benefit from the retrofit programme or the grants available through the Sustainable Energy Authority of Ireland.
We launched a number of key product strategies. We launched an online shop in April and revamped and redeveloped our service and repair business to the extent that we are now in approximately 10,000 homes every month during the winter period offering repairs and services. We have forecast and determined our capacity to offer repairs within 24 hours to prevent customers from being without heat during cold periods. We have evolved our service strategy to allow customers to avail of ongoing contracts such that, if there is a breakdown, all the costs will be borne by us.
In June, in conjunction with Sierra Communications, we returned to offering boilers, controls and central heating systems to customers. This was part of our legacy from the 1980s and early 1990s. One will recall the 50:50 cashback programme. It was a question of developing our own capabilities, brand recognition and credibility in that marketplace. We recently launched a programme for attic and cavity wall insulation. Bearing in mind my comment on ease of installation, this involves non-intrusive work.
We are now considering the period to 2011 and beyond. We are deciding where we need to be and what our activities will be. In the short term we are considering the renewable space and what works with the Bord Gáis Energy brand and our customers. We have engaged with a number of providers of solar thermal energy panels. The slide shows a typical solar panel on a roof. Its purpose is to heat the water in the hot water cylinder. Typically in the summer, it would meet all of one's hot water demands, while supplementing one's hot water requirements during the winter.
To touch on the points made during the presentation by Calor Gas, a typical solar thermal installation has a typical payback period of between 15 and 18 years. It makes it difficult, therefore, for the customer to justify the expenditure thereon. Although there is a grant available through SEAI, the cost is a big ask for the customer. We have sought to put in place a facility to allow customers to pay for work done over a period of up to two years. We are effectively offering customers an interest-free credit term of two years for a sum of €4,800. This was based on the work of focus groups that showed customers would be happy to pay a bill of up to €200 per month for services. We are trying to make it as easy as possible for customers to make decisions and engaging as closely as possible with the SEAI. We are seeking to charge the customer net of any grants due to him or her. We recoup grants directly from the SEAI.
With regard to microgeneration and micro-CHP systems from 2011, we are engaging closely with Ceres Power and Baxi Ecogen in respect of micro-generation products. We still need to ascertain whether they are suitable for our customers. We are always focusing on what our customers want and trying to bring products to the market that they will be willing to buy. That is the key for Bord Gáis Energy throughout the process of working with renewables.
Mr. Henry Smyth
We have listed various technologies that fall into the category of microgeneration. Microgeneration means different things to different people, from small wind turbine and photovoltaic generation to micro-CHP generation units. The units on which Bord Gáis is concentrating specifically in the area of micro-CHP generation are the Baxi Ecogen system and the Ceres fuel cell boiler. We are also considering solar energy and heat pumps.
Mr. Cathal Gallagher
I was tasked with trialling and demonstrating these technologies within the home to see whether they were fit for business before passing them on to the home team for installation. Much of this ground has already been covered by Calor Gas in terms of the technology. We began by trialling the Baxi Ecogen micro-CHP unit, a commercially available product. We installed it in six of our employees' homes in order to understand a little more about the complexity of unit, how best it fits, its capability in terms of energy reduction, its maintenance needs and installation procedures. We are carrying out the programme in conjunction with SEAI which is monitoring the data from the products. It will build a case history to determine how best they fit. We are being prudent in dealing with the products and gaining a better understanding of them. We are trialling six units.
The eighth slide covers ground similar to that which has already been covered by the representatives from Calor Gas. It shows a fuel cell boiler, a product which we identified more than two years ago. Bord Gáis Éireann was so impressed by this boiler and by the strategy employed by Ceres Power - the company which developed it - in bringing it to market, that we invested in it. It has a very good heat-to-power ratio which is very suitable to modern homes. The product incorporates fuel cell-based technology which Mr. O'Carroll has already outlined. I could show the committee a video similar to that which he presented, but I will not bore members by subjecting them to the same level of detail.
The boiler to which I refer is not yet commercially available. We hope it will become available in the Irish market in 2012. We will again trial this product in employees' homes next year and then in customers' homes. We are taking a prudent approach to the testing and trialling of the product. Data from the UK illustrate that typical savings of 25% off people's total energy bills can be obtained from the use of this product. In addition, these boilers will lead to savings in CO2 emissions of between one and 1.5 tonnes in a typical home.
The representatives from Calor Gas stated that they see this as a rural opportunity. We are not in competition and we have exclusive rights for this product for natural gas customers on the island of Ireland. In such circumstances, the product can in time be made available to such customers in urban and rural settings.
Mr. Henry Smyth
Some 660,000 houses in the South are connected to the natural gas network and more than 100,000 in the North are also connected to it. In that context, there is a very large market for this product.
The next slide shows a smart meter in respect of which trials are currently taking place. Bord Gáis Éireann is actively involved in this and more than 6,500 electricity meters and more than 2,000 gas meters are being trialled at present. The type of meter shown provides householders with feedback in respect of how their energy is being consumed. It also provides a signal for them to either adjust their lifestyle or how they are consuming energy to reduce the cost involved and save money. Smart metering is key to the roll-out of micro CHP in that it will be the link between the home and the outside network and will measure the amount of electricity being exported back on to the grid. There are a number of other developments at national level which will also support the roll-out of microgeneration.
The next slide provides an overview. Mr. O'Carroll already dealt with some of the matters to which it refers. However, the slide provides a comparison between the Irish and UK markets. At present, one supplier in Ireland is offering a microgeneration electricity tariff. In the UK, the entire sector is supported by a Government-backed feed-in tariff. In Ireland, microgeneration is limited in size to between 6 kW and 11 kW. In the UK, it is covered up to 50 kW. Therefore, many more and larger technologies are in play in the UK market. Approximately 400 microgenerators are connected to the electricity network in Ireland, whereas in the UK there are more than 100,000 connected to the network. There are supports available in Ireland at present, via the Sustainable Energy Authority of Ireland's reheat and greener homes schemes. The typical payback on a 6 kW wind installation in Ireland is over 20 years. In the UK, the equivalent is less than ten years.
Bord Gáis Éireann is very active on many different fronts, including those relating to sustainability and renewable energy. As Mr. McCabe stated, we are proceeding on a step-by-step basis and we are examining different technologies to see what works. If we discover that a technology works, we consider proceeding with it if there is a demand among customers for it. We are of the view that microgeneration represents an excellent opportunity for Ireland, particularly in view of the fact that our housing stock is already built. As everyone is aware, we will probably not build too many new houses in the coming years. Microgeneration is ideally suited to be retrofitted into existing houses to reduce energy consumption. This is not particularly easy to accomplish with other technologies.
Bord Gáis Éireann is making substantial investments in this area in the context of trying to identify and trial products that will work in an Irish context. As Mr. McCabe stated, we are introducing a financing option for our customers to assist them in making an investment in the technologies to which I refer. Another key point regarding technology of this type is that it will assist us in avoiding being obliged to construct and further reinforce transmission and distribution networks. The latter is quite difficult in Ireland at present.
I thank our guests for their presentations, which were extremely interesting. Before I call on members, I will put two questions. Would both projects be sustainable in the absence of subsidies from the State? The representatives from Calor Gas indicated that the UK, the Netherlands and Germany have subsidy schemes. Do any other countries have such schemes?
I thank our guests for their presentations. It is interesting to be informed about the kinds of innovations that are being developed. It is also interesting that both of the companies represented are taking the opportunity to seize upon those innovations.
Certain themes came through from both presentations. The first of these relates to CHP being designated as renewable. If one examines the fuel chart provided by Calor Gas, it is obvious that the carbon emissions relating to LPG are greater than those produced by natural gas. In such circumstances, how can an argument be made in respect of CHP being classified as renewable? What is the current position in the context of the national energy efficiency plan? The latter appears to be an issue for both companies.
One of the concerns I harbour in respect of smart metering relates to the slow nature of delivery. When the Government first came to power, the Minister made great play out of the idea that every house would be fitted with a smart meter before it left office. We are way off in respect of that target. I cannot understand why the trialling period is so long. Decisions must be made at some point. It seems that if one waits long enough, the technology will change in any event. In that context, what should be done? Should we wait forever or should we proceed with the smart metering programme and complete it as quickly as possible so that consumers might benefit but also ensure that we use our energy in a more intelligent way?
If a person who lives in a rural area has fuel cell technology in his or her home and has excess energy which he or she wants to sell back to the grid, do our guests envisage that there will be barriers to prevent him or her from doing so? When we consider renewable energy, it often emerges that there are specific barriers in place. These might be technical or infrastructural in nature or there might be others which give rise to difficulties in the context of processing, planning, licensing or whatever. Do our guests envisage that there will be such barriers in the case of microgeneration or are they of the view that the system is so simple and small-scale in nature that difficulties should not arise?
An argument can be advanced that Government supports are already in place in the form of the capital grant. In the context of feed-in tariffs, and so on, it will become more difficult - particularly in light of current circumstances - to make the case for such supports. However, I am of the view that these technologies represent the future and that we must invest in them. That may very well be the case but the country is in crisis. Perhaps our guests will expand further on this matter.
My final question is for the representatives of Bord Gáis Éireann. If the company is privatised, what will be the impact on the type of innovation we are discussing?
I thank our guests for their presentations. This is my first day as a member of this committee, so my level of knowledge in respect of this matter is not the same as that of my colleagues.
Our guests stated that a subsidy will be required. Is that because the payback period is longer or is it due to the fact that the initial capital cost will be much higher? What will be the benefit to consumers? Is it a benefit to the environment rather than a direct benefit to the consumer in terms of cost savings?
On the subsidy, have they had talks with the Department or the Minister, and what kind of feedback are they getting? Obviously, the Department has not given commitments, but is it open to the notion of subsidising this type of energy generation?
I also have the same question about access to sell back to the grid. Is that feasible right throughout Ireland or merely in certain parts of the country?
We will return to Mr. Kossack first.
Mr. Michael Kossack
I will begin by answering the first two questions. On whether this energy is sustainable without Government subsidies, of course it is sustainable and at present we are installing different kinds of CHP units in Ireland where customers are earlier adapters and using the technology. However, it needs an initial support package to get this technology up and running, to create economies of scale and to get to a certain speed and to a certain level of installations. If there will not be any Government subsidies it will be a slow implementation process and achieving 100,000 units over the next ten years will be difficult if not unlikely.
On the questions of subsidies in other countries we have looked at particular countries. The landscape is evolving all of the time. In France, for example, there are even higher subsidies on certain renewable technologies. We do not have the figures with us, but certainly would be able to provide the committee with more information afterwards.
On emissions, I will pass on to my colleague, Mr. O'Carroll.
Mr. Tom O’Carroll
On the subsidies, there are different models in place in many different countries around the world and we simply picked three of Ireland's closer neighbours as being examples of what might be done.
Are most countries subsidising this product?
Mr. Tom O’Carroll
When one talks about most countries, gas-fired combined heat and power on a domestic scale is really most suitable typically for northern European countries. In countries such as Italy and Spain where there is not a demand for central heating, one would be more likely to adopt something like solar power as one's solution. In climates like ours, this is a particularly suitable technology.
We make clear that LPG is higher in carbon than natural gas. In terms of rural environments, it is the lowest carbon-content hydrocarbon fuel available. When one takes the combination of that fuel with the technology we talk about, the potential for saving CO2 emissions is greater than with the other technologies. In terms of the amount of carbon saved relative to the capital investment, we showed a table where it is clear that the amount of carbon saved per €1,000 spent is significantly better than any other technology we can identify.
Whether we look on this at a national level or at a consumer level, the pot of money available is limited and it is a question of how that money is best spent. If the aim is to spend as little money as possible saving as much CO2 emissions as possible, then micro CHP must play a significant part in that, particularly in rural areas because, typically, in those areas one would replace oil whereas in the urban areas one would install a micro CHP unit to replace a gas boiler.
On why smart metering is taking so long, we have not been involved in that and this is a question better answered by BGE. Smart meters are not a prerequisite to fitting micro CHP units. One would need a net meter which need not necessarily be the same as a smart meter. Ideally, for large-scale roll-out smart metering would be available.
One would need a smart meter to sell back into the grid.
Mr. Tom O’Carroll
One would need a net meter.
What is a net meter?
Mr. Cathal Gallagher
An import-export meter.
I understand.
Mr. Tom O’Carroll
The barriers to selling electricity back into the grid is a matter that is between policy and ESB Networks because it would be ESB Networks which would pay for the exported electricity. Ultimately, ESB Networks can be directed by SEAI through Government legislation, if that is enacted, to give a particular subsidy for electricity exported. There are already schemes to allow payment for electricity exported. From our point of view it should be relatively simple to adopt those mechanisms to allow export from a large number of homes.
Is it technically feasible without an investment?
Mr. Tom O’Carroll
Once one has a meter that can measure what is exported, it becomes an administrative matter more than anything else.
We were asked about existing Government grants given that the country is in crisis. Our business case was developed very much with that in mind. We asked how can we contribute to reducing CO2 and give a benefit to the consumer without costing the Government anything directly. The business case we put forward is trying to do that. In fact, we see a small net contribution to the Government over the period. Such contribution is understated because, for instance, we have not taken into account the effect of increased PAYE and reduced social welfare payments from the jobs that would be created. We looked solely at the VAT receipts and the reduction in the carbon credit savings.
Where we talk about the generation and feed-in tariffs, we do not see those being provided directly by Government. We see them as being provided as a levy on other electrical users.
As Mr. O'Carroll will be aware, there was a significant response to a 5% PSO. One must be competitive.
Mr. Tom O’Carroll
I accept that. What we talk about here, in terms of scale of 100,000 houses, amounts to approximately €46 million a year. As I understand it, the current PSO for wind and peat energy amounts to approximately €150 million a year. I accept that we are talking about a sizeable amount of money but it is significantly less.
If one takes the broader perspective, the benefit to the nation outweighs the uproar that one would get from people paying for that subsidy.
It is not either/or though.
Mr. Tom O’Carroll
We all can wear both hats on this. I would be the one paying for it and I would also hope to be one of those benefiting from it because I would hope to install one of these units in my house.
On the question of whether this project can take off without Government support, as Mr. Kossack states, it will take off, but on a small scale, and it will never reach the kind of numbers we are talking about. We also believe that as time goes on and these units are produced in mass scale, the level of subsidy could be reduced, for instance, they will be reviewed in the UK. We would not be averse to a scheme coming in with a review period at some point.
In the graph where we showed the position of the different technologies and the capital investment involved, for instance, with an existing condensing boiler versus the fuel cell boiler, the capital investment is significantly greater for the consumer and consumers must be able to see a return on that to make that additional capital investment. Ten years ago, people were very reluctant to buy even condensing boilers because they were new technology and were more expensive. Today, it is impossible to buy any boiler that is not a condensing boiler. This is because that technology was supported. With regard to existing grants for new boilers, we believe the SEAI got it wrong, and we believe it would admit that privately. Of the €700 grant available, €500 is available for improving the controls in the house and only €200 is available for the boiler. We would have said it should be the other way round because most of the savings come from the boiler rather than the controls.
We are asking that the same level of capital grants apply for the fuel cell boiler. To us, the generation and feed-in tariff is the crucial element because this is what rewards the generation, which is what results in the CO2 saving. We are not looking at models which encourage export because typically with the units to which we refer, the consumer will still have to import electricity from the grid over the year and the imported amount will exceed the exported amount. The export will also help ESB Networks reduce the peaks in demand and reduce the amount of generating capacity it needs and, as our friends from Bord Gáis Éireann stated, it will also reduce the investment in the electrical network.
Mr. Henry Smyth
To return to the Chairman's initial questions, his first question was on sustainability without Government intervention. We are very much in line with the thinking of Mr. Kossack and Mr. O'Carroll. Any new technology will require support to get it going and to generate economies of scale. We see this with any electronic product; at the beginning the cost can be quite high and in time, as the quantity of manufacturing increases the cost decreases dramatically, at which point we believe supports can be reduced. Somebody might wonder whether he or she should replace a boiler with a gas boiler for a certain amount of money or a micro CHP plant which might cost twice as much. At the initial stage, good support is a huge impetus to get over that market inertia and make it start happening. Once it starts happening, support services are also important in terms of installers and maintenance services. Costs tend to reduce quite considerably within several years. We advocate the presence of support in the early stages, and that the support should be monitored from year to year to see whether it is still appropriate and whether it can be reduced.
With regard to support in other countries for various technologies, I have some figures, most of which relate to photovoltaic which is the panel one puts on one's roof which converts the sun into electricity. In Germany, four times the normal electricity market rate, approximately 37 cent or 38 cent per kWh for 20 years, is provided to support photovoltaic. This is also the case for wind and hydro power. France provides up to 30 cent per kWh for photovoltaic and there is a 50% tax credit for the cost of installation. In Spain, 42 cent per kWh was being provided for photo voltaic but this has been reduced to approximately 32 cent per kWh. The market there has matured and now it is reducing the rate. In Italy, support ranges from 44 cent per kWh to 49 cent per kWh for various technologies, with grants of up to 80% of the cost. Throughout Europe, there is a broad range of support mechanisms. In the UK, there are feed-in tariffs for various types also.
Deputy McManus asked how these units can be classified as renewable given that they use gas or liquified petroleum gas. This is one of the issues about the gas network. Bord Gáis released a study several months ago examining the potential to produce biogas or biomethane and inject it into the gas grid. A total of 7.5% of total gas consumption in the country equates to approximately 35% of domestic gas consumption. Putting methane into the gas grid and burning it in some of these units would be completely renewable heat and electricity. Even supporting a technology such as this may provide the impetus and the mechanism to support a new industry in Ireland to convert waste and surplus grasses through anerobic digestion, clean it and put it into the gas grid. This began a month ago in Britain, and it is also done in Germany and Sweden.
This defines the fuel as renewable rather than the technology. The request coming forward was that somehow the technology would be defined as renewable.
Mr. Henry Smyth
The point being made by Mr. O'Carroll is that in other countries in Europe it is defined as such given its high level of efficiency. In Germany, gas is being injected into the gas grid and this has been done for several years. It has more than 3,500 anerobic digesters; we have six or seven. In recent years, 40 or 45 of those anerobic digesters have begun to clean biogas and put it into the gas grid. It is burned in combined heat and power plants and is now regarded as 100% renewable heat and electricity. Britain began to do this last month; British Gas is actively involved as is National Grid. It has been done in Sweden for years and it has been done in Austria. It is being rolled out and increased on an exponential basis throughout Europe. If something similar were to be done in Ireland and the support was there to create a market for biomethane a new industry could be developed with the potential for thousands of jobs. This is all covered in the report our CEO, John Mullins, launched approximately three months ago.
On the question as to why we are slow to deliver on smart metering, the major issue is cost and there is a large capital outlay involved in converting all meters in a country. To a certain extent, there has been an attitude of watching and seeing what happens elsewhere. The Italians converted all meters a number of years ago and Britain is following suit. We do not want to make the mistakes that have been made elsewhere. We want to ensure we get the right technology. A large trial is taking place at present and a full cost benefit analysis is due to be completed next year by the Commission for Energy Regulation. It is hoped this will act as a stimulus for a much wider roll-out throughout the country.
In terms of selling back to the grid, at present, as Mr. Carroll stated, there is no issue with the grid; the major issue is the support mechanism to make it worth one's while to sell back. A question was also asked about Bord Gáis being privatised. I will not go down that road. If members do not mind, I would prefer to defer that question. Bord Gáis is operating on a prudent basis. All of the main utilities throughout Europe are involved in sustainability and looking at how to de-carbonise the power generation market; how to do the right thing, how to get a balanced portfolio of green power and conventional generation. What we are doing is right and prudent, and it is the right approach for the company.
Deputy Mitchell asked about the overall benefits rather than just the benefit to the consumer. Mr. O'Carroll spoke about CO2 benefits as did Mr. Gallagher. These are 1 tonne to 1.5 tonnes per annum per house, which adds up to a great deal if one multiplies it out with regard to our national CO2 output. There are also security of supply benefits. A house can produce its own power for electricity and heating; we saw the effect of recent storms on the grid, where it has come down. Other benefits with regard to grid expansion costs are that it is not necessary to put as much money into developing the national grid because a house is not trying to get more electricity as it is producing electricity and may be putting it back in. These units support the national electricity grid at a local level. There were many benefits on that side.
Has there been any discussion with the Government?
Mr. Tom O’Carroll
We have made a submission to the Department of Communications, Energy and Natural Resources. The same White Paper supplied to the committee was also submitted to the Department. We have met the chief technical adviser on energy in the Department and he was quite impressed with our proposal. The Minister has agreed in principle to meet us but with the discussions on finance, no date has been set.
Is Calor Gas in the ETS?
Mr. Michael Kossack
I am not even sure what the ETS is.
It is the energy trading scheme. Is the company not big enough to be part of that scheme?
Mr. Michael Kossack
No.
Since there are no further questions, it is just left to me to thank both delegations for their very interesting presentations. I wish both companies success in the next two years with the progress of the proposal as it is an exciting new development for the country.
I am sure members are aware of the recent death this week of the mother of Deputy Mattie McGrath, the convenor of the committee. I propose a note of sympathy to Deputy Mattie McGrath on his bereavement.