Energy Review: Presentations.

I welcome Ms Anne Grete Holmsgaard from the Danish Parliament to participate in discussions on the joint committee's energy module. She will provide the committee with a review of the Danish energy policy model which I am sure all members will find very interesting. Her short presentation will be followed by a short question and answer session. I draw attention to the fact that while members of the committee have absolute privilege, the same level of privilege does not apply to witnesses appearing before the committee which cannot guarantee any level of privilege to witnesses. Under the 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.

Ms Anne Grete Holmsgaard

I thank the joint committee for the invitation to attend the meeting. I am vice-chairman of the energy committee of the Danish Parliament and have worked on energy policies for a number of years. I have been a Member of Parliament in different periods, the current one having started in 2001. Previously, I chaired a board, the purpose of which was to make recommendations on sustainable energy policies to the government and parliament. I held that position for six years. Committee members are free to interrupt me if they wish while I explain our action plan for energy conservation.

Energy conservation is important in the context of our increasing dependence on imported fuels which come predominantly from politically unstable regions in the Middle East, north Africa and central Asia. Competition is becoming tougher and resources scarce. We have all noticed the rise in oil prices to a level not experienced in many years. Global warming has become very threatening, in which context EU Ministers and Heads of State have decided we must not permit an increase greater than 2 degrees Celsius this century to avoid significant harm.

We are in a situation where we can gain major advantages by solidly engaging in energy conservation, resulting in less dependency on imports. The European Union as a whole is moving towards importing fuels to meet 70% of its needs. We will have to invest in new production capacity if priority is to be given to energy conservation. Denmark is one of the primary movers on a European and global scale in developing technologies that can assist us to use less energy because we realise we are using our energy resources inefficiently. The reasons for inefficiency are the number of jobs involved and the potential for fuel exports. As a Dane, I used to say we could do the same with energy conservation as we had done with windmills. Denmark has half the world wind energy market and the history books do not say it will be the same in ten years but the windmills provide a major source of income for the country and the industry is a major source of job creation. Some 20% of our electricity supply is generated by wind. This figure will increase in the coming years, partly through offshore plants and wind turbines on land. Ireland has a number of wind turbines and it is quite windy here.

We must change our energy supply, as every country knows. It is easier to change if energy is used more efficiently. This revolves around more efficient production plants and energy conservation. The potential for energy conservation is great. The European Union uses more than 40% of its energy on buildings. Denmark has looked into this issue and the figures on screen were supplied by the Danish Energy Agency and the Department of Energy and Transport. Denmark could save 42% of the present consumption level of heat and electricity used in buildings, which comprise a good private economy. This is due partly to high taxes on consumers for heating and power, although taxes are not high on enterprises. I have also included the figures for the socio-economic potential, 24% of consumption. The committee can consider how much less production capacity would be needed if one quarter of a country's energy bill could be saved.

We reached broad agreement in June, following a month of negotiations, although a great deal of time was devoted to this before the negotiations commenced. Six out of the seven parties in parliament have approved the agreement on consumption which will cover the period 2006 to 2013. The agreement provides for an annual target in order that energy consumption will be reduced. Some 7.5 piter joules is equivalent to 1.75% of energy consumption and three times higher than previously. Reductions must be monitored. A review in 2008 will examine whether good methods are being used or whether they should be changed. One of the founding ideas is to create an energy conservation market by forming packages to make it attractive.

The agreement is based on the voluntary involvement of local oil and heating companies and our electricity saving foundation. They are responsible for reaching the targets set. We have not introduced a law that obliges them to do this. However, as we had negotiated with the companies involved before the agreement was concluded by the political parties, their boards had said yes. They then had to persuade the different companies that they had to do this and that they would be monitored. They will do it because they were informed about the agreement and were involved beforehand. They know what they agreed to and are aware of the possibility that if they do not stick to the agreement, we, the politicians, will make a law. However, as they would prefer not to have a law, they will do it voluntarily.

A board will be established with representatives of both the heating and electricity sectors who will co-ordinate energy conservation measures in practice. A number of the activities will be tendered. I favour more tendering but as the companies did not want this, we reached a compromise whereby a smaller number of activities will be tendered and the companies will take care of the rest. They have the money to do this and, under our law, have the right to take money in from consumers via the public service obligation levy for those activities. Companies which produce equipment necessary for conservation such as insulation, thermostats and pumps, as well as window and building companies in general asked us to make an ambitious plan because they believe this is a good opportunity for business and to save energy because they need less production capacity.

I refer to what is provided for in legislation and voluntarily. The law provides that all private houses and buildings must be labelled. That has been the case for six or seven years. However, the new law provides that the labels must include financing proposals. We learned that labelling was only done when people sold their houses and that they were not motivated by energy conservation. If an individual makes an agreement with a plumber, a glazier or an installation company, it is complicated. To make it more visible and attractive for house owners and tenants, labelling and a financing plan must be provided. If they take out a loan from one of the financial institutions, they will see this is good business because it is cheaper to take out a loan and invest than continually pay too much on their energy bill.

The public sector, including the state and local authorities, must invest in various energy conservation measures which provide for a payback period of up to five years. The investment is set directly for state-owned property but must be negotiated for local authorities. That is a Danish requirement. Tighter building regulations which will come into effect in January 2006 will ensure new buildings will be much more energy efficient than those built prior to this. Under the new regulations, buildings will be between 25% and 30% more energy efficient than those built ten years ago. The regulations will be tightened again in 2010. While this is very good in the case of new buildings, the bulk of our buildings which are older will require investment.

Members will see a slide of a device made by the German Energy Agency to measure energy consumption. When consumers are asked to give a breakdown of their household energy consumption, their response is that almost 40% goes on electricity for lighting, computers and so on; 26% on heating and 18% on hot water, while gas accounts for 14%. Surprisingly, people do not believe heating and hot water account for the greatest demands on energy, followed by the car and electricity which accounts for only a small part of total consumption. In many ways the use of electricity is much more visible and until now we had put our resources into saving electricity rather than on conserving energy for heating, which offers greater potential for saving energy.

Let me give an example. The slide shows a typical house built in 1927 — from the pre-Second World War period — which was used to demonstrate how one could save energy. A company decided to show how half the energy used could be saved. The sum of €21,000 was required to be invested in the house and a loan for this amount was taken out at the normal interest rate of approximately 3%. The owner's energy bill has been halved and he has a surplus €1,000 per annum. He also has the advantage of a higher energy rating on the building which increases its value by more than €50,000. This is a good business decision. Why do people not take advantage of this? One of the reasons is that they do not know about the efficiency of energy conservation. When one of the directors from an enterprise company made a presentation to Members of Parliament, one member of my group in parliament asked if it was really true that he could cut his energy bill in half and was told that most likely he could.

There are no standard solutions. What is the latest home improvement trend in Ireland? Is it new kitchens or bathrooms?

Furniture and fittings.

Ms Holmsgaard

In Denmark new kitchens are the in-thing and one can just walk in and choose one and make all the arrangements to have it installed. Can one contact anybody if one wants to reduce his or her energy bill? One can contact either a non-governmental organisation or a company but there is nobody who will design a package based on reducing energy consumption by 25% or 50% of the current rate. One must contact a plumber, then somebody to design and install new windows and so on. To deal effectively with the reduction of energy consumption, we needed to create a new market. How did we do this?

Denmark has a relatively long tradition in making broad agreements on energy policy and other areas requiring long-term investments. If one has to change the level of consumption, one needs the stability of knowing that the plans and targets for energy policy will not be changed following the next national elections. The risk element of such major investment would increase significantly without stability and a commitment from politicians to a policy of reducing the imports of fuels and increasing energy conservation. Of course, Danish politicians do not agree on everything; different parties have different platforms and opinions on how ambitious we should be on this issue. However, energy companies, industry and non-governmental organisations have all reacted positively to our policies. We were more ambitious but we accepted this compromise. Under an earlier agreement, the government was obliged to prepare a draft energy conservation plan which was presented in December 2004. In the process leading up to this, a mid-term seminar was held, at which papers prepared by the energy agency under the auspices of the Ministry were presented to politicians, representatives of enterprise, NGOs and companies which were invited to comment on them. This formed the basis of the December draft plan.

A national election was called in January before the expiration of the government's term of office. Everything came to a standstill for a couple of months. From mid-May until mid-June all the parties were engaged in discussions and the draft plan was amended in a more ambitious fashion. From the briefing documents distributed, members will see the original draft proposals from the Ministry and, on the last two pages, the additional agreements. We agreed with most of the Ministry's recommendations but increased the target from 1% to 1.75% and added additional means not included in the original draft. We are all satisfied with the compromise reached, those who believe the plan is too ambitious and others who believe it does not go far enough. It is the first time we have an agreement on energy conservation. It is a period of trial and error and we must keep in close contact with the players in the field. We have decided that, as politicians from the energy committee, we will follow the development very closely and engage in discussions.

I know we have different political traditions but energy conservation is important to everybody and our societies. We cannot just close our eyes and ignore the consequences of a future where we are over-dependent on fossil fuels.

That was a most interesting introduction. Do the Danish initiatives on heat saving in buildings exceed the EU buildings directive?

Ms Holmsgaard

We are going further than the buildings directive. We support mandatory targets for the directive on efficiency which has not been agreed yet. There should be a level playing field in Europe.

What does Ms Holmsgaard classify as short, medium and long-term goals for energy policy until 2030?

Ms Holmsgaard

We do not have a vision for 2030 yet but we are going to start negotiations on a long-term strategy on supply and demand in 14 days. We will examine production targets, how much renewable fuel will we use, how to reduce CO2 or greenhouse gases and how to develop our grid infrastructure when the backbone of the grid is owned by the state.

Does Denmark tax consumers on the level of consumption of power and heat? How does that work?

Ms Holmsgaard

Private consumers are taxed heavily on electricity and heating consumption directly through the billing system. Enterprises are taxed at low rates so there is a major difference between the two taxes. This was done to motivate people to use less energy. It also generates revenue for the state budget. Our taxes are higher than in Ireland, although I do not know how Ireland taxes energy. The more tax there is, the more sense it makes to save energy but it is becoming more sensible even if there is lower taxation because oil and gas prices are rising. They may fall a little again but they will rise again.

How does that play with the voters? Are they in favour of taxing energy?

Ms Holmsgaard

A majority supports it. There are those who complain but it has not been changed until now.

It would be hard to sell the idea to people in Ireland.

Ms Holmsgaard

We have had it for many years and there have not been many protests. People like free hospitals and know there must be some income stream to support them.

I know Ms Holmsgaard is doing something remarkable for a politician, she is getting out of the country on the day of the local elections. Most Irish politicians would be at the ballot boxes counting the votes so we appreciate her coming to share her experience.

The energy conservation plan that was outlined should be of huge interest to the Irish people at a time when our electricity bills are increasing dramatically. A similar country using a standardised system for energy conservation that saves 50% of consumption must be of interest to every household here and must be taken seriously because with increasing electricity and gas prices, people, particularly those on lower incomes, face real problems of fuel poverty. If by reducing consumption by half we can address that, it is hugely important politically, no matter about taxation. Cutting consumption should be of interest to every household in the State. I am interested in the details of that plan to see if we could replicate some of the work that has been done in terms of implementation measures to bring about such change.

I am even more interested in the policy framework process. We are engaged with that as a committee and will produce a report on it. The Government has engaged in a review of energy policy for the preparation of a White Paper. We have something to gain, however, from the partnership approach that applies in Denmark. It is not just a partnership between different political parties, although that is an interesting concept, but between industry, the grid and NGOs. All of them realise there are huge opportunities for business and are therefore willing to support demanding mandatory targets. They have seen in the past how investment in new technologies, wind or otherwise, led to Denmark being at the forefront in those technologies and has created thousands of jobs with steady incomes. If that process could deliver something similar to Ireland, we should examine it.

Is there an example of how the political process works? How does working on a cross-party basis to secure agreement on long-term targets affect the day to day political debate that occurs in all countries when the Minister is being criticised? If a politician tries to agree with the Minister on a measure, is there still room for criticism from the opposition?

Where does the parliamentary committee fit in with the ministry and the agencies? Is it an open process with committee meetings? What mechanism is used to reach agreement? Is there a public forum that involves people from industry?

Ms Holmsgaard

I am a member of an opposition party. I can criticise the Government but my criticism is different from how it would have been if there had not been an agreement. I stick to the agreement, believe in it and support it but believe it should have been more ambitious, although it is a realistic attempt to achieve greater energy conservation.

I would criticise the present Minister in a different way if there was no agreement. If that were the case, I would simply have said he is a bad businessman. He is a businessman as well as a Minister and I would have asked how he could make money on shoes when he cannot achieve a conservation agreement. I would have criticised him in the past. Now I would say to him this is good business, that it could have been much better and that I am a better business person than him. However, we must move on. That is essential. If we enter into broad agreements, we must also have room for criticism and development.

I can understand, from an opposition point of view, how it might work. From a government perspective, how is it that it yields to certain influences? Does the government not find this difficult?

Ms Holmsgaard

Yes, it finds it difficult. The Minister said he simply could not go any further, that we were scratching to the point where the issue was becoming an open sore. He said he would have many problems, not necessarily with his local constituency, but with the Conservative and Liberal parties. He was very frank during the negotiations and said he could not move any further. We could see in his eyes that this was true. The view of the opposition was that we should not endanger the possibility of reaching agreement. We felt it was better to have an agreement that was less ambitious than to have no agreement at all. It is better to have the broad majority supporting an agreement because then matters can really change. The Minister says in public that he has stretched his out hand further than is reasonable but that this is fine because we have an agreement, to which he will stick, which he will back and believes is good. We use different tones when talking about this issue in public. However, it is always referred to in a relatively friendly way. If we do not keep that friendly tone, it will be difficult to make agreements.

In what way is the committee involved with the parliament? Does it deal with it in an open way?

Ms Holmsgaard

Members of the committee are involved in negotiations but the actual scene is played out in the Ministry. The Minister invites us to attend the negotiations. We move to his office and all parties are involved, as well as members of his staff. The negotiations could easily have taken place in parliament but this is the way it has traditionally been done in Denmark.

There is one party which was not a party to the negotiations. It is not that it could not take part but rather that it did not want to participate. It argues that what has been achieved in the negotiations is too little. Therefore, it wants to remain outside the negotiating process and be totally free to criticise. It was totally outside the process in most of the agreements reached on energy. In the case of some of them, two parties remained outside the process, one on the extreme right and the other on the extreme left.

The Deputy asked how open was the process. It has varied during the years. Some of the negotiations were very open, where all of the documentation was posted on the website in order that the general public had full access to it. We did this when we completed the reform of the electricity market in the late 1990s. We have a process where we ask a lot of questions, get answers from the Ministry and place all of the information on the website. This time the process has not been quite so open. However, it is open in the sense that it is not forbidden to send information to others. In reality, when we return from a meeting, we forward papers to all interested parties. I forward them to many groups, including the building industry, enterprise associations and Greenpeace. That is the spectrum involved. I forward the documentation to all parties and they can see who else is receiving the information contained therein.

That is good politics.

Ms Holmsgaard

It is but it would be easier if the Ministry made the information available on its website. Perhaps it will do this next time. It is good when it is placed on the website because people can then record their comments on the negotiations. It qualifies the process.

Yes. The fact that it is accessible is good. The information is on the Internet for people to see.

Ms Holmsgaard

It is really good.

I thank Ms Holmsgaard for her presentation. The initiative sounds great, particularly in a sector such as energy where the horizon of policies should be much farther away. It is in everybody's interests to reach political agreement on such matters. I am unclear on who initiated the process. Ms Holmsgaard gave the impression that the government was a very reluctant contributor, backed up by the fact that it had not posted the agreement on its own website. I can understand that the Minister for Transport and Energy's party might have its own reasons for not publicising the agreement, given programmes for government and so forth but would it be fair to say the government is a reluctant player? Now that the deal has been struck, is the agreement a government or national energy policy?

Ms Holmsgaard

It has been public policy since June when we had the last negotiation meeting. It is now official government policy. Everything has been placed on the website. It was during the process of negotiation that the information was not made public. The previous government operated differently in that regard, while the current one has defended its position.

It is correct to say the government was reluctant to engage but not totally. We made an agreement in March 2004 on the transmission system, money for research into energy, bio-gas, offshore plants and a number of other items. This was a package with a number of elements, including the development of two large offshore farms. The opposition parties asserted that they wanted to be part of any forthcoming agreement on an energy conservation plan. Therefore, it was on the initiative of the three opposition parties that energy conservation was included in the agreement. The government was reluctant initially. It was not that it would not undertake conservation policies but wanted to do so in a low key manner. It was very keen to make an agreement with the opposition on the transmission system because it was owned by the electricity companies and we wanted to make it independent.

Was the transmission system owned by the state electricity company?

Ms Holmsgaard

It was mostly privately owned. Some of it was owned by local authorities but there was absolutely no state involvement. The opposition parties wanted to safeguard the transmission system because it is crucial that we do not have private monopolies if we want competition in the energy market. We negotiated with the electricity companies to hand over the system to the state——

Is it now in state ownership?

Ms Holmsgaard

Yes but the companies involved did not do this out of love for the state. There were major disagreements on how to calculate the value of the power companies after liberalisation of the market——

What compensation was paid to the companies involved to achieve state ownership of the grid?

Ms Holmsgaard

An agreement was reached on the value of the companies involved which were sold and the government took less in tax from them than was possible or permissible. Compensation was not in the form of a direct payment. Liberalisation of the market involved estimating the value of the companies anew. Previously they had operated under different principles. They were previously able to take in money from consumers and use it for investment. They did not pay tax but now they have been transformed into ordinary enterprises.

Did the Government take part-ownership of the companies that operated the grid?

Ms Holmsgaard

It was a give and take situation. We received the transmission system and they received an agreement on their value.

Is it a partnership? Did it become involved in the smaller companies?

Ms Holmsgaard

It applied to both the small and large companies.

Was the system compulsorily purchased? Were the transmission companies required to sell?

Ms Holmsgaard

There was no law requiring them to do so but they entered into an agreement to hand over the transmission system.

Was it voluntary?

Ms Holmsgaard

It was voluntary but there was a great deal of fuss and much crying and screaming. The Government felt it was important to have broad political agreement behind the voluntary transfer of the transmission system. Many companies, large and small, owned parts of the transmission system and for them to hand it over there needed to be a broad political consensus that they should do so.

Were there trade union difficulties and is that why the Government sought cross-party agreement?

Ms Holmsgaard

The unions were not a problem. The companies threatened to go to court to argue they should be valued higher than the state thought.

One of the benefits for a government that wants to see the energy industry and the economy develop is the agreement of the Opposition because it gives certainty to businesses that there is a commitment to a certain energy policy regardless of the next election. That makes for a better investment climate for any business and leads to jobs which is good news for an existing government. Did that benefit the government?

Ms Holmsgaard

Definitely. It gives stability to a field with the prospect of long-term investment. Broad political agreement does not shut the opposition up but it changes their tone. It also prevents the enterprise lobby identifying with the right wing. That pattern has been broken and does not exist as it did 20 years ago. I am a leftist and probably have more sympathy with many enterprises than do some of my colleagues from the liberal party. They feel I do more than they to promote and support a branch of industry that can develop and create some of the jobs on which we will depend in the future. The pattern of the past 100 years is starting to change. It cannot now be said that enterprise is on the side of the right wing and the labour movement on that of the left. The lines are becoming blurred. I believe in trying to make agreement because we are in politics to change things for the better and avoid a crisis in a couple of decades.

Ms Holmsgaard said she preferred the option of tendering out. Can she explain what that means?

Ms Holmsgaard

The grid companies and heating and oil companies have the responsibility to ensure that we achieve our targets. They may not be the best fit for this task because, for example, heating companies are not very motivated. Why should they be motivated to reduce heating bills? Why should local grid companies be interested in cutting electricity consumption, although I accept that they have been working in that sphere? Why not put the money for conservation to which they have access out to tender so that everybody can compete? A grid company, a normal engineering company, a building company or a combination of these could apply for the money and compete to be the most efficient. This would achieve the highest amount of conservation for the least money. That would be interesting. We are trying it with a restricted amount of money at the moment. It is developing and so may be more significant in a couple of years. The Government parties did not want it, however, and responded with a clear no. We discussed it over the course of several meetings but to no avail.

Were there any competition issues involved in the valuing of the grid?

Ms Holmsgaard

Is the Vice-Chairman referring to the small grid companies or the transmission system?

I refer to competition laws imposed by the European Commission.

Ms Holmsgaard

There have been no problems so far and I do not think there will be. Denmark is the nice boy in the class who always sends everything to the Commission.

To keep it onside.

That is not quite true because Denmark is not a member of the eurozone.

Ms Holmsgaard

That is not the same because there was a referendum.

Does Denmark have agreement on that as well?

Ms Holmsgaard

Ireland knows quite a bit about referenda.

We think Ireland is the good boy in the class. It used to be.

Ms Holmsgaard

What is the correct phrase?

Ms Holmsgaard

We are the teacher's pet and I do not say that positively.

To which party does Ms Holmsgaard belong?

Ms Holmsgaard

The Socialist Party.

I extend a special welcome from my party. I am interested by what Denmark is achieving but I notice there is no Green Party in the agreement. In regard to what has happened since the 1980s, there are some differences between Ireland and Denmark. Denmark had a mature economy with perhaps twice or three times our GDP, and we have been trying to catch up. Our starting circumstances are, therefore, somewhat different. Is Ms Holmsgaard saying that energy consumption has remained stable throughout the developments since approximately 1980? Did Denmark make any structural changes in its economy to enable this to take place? Is the economy in some way fundamentally different to enable Denmark to control energy consumption and energy waste at such a level?

On CO2 allowances, we are very interested in personal responsibility, the responsibility of individuals and households for their own energy consumption. I am sorry I missed the start of Ms Holmsgaard's presentation. It seems from what she said and from the plan to which she referred that individuals and householders have contributed more to this than great enterprises which, as in this country, have been allowed to waste energy to some extent and were not subject to as tight a regime or governance structure. There seems to be a focus on individuals. Ms Holmsgaard refers to efficient appliances and appliances on stand-by. Are there any absolute rules? She refers also to the housing directive. Besides impacting on individuals, how does one ensure that the whole economy responds, or is this something that is targeted on families rather than businesses?

Ms Holmsgaard also states that there are still many areas in Denmark where there is potential for major savings that are not exploited. Why is that the case given the long-term strategy and all-party agreement for the ultimate energy future of the country? This aspect is something we find attractive.

Ms Holmsgaard

I hope I will be able to remember all the Deputy's questions. General energy consumption has been at the same level since approximately 1980. We have had quite a growth in the economy during the same period. There were no major structural changes in the economy. Changing the energy system to combined heat and power was responsible for the bulk of efficiency. The change from oil to natural gas did not mean very much in that period. It gave security of supply but did not change the pattern because oil prices were relatively low. In terms of CO2 and greenhouse gases, I can add that 20% of our electricity production is from wind.

I was asked how big a role was played by private responsibility and how much by enterprises. The gentleman who asked about taxes has left. It was a conscious decision to impose higher taxes on energy consumption in order to give a clear signal that it would be beneficial for a single family or individual to be more responsible in using energy by, for example, using low energy bulbs and more careful use of hot water. There have been many campaigns.

We also created a foundation to promote reductions in the use of energy which is very active. It assists people in the countryside to change their heating and power systems, because they are not supplied with combined heat and power. People in the countryside use oil and electricity for heating. The foundation negotiates agreements with companies on how high the price will be when they change their systems. We are now negotiating on behalf of 50,000 to 100,000 Danish families so prices will come down. Changing heating systems, installing heating pumps and solar heating systems can be done much more cheaply than it could be done by a single person.

Companies also benefited from some of the savings. We had an arrangement whereby companies got a tax reduction on their energy bill if they agreed to an energy saving plan which could be monitored. We did that for five or six years and assessment and evaluation by independent agencies has shown this arrangement is very efficient. Prior to that, public subsidies for insulating private homes were very effective. For the time being this is not on the agenda.

It is a very high priority for the Government to have absolutely no change in the tax system. It has promised builders there will be not an extra crown in tax and that there will be no change in the system. That makes it very difficult. The process could be speeded up by providing a tax deduction or subsidy for investing in insulation or new windows in houses. There are three things that change the energy consumption in a house. One is windows. Houses built in the 1960s lose almost half their energy through the windows. The second is insulation of the roof, cellar and walls. The third is the use of thermostats. Those are the three elements that really change energy consumption. One can use better bulbs and turn off computers and so on. In reality that is marginal in comparison with the rest. However, it is easy to do because one needs only to switch it off.

I have a question on the capacity of the grid and the volume of wind. In this country the ESB indicates that we can put only 10% of power from wind on to the grid. Is there any such restriction in Denmark?

Ms Holmsgaard

No. The system operators state that in principle the grid can handle 100% energy from wind. There is no technical barrier. However, in some areas a stronger grid is necessary to take the energy. As of now there is no problem and 20% is the average on a yearly basis. Much more wind energy is taken in during the winter. It is a matter of combining technology and skills.

Are there any objections to wind turbines on planning grounds? They are quite controversial in certain parts of Ireland and people take issue with having them on the skyline.

Ms Holmsgaard

Wind turbines were not initially controversial in Denmark as the first installations were made by grassroots movements or individuals such as my father. He had a small stall, while others might have been mechanics. They wondered if they could do something about windmills and their movement was very popular due to the sympathy people have with those who use their own money to take such action. After ten years, the major energy companies were forced to put up larger mills. While there has not been a great deal of protest against wind turbines, it should be noted that a great deal of planning has gone into their establishment.

In America, a great many windmills that were not maintained were left on the skyline but did not function. Did that scenario develop in Denmark?

Ms Holmsgaard

Is the Vice-Chairman referring to Cape Cod?

Ms Holmsgaard

One should never put one's windmills where rich people have their summer houses. They will complain and have a great deal of money to lobby. While we did not have problems of that nature in Denmark, we have begun to encounter difficulties in terms of finding enough space on land where wind installations are acceptable. A great many things have been done to erect turbines in nice combinations to ensure that they are pleasant, rather than ugly, to view.

Are certain colour schemes used to blend turbines with the landscape in an aesthetic manner?

Ms Holmsgaard

Yes. If they are very tall, they are lightened to make them appear very faint. Objectors have accepted this approach.

I welcome the Chairman, Deputy O'Flynn. I will hand over to him in a few moments. Does he wish to ask a question?

No. I wish only to apologise to Ms Holmsgaard for being late. I was out of the country. We are very grateful to her for taking the time to come to Ireland to speak to the committee.

Ms Holmsgaard

I thank the Chairman and am grateful he has attended. I understand that it is in the nature of politics that one can make plans to attend but that, subsequently, one may not be able to do so. That is just how life is.

Deputy O'Flynn is a very good Chairman. He never misses a meeting.

Ms Holmsgaard

In that case, it would not be good to miss this one.

What percentage of energy in Denmark is generated through nuclear power?

Ms Holmsgaard

We do not have nuclear power.

I thank Ms Holmsgaard for attending what has been a very beneficial meeting. Its content is something the committee will need to discuss separately in private session, although, given the lesson to be learned, doing so in public session might be better. I hope we can learn from the lessons Denmark has to teach us and, as a committee, tease out with the Department whether it would be possible for us, having completed our report, to do useful work in the new year. Perhaps we can not only present a report to the Department but take on some of the lessons from Denmark to pull in certain agencies or outside bodies with an interest in the subject, including IBEC, and replicate in a flexible way some of the work we have seen today. My party would be serious about adopting a partnership approach on certain common, long-term trends which benefit the Irish people, regardless of who is in Government. Perhaps we can take from today's meeting a model we can use to good effect in Ireland. I thank Ms Holmsgaard very much for helping to deliver that message.

Ms Holmsgaard

I am grateful for the opportunity to meet the committee. It has been very interesting. I hope the Danish model can function as an inspiration in the committee's future work. I wish the members luck.

I thank Ms Holmsgaard most sincerely for attending. As Deputy Eamon Ryan said, political consensus is important. It is a more realistic approach to embody the hard-core principles of an energy plan in a policy which extends to 2030 and which would not be vulnerable to changes in Government. In that context, the Danish model is a fantastic one to follow in order to develop a visionary plan for Ireland. I concur with the suggestion of further discussions. Today's debate was very useful and I am certain it will constitute the foundation for an all-party agreement on a way for Ireland to develop an energy policy going forward.

Sitting suspended at 3.15 p.m. and resumed at 3.20 p.m.

I thank the Vice-Chairman, Deputy Perry, for handling the previous session and I thank all those who contributed. I welcome Mr. David Taylor and Mr. Morgan Bazilian from Sustainable Energy Ireland, SEI. Before I ask Mr. Taylor to begin, I advise members that we will hear a short presentation followed by a question and answer session. I request that all mobile phones be switched off. I draw everyone's attention to the fact that members of the committee have absolute privilege. That privilege does not apply to witnesses appearing before the committee, which cannot guarantee them any level of privilege. Furthermore, under the salient rulings of the Chair, members should not comment on, criticise or make charges against a person outside of the House or an official by name in such a way as to make him or her identifiable.

I thank Mr. Taylor and invite him to begin.

Mr. David Taylor

I thank the joint committee for the invitation to appear before it. As the Chairman stated, I have a short presentation, copies of which have been distributed to members. If it is convenient, I will go through the presentation. I will be begin by referring briefly to the context in which the review of energy policy considerations is taking place.

I will first discuss supply trends and context and provide a summary of the situation from 1990 to 2003. During that period we saw sustained growth in demand for energy services, which have been satisfied broadly by increased fuel and electricity imports. At that point, heat, electricity and transport had similar primary energy requirements. One observation is that the oil share of heat demand is twice that of gas in most sectors, so room exists for further growth in gas penetration in the heat market.

I will refer briefly to the three pillars of energy policy, the first of which is security of supply. We have seen our import dependency grow from 1990 to 2003 to the point where we are 90% dependent on imported energy. My colleagues from the energy policies' statistical support unit were before the committee and gave members detailed data on that topic.

The second pillar is environmental impact. I will focus on greenhouse gas emissions, which have peaked and started to decline. They are above our Kyoto target. The third pillar, competitiveness is most important. It is interesting that following the most recent oil and gas price increases, the best new entrant's price for electricity now exceeds the price for wind. The prospects for renewable energy and energy efficiency are increased as a result of increasing prices.

To summarise the position as regards sustainable energy indicators during the past 13 years, gas replaced coal as the dominant fuel in electricity generation and dependence on it continues to grow. We also saw a striking improvement in the efficiency of electricity generation, which now stands at more than 40%. Commensurate with that fuel switching and improvement in energy efficiency, the CO2 emissions decreased per unit of electricity generated from 981g/kWh to 651 g/kWh. Some progress has been made.

I will now focus on SEI's remit. Our emphasis is on energy efficiency, renewable energy, combined heat and power and reducing the adverse emissions of greenhouse gases, principally from energy. Our priorities are to provide support to Government, industry and the public. We do this mainly through energy awareness and advice. In addition, we have designated budgets to support energy research, demonstration and innovation in industry, transport and the built environment.

Our programme focuses on both energy supply and demand issues. As members will appreciate, strong performance on the demand side places one in a better position to deal with future risks in competitiveness, security of supply and environmental impact. In that sense, energy end-use efficiency is paramount. Our research and development demonstration support is dispersed mainly in the residential and public buildings areas and directly to renewable energy developers and researchers, with a modest amount in the transport area. We actively support third level capacity building through scholarships and other third level directed funding.

A competitive industry sector is the bedrock of the economy. Working through the NSAI, SEI recently produced IS 393, which is an energy management standard. Interestingly, this is based on a Danish energy standard and was one of the fastest produced by the NSAI in recent times. That standard will be at the core of a new SEI initiative based on voluntary agreements.

We are also working with 80 other companies in the larger industry energy network. I will leave copies of the most recent annual report with members. We support the development of a sustainable energy zone in Dundalk. The intention is to demonstrate in one place the possibilities that arise when a concentrated and holistic approach to sustainable development and energy is taken, with emphasis on the built environment industry and the third level sector.

SEI's programme in the built environment addresses the need for innovation in housing, protection of the poor, leadership by the public sector and preparation for the implementation of the energy performance in buildings directive. I will provide members with examples from a public sector programme of successful demonstrations in schools, county halls and recreational facilities sponsored by local authorities. I will also provide information on SEI's work with an interdepartmental committee on the preparation of a draft action plan for the implementation of the energy performance in buildings directive.

The renewable energy research and development funds at our disposal were allocated principally to biomass and wind. The percentages at one point were that 44% was allocated to biomass and 40% to wind. We also produced a programme overview that gives examples of the types of projects involved and outlines of case histories, including the amounts dispersed in each case.

Members are more aware than I that a broad societal consensus will be necessary to support a step change in the way we use energy. The SEI approach is to empower current consumers with information and to provide their future counterparts with such information through our schools programme. The teaching materials relating to this programme are developed in co-operation with teachers, designed around the curriculum and integrated into normal classroom activities. Some examples of aids to teachers are the energy file and guidance notes for a large format book entitled Guzzler Investigates Energy. In its large format, this book is used for illustration and teaching junior cycle and infant children. From the viewpoint of wider consumer awareness, one may see in the chain grocery stores the Combat Climate Change Challenge which is designed to heighten consumer awareness of the links between behaviour, energy use and the wider global impacts on climate change. In the presentation I mentioned briefly the energy policy statistical support unit publications. The unit has already made a presentation to the joint committee. The office is committed to the production of timely and authoritative useful data on energy use. We have had a renewable energy information office and the intent is to produce a constant stream of information directed at farmers, developers, planners, local authorities and central government.

The ethos of Sustainable Energy Ireland is to work closely with responsible agents. I have set out examples from the institutional area where, with the Environmental Protection Agency and the Meteorological Office, we took a forward look at the likely consequences of climate change in terms of temperature, wind and rainfall variations. We did this under the banner of the C4i — climate impacts — research. We have a joint strategy under development with the Marine Institute for ocean energy. We are doing work, co-funded by the Environmental Protection Agency. We have engaged in collaborative development with COFORD on bio-energy exploitation. In looking forward and modelling the future we are working with the Economic and Social Research Institute. We are also working with a number of voluntary agencies on the issue of fuel poverty and its alleviation. We have cross-departmental relationships working on the energy performance of buildings directive.

I mentioned the Dundalk 2020 document, the elements of the vision for Sustainable Energy Ireland, which was part of a strategic response to decentralisation, designed to exploit the virtues of the location in terms of its proximity to the Border, its placement in the Dundalk-Belfast corridor and the opportunity that arose to make a contribution to the economic, social and environmental development of the region. It was an important opportunity to demonstrate at a concentrated regional level Government policy priorities. By doing it in that way, we provide market indicators and the policy system in Ireland with the opportunity to test new approaches and pilot innovation in an open and supportive environment. The theme we are pushing is a holistic integrated approach that will reveal what the various issues are in moving to a truly sustainable basis.

As part of our long-term vision, we are also working within the framework of the joint steering group on the all-island energy market. Members will have seen a recent consultation document on the Vision 2020 preliminary consultation paper for renewable energy and electricity supply. It is my intention, as chairman of that group, to follow through with other papers on heat and transport.

A number of our resources and papers are available on disk and I have pleasure in leaving them with the committee. Energy will remain high on the policy agenda. All the drivers point to the need for increased energy efficiency in all sectors and the wider deployment of renewable energy options. To achieve this we need to sell the wider benefits, not just financial. We, in Sustainable Energy Ireland, are committed to developing and implementing programmes that will support the ongoing policy development and implementation process.

Was Mr. Taylor present during Ms Holmsgaard's presentation?

Mr. Taylor

Yes.

Did Mr. Taylor find her presentation helpful?

Mr. Taylor

I hope it was helpful to the Chairman. I had the pleasure of visiting Denmark as part of an energy charter review group and would have received a number of presentations on various aspects of energy policy. There is absolutely no doubt that the Danish achievements on energy conservation have been impressive.

Before I hand over to Deputy Durkan, may I ask Mr. Taylor about the substantial funding awarded to the energy sector and Sustainable Energy Ireland under the national development plan? Is some of this funding not being used? How much has been used for research and development?

Mr. Taylor

Would the Chairman repeat the first question, as I did not hear it?

I stated Sustainable Energy Ireland had received a large amount of funding under the national development plan. Is that correct?

Mr. Taylor

Yes.

How much of the total has been used and how much has been allocated to research and development and if funds allocated may not used during the lifetime of the plan?

Mr. Taylor

The national development plan set out a total funding envelope of €220 million. In practice, the Exchequer Vote was considerably less than this per annum. The percentage used for research and development — I can give the Chairman the exact figure — would be approximately 40% to 50%.

Will all the money allocated to research and development be used during the lifetime of the national development plan?

Mr. Taylor

All the voted Exchequer moneys which have been entrusted to Sustainable Energy Ireland to deliver to the market will be used.

I apologise for being absent during the earlier session, but I had to go to a funeral in Kells, County Meath, which is a little more than one hour's journey from Dublin.

How does Sustainable Energy Ireland see the Danish model for energy conservation being applied in Ireland, bearing in mind the necessity to ensure security of supply? My second question relates to a paragraph in the summary which states that during the past 13 years gas replaced coal as the dominant fuel in electricity generation and that dependence on it continues to grow. We also saw a striking improvement in the efficiency of electricity generation, which now stands at more than 40%. CO2 emissions decreased per unit of electricity generated from 981g/kWh to 651 g/kWh, a reduction of approximately one third. The production of electricity has increased. Will Mr. Taylor state the actual position vis-à-vis the position 13 years ago in order that we can identify the rate of progress in meeting the targets set in the Kyoto Protocol?

Another important consideration in considering the use of alternative fuels is maintaining security of supply. I presume interconnectors are one way of ensuring security of supply can be guaranteed. COFORD is another. However, what does Mr. Taylor think is the most appropriate backup system — apart from the interconnector — to ensure continuity of supply in the generation of wind energy when it is becalmed?

Mr. Taylor stated consumer awareness of the need to conserve energy has a significant impact on consumption. It has been brought to our attention that industry in Ireland pays the highest prices of all industrial consumers in Europe. To what extent can this be tackled through the use of alternative energy sources? Industrialists are concerned about the disadvantage this causes in production costs.

Did Sustainable Energy Ireland have the correct figure for the level of Exchequer funding?

Mr. Taylor

I would have to give the committee a note on that matter. I do not have the figure in my head.

It was indicated that it was not what was recommended. If SEI had received what had been recommended, could it have spent the money?

Mr. Taylor

To expend the full amount of money we would have needed more internal resources or a different business model. As to what proportion of the originally voted NDP moneys we are likely to get over the lifetime of the programme, allowing some latitude, we will receive between 40% and 50%.

Could that information be emailed to us?

Mr. Taylor

Certainly. On the Danish model, as was observed in the discussion, the starting points were different. The recent experience, particularly since 1995, has also been different. Our growth rate has approached 10%, while the Danish growth rate in the same period was 2.5%. Taking the index of industrial production between 1995 and 2001, the Danish figure would have increased to 120, while here it would have been 220. Another sustainable energy indicator such as the efficiency of the electrical system would show a difference of 40% here, whereas in Denmark it is 60%.

Why is that?

Mr. Taylor

It is the result of high levels of wind penetration, high reliance on combined heat and power and integration of the electricity and heating systems. Such achievements would only be possible within a strong tradition of planning and the social democratic model in place in Denmark. It requires a certain culture and form of organisation and affluence as a starting point. There is a much stronger awareness in Denmark of environmental issues compared to here. There are different starting points, values, organisation levels, wealth and growth rates and planning traditions. Nevertheless, there are good examples of where Danish leadership can feed into our system. One is the development of the Irish standard in energy management to which I referred. There are only two countries in Europe with such a standard, Ireland and Denmark, and the European Union is about to move on the production of a standard based on those models.

My team has been to Denmark to meet officials and get insights into the obstacles faced in that market with the implementation of the energy performance of buildings directive. Similarly, we heard the answer to the question on the level of wind generated electricity that is possible — any level under the right conditions. The situation in Denmark with regard to interconnection, with potential backup support in terms of large hydro availability to the north and to the south in Germany, makes that answer conditional on those factors.

Is there a hydro possibility here equal to them?

Mr. Taylor

It is not equal but there is a hydro possibility.

On the Kyoto Protocol, while I pointed towards improved efficiency of electricity generation, I also pointed to a decrease in the emissions associated with each unit of electricity; electricity consumption has grown and net emissions have grown as a result. It is interesting, however, to note that our most recent figures from the energy policy support unit show that we produced more electricity with less energy in the past couple of years. The level of emissions, therefore, has dropped. On one of the slides we can see the trend towards the Kyoto Protocol targets. We are not there but our emissions appear to have peaked and we are on a downward trend. The climate change strategy is designed to match them.

Under the Danish model, any available wind energy can be taken into the grid. We were told otherwise by other groups which have presented recently.

There was a particular reference to security of supply.

Mr. Taylor

On interconnection, security of supply, co-firing, appropriate backup support for wind energy, there is no simple answer. The Danish model is strongly interconnected to the north and south. The backup support to the north comes from hydro supplies from Sweden where there is large capacity for such production, while the backup support to the south comes from Germany from more conventional energy sources. The backup support available to us in Ireland comes from a small pump storage scheme and after that from more conventional forms of energy such as gas, coal or peat. The form used depends on conditions at the time.

On wind energy penetration, it is important to be aware that the limiting factors are determined by technology, the market arrangements and the level of interconnection.

Has there been an assessment of the desirability of interconnectors? Has the optimum level for interconnectors, north and south and east and west, been identified that would facilitate greater use of wind generated electricity and access to the grid for it, keeping in mind the need for security of supply?

Mr. Taylor

The thrust towards an all-island energy market recognises that a larger market in terms of spinning reserve backup support for wind energy will offer better potential than a smaller market and thus benefit consumers. The consultation document on the programme of work addresses in a timely fashion the questions being put.

If a figure of 20% for wind generated electricity was available to the grid and we were approaching 80% of the maximum load and there was a shut down, what grid capacity would we require, given the level of economic growth in the past ten years and likely growth rate in the next five or ten years? That is a critical question in terms of continuity of supply.

Mr. Taylor

The grid operator would be in a better position to answer that kind of technical question but once one has a large plant or a plant with very similar characteristics that is susceptible to a single change like a drop in the wind, on the grid, one needs to have an equal measure of plant available to respond as fast, in the case of wind, as the wind decreases or in the event that it was a single incident, such as that which caused the moratorium. One would then need to have either very large capacity on spinning reserve or a very strong level of interconnection. Issues then arise as to who would pay, what would be the added cost and what would be the likely impact on competitiveness.

What progress has been made regarding the energy performance of the building directive? We have a 90% dependency on imported energy. Does Mr. Taylor believe enough is being done to develop our indigenous energy resources? Is enough being done to reduce energy usage in the transport sector and to encourage fuel substitution, such as the use of biofuels?

Mr. Taylor

There are two parts to the Deputy's question, one relating to energy efficiency and whether we could do more on that front and the other relating to opportunities to achieve higher levels of renewable energy penetration. One of the key considerations in this area is what we can afford to do. Competitiveness determines how far and how fast we are able to move. An economy or an industry can be more competitive if it uses its energy effectively and efficiently. Hence, our programmes relating to industry concentrate on alerting it to the opportunities to which it is in its best interests to respond. Efficient energy use is about technology and behaviour. Studies show that two equally well-designed buildings, from a technical perspective, can have energy consumption levels that vary by a factor of two. In other words, one building can consume twice the amount of energy of the other. The difference in those instances is the inhabitants of the buildings.

Is it about better management?

Mr. Taylor

Yes, in this area it is about behaviour and technology.

Energy is very costly to business. There are a number of publications available on the subject but the question of the implementation of energy efficiency systems is difficult. Has Mr. Taylor worked with the chambers of commerce, ISME and small businesses to develop a programme to encourage economic use of fuel?

Mr. Taylor

We have a number of publications directed at small companies——

I have seen those publications.

Mr. Taylor

We are working closely with the Hotels Federation in particular. There are two initiatives under development at present. One is the agreements initiative to which I referred earlier and which will focus on larger entities. For smaller entities, we are developing a web-based tool that will allow them to effectively access information which will assist them in assessing their energy usage and implement——

I have a question regarding the ESB and its demand reduction incentive scheme. If businesses reduce their usage between 5 p.m. and 7 p.m., and some have switched to generators to do so, they are rewarded. How effectively is Sustainable Energy Ireland involved in that type of promotion? The scheme is quite difficult for people because if they miss one day in a month, they lose all the benefits. The penalties for non-compliance with the terms of the scheme are severe. In many ways, the promotion of that scheme has not been effective, particularly with regard to heavy payers within small business. A lot more could be done in that regard.

Mr. Taylor

We have been working closely with ESB National Grid on the development of its demand side management programme. We recently commissioned a study, in conjunction with the UK authorities, to examine demand side management, the results of which we will make public.

Perhaps Mr. Taylor will come back to the committee with the outcome of that study.

Mr. Taylor

I will make the report available to the committee, with pleasure.

What has SEI been doing in terms of research and development not so much in respect of wave energy but rather in terms of that generated by ocean currents? Is there potential in that regard and what has been done to date? Is the idea simply pie in the sky? I am also interested in Mr. Taylor's views on the extension of the gas national grid to other urban centres throughout the country. Would that have a positive effect in terms of security of supply and the environment? I note that in terms of the cost of heating, oil compares to gas at a ratio of 2:1 but it appears that Bord Gáis has no intention of extending the grid, particularly into the north west.

Mr. Taylor

On the wave front, we have done some work quantifying the resource, which is publicly available. The other work that we have done——

Is it correct that the wave is different to the actual current in the water?

Mr. Taylor

Yes.

I know that there is research available on wave energy. Has any research been done on the actual currents, their strength and their potential to supply us with energy?

Mr. Taylor

Yes, we have estimated the tidal stream resources. With regard to their exploitation, we have a joint strategy with the Marine Institute. There are three or four active developers in this area and we have supported their initial analysis of prototypes and, more recently, the building and testing of these.

When will information on those projects become available?

Mr. Taylor

I believe they are listed in our annual report. Anybody who has received a grant from us is listed ——

Is SEI supporting University College Cork in its development programme?

Mr. Taylor

UCC has been providing some services to the aforementioned developers and we have been paying for those services.

Senator MacSharry also asked about the extension of the gas grid. If one extends a gas grid while maintaining uniform charges for everybody, then the burden on consumers begins to increase the further it is extended.

Without subvention, the burden increases.

Mr. Taylor

Yes.

With subvention, the burden may not increase. It may even decrease, over time.

Mr. Taylor

My point is that in order to extend the grid at the same price, one has to subvent it and the only people who can pay for that are the existing consumers. Therefore, the overall cost of delivering the service increases. We must realise that the more one extends the grid, the more costly it becomes to deliver the service. The other consequence of a policy that is concerned with gas-only extension is that we begin to preclude the possibility of other energy forms, such as biomass, that might be more applicable in rural regions, where the raw materials are more plentiful. It is important to strike an appropriate balance between grid services that can be delivered efficiently and economically and off-grid services that can be supplied, more economically and in a more environment friendly manner, by indigenous energy resources.

Are rural regions in Ireland suitable for biomass energy?

Mr. Taylor

The modern forms of biomass, that is, the pelletised fuels, are growing in competitiveness. They are also becoming more widely available. My understanding is that, at current prices and delivered in bulk to suitable consumers, they are highly competitive.

Does SEI have a view on extending the gas grid throughout the north-west region? Entire areas are being disadvantaged because of their low population levels. Is it practicable for the grid to service the entire map?

Mr. Taylor

As I said, it is important to strike a balance between consumers and the competitiveness of the economy and to make sure in doing so we do not block the opportunities that naturally arise for other indigenous fuels.

That is a great answer. Mr. Taylor is in the wrong seat.

I welcome Mr. Taylor. It is stated on page 4 of the presentation that "generation efficiency improves to over 40%". I do not understand this. Does it mean the current level of generation efficiency in power stations is just over 40%? That would be appalling.

Mr. Taylor

That is correct. If one compares the figure for delivered energy as a fraction of the figure for energy taken in, there is a useful energy level of just over 40%.

What were the figures for efficiency levels before the existence of SEI?

Mr. Taylor

They would have been as low as 31% or 32%.

Does Mr. Taylor know why that was, or why it is still at only 40%, which is outrageous?

Mr. Taylor

The more energy that is available and the cheaper it is, the more carelessly it is used. That is a key point and the philosophy of those who advocate higher prices or taxation to reduce usage. There are also technical reasons. The technology deployed 30 years ago involved a large boiler and steam turbine. The overall efficiency level of that process was seldom above 37% or 38% in the best plant, let alone older plant. Also, when one studies the load curve, the way the level of demand for electricity varies during the day, one will see that a plant only operates for a short period. It is like driving a car to the supermarket. On such a journey a car that would normally return 40 miles per gallon on average would return only 20. It is exactly the same for power stations that need to ramp up quickly. That is part of the argument that conventional power producers make about the wind industry. They often say it gives rise to a greater level of variability in plant and, therefore, to a lower level of average performance and capital utilisation.

Is there a difference between the generating capacity of a power station and the generation of energy? A power station might act as backup to a wind energy source and ramp up slowly, become engaged and no longer be required. I can see how somebody might say that is not making efficient use of a power station but it might not be inefficient in terms of the energy provided for the grid because of the period the power station is not engaged.

Mr. Taylor

I am simply saying people make that argument but the Deputy is correct.

How efficient are the top of the range, most modern generators and power stations nowadays?

Mr. Taylor

In conventional terms, combined cycle gas-fired generating plant achieves a level of 51% and upwards.

That is appalling. Can we ever expect better?

Mr. Taylor

The impact level of Denmark's electricity system is much lower because it has made a strong commitment to the simultaneous production of electricity and heat. Its structures suit this approach because the electricity generating industry was never centralised to the extent it was in Ireland. Local authorities or municipalities still had ownership of power and heat producing plant. As entities acting in the public interest, they delivered both services. The fact that those services are so closely intertwined has caused tensions in the process of market liberalisation. That rigorous, planned approach needs a supporting environmet. The introduction of a liberalised market has created problems.

In Denmark also?

Mr. Taylor

I believe so.

I will ask about the research and education element of SEI. What percentage of its time and budget is spent on public information and education and research and development? In response to a question on research and development Mr. Taylor said he could see a different business model. Is there a cap on the grants SEI is allowed to provide or does it impose its own?

I am conscious of the relationships between SEI, the IDA and Science Foundation Ireland but if I wanted to manufacture, for example, a battery system that would store energy for the renewable sector, to which organisation would I go? Is there duplication? What has been SEI's best achievement to date and what is its unfulfilled ambition?

Mr. Taylor

I will think about the last question while I am answering the others.

Approximately two thirds of voted moneys are destined for external bodies with one third for programmes directly delivered by SEI. Of the two thirds disbursed through various programmes and schemes, approximately half goes to research and development. The principal areas are public good research where we look at the prospects for renewables in the current market design, resource studies for policymakers and developers, and demonstrations, technologies which have been developed and are available for market deployment but which have not to any appreciable extent been demonstrated in Ireland. Enterprise Ireland which funds indigenous manufacturers is the most appropriate body to promote manufactured product development in Ireland. With respect to our moneys committed to external bodies, we have an external committee on which Enterprise Ireland is represented and in which it participates. Its full knowledge of what we do and how we develop our policies leads to alignment. Science Foundation Ireland is a different type of organisation. It concentrates on basic and pre-competitive research and development for large resources. It is upstream from SEI.

Deputy O'Malley asked where one would go if one developed a battery system. Such a development would be close to the margins and we would certainly take an interest in it. However, if we felt the moneys involved or the advice required were more appropriate to Enterprise Ireland that is where we would direct the person concerned.

Would it be dictated by the business model and commercial end rather than the sustainability of the project?

Mr. Taylor

Yes.

Does Mr. Taylor think Ireland could be a leading centre for research and development for sustainable energy products that have yet to prove they could be commercial?

Mr. Taylor

Innovation and research and development amount to a business in their own right, which requires an understanding of markets and company development. The reform process which created Enterprise Ireland in the first place involved recognising the need for a well integrated company, market and technology development model. In that way the best interests of the country would be served with export-led growth. I will not detract from this. It is sound and rational.

As committee members understood from my introduction of the Dundalk 2020 document, we envisage real problems in integrating certain practices and sensitising consumers to what is in their best interests and ensuring the market has appropriate backup support for the innovations that may be introduced. If we want to achieve what Denmark did, we must bring pieces of the Danish model here and demonstrate a community of energy efficient houses that relies for a portion of its energy needs on a visible wind turbine with a supporting third level institution prepared to give classes at different levels such as trade or consumer level. In that way we would begin to demonstrate in concrete terms the vision of the society to which we aspire for the entire country. We can learn from, develop and widely replicate smart metres, renewable energy promotion and supply, sensitised consumer behaviour and bulk purchases.

I will finish if I may as a presentation from Bord na Móna will follow. How important is peat generation, or how important could it be?

Mr. Taylor

It is important to recognise that peat contains a great deal of carbon. In terms of the environmental penalty, there is a price on it. It is significant and may well be growing. Against that, it is indigenous.

Is there an abundance of it?

Mr. Taylor

No. It is not unlike oil because several times its demise was predicted. We do not envisage a time horizon of more than 20 years for it.

As an indigenous product, is it important to use it for the generation of energy?

Mr. Taylor

In order to have it available to generate energy if there was a security of supply issue, it should be used now.

Mr. Taylor has not answered my question which was a simple one. Does he think we should use more peat to generate energy now rather than buying in coal for Moneypoint or energy supplies from elsewhere in Europe?

Mr. Taylor

Sorry, if the Chairman comes at it from that direction, it would be inadvisable.

For what reason would it be inadvisable?

Mr. Taylor

It would be inappropriate to upscale or increase our usage of peat in the short term.

Is that because of its carbon content and——

Mr. Taylor

The finite nature of the resource. The principal reason for exploiting it is that it is indigenous and would cover a potential security of supply issue. If it were used up faster, it would not be available. The extra cost of both the peat and the carbon would increase our electricity costs.

Should we introduce incentives to drive energy conservation?

Mr. Taylor

Certain energy efficiency and conservation measures require incentives but they need not always take the form of direct payments. Our approach to industry is to create networks and offer knowledge and technical support rather than direct financial inducements.

In essence, Mr. Taylor is in favour of the provision of incentives if we can reduce our energy requirements in industry.

Mr. Taylor

Price is a strong incentive. The Government is already taking the lead. It decided the public sector should be a model for energy efficiency and uses all new public sector buildings, particularly those supported by SEI, to that effect. This establishes a good model for commercial developments and increases the capacity of architects and service providers involved in design who are in a position to offer such designs to the commercial sector.

I have a final question. Senator MacSharry discussed the importance of the grid in the north-western region. Does Mr. Taylor agree we need a generating station to create the critical mass for the use of gas in the proposed line? I have no doubt the committee will recommend this in its report.

Mr. Taylor

The Chairman will recall that in order to finance the Cork-Dublin gas pipeline, the Poolbeg station was converted to enable it to use gas. It made a great deal of sense because the power station was located close to an area in which there was large demand.

Does Mr. Taylor agree?

Mr. Taylor

I have stated a large user at the end of a pipeline is an incentive——

What is important here?

Mr. Taylor

Whether it is an appropriate place to situate an extremely large user is another question.

What does Mr. Taylor mean by "an appropriate place"? One can generate current and get it onto the grid anywhere in Ireland.

Mr. Taylor

It costs money to generate energy either by gas in one direction or electricity in the reverse direction.

Does it cost money to generate it in one place and supply it elsewhere?

Mr. Taylor

Yes.

I thank Mr. Taylor.

Will Mr. Taylor briefly answer my questions on SEI's ambitions? I would be grateful if he did as it would give us an idea of what it is proud of and the direction in which it is moving.

Mr. Taylor

One of the achievements of which I am proud is the way we entered the debate on the moratorium on wind energy. It had the potential to be divisive and not useful but we rolled up our sleeves, applied our money, commissioned work, worked with the working groups and committed ourselves to assisting those involved to find an appropriate consensual solution. I would like to think we could achieve the same in respect of the Dundalk 2020 project. We could begin to create an agreed vision as to what might be achievable for Ireland in integrating sustainable energy sources in a holistic way into housing, institutions and industry. If we had that much learning, we could apply models from abroad.

I thank the delegates for appearing before the committee. A number of questions were asked that could not be answered completely. I, therefore, ask them to have regard to the committee transcripts as they appear on the Internet in the next week and if there are answers that are incomplete or if there is anything that should be explained further, we would be grateful if they would get back to us because we want the report to take into consideration all of the views expressed.

Mr. Taylor

I will do that. As the committee moves towards drafting its report, if it needs to check anything or if we can provide additional information or clarification, we will be happy to do so.

I welcome Mr. Fergus McArdle, chairman of Bord na Móna; Mr. John Hourican; Mr. Seán Grogan, director of peat and allied business; Mr. Colm Ó Gogain and Mr. Gerry Ryan. Before we begin, I draw attention to the fact that while members of the committee have absolute privilege, the same level of privilege does not apply to witnesses appearing before the committee which cannot guarantee any level of privilege to such witnesses. Under the 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.

We are running late and committee members have other commitments but this is not a reflection on Bord na Móna or the importance of its presentation. It is important to us to hear the group's views on energy that will allow us to formulate our own recommendations on the future energy requirements and policies of the State.

Mr. Fergus McArdle

The timing of this meeting is excellent because in October the Government approved our strategy, something on which the company spent a long time. It is a twin track strategy whereby we continue the profitable extraction and processing of peat for fuel while diversifying into environmental and wind energy production and other aspects of business to sustain the company in profit for the next 20 years and safeguard employment. The members of the team will make a presentation. We will then take questions from committee members.

Mr. John Hourican

We are delighted to have the opportunity to address this distinguished committee. I will start with an update on Bord na Móna which has wrought a financial miracle in the past 15 years, going from virtual bankruptcy in the late 1980s to being a vibrant, well run, well financed, solid company with a firm view of where it wants to go. As the Chairman said, we have outlined our intentions to the Government and have had our strategy approved. Therefore, this is a great time to talk about what we propose to do.

We are active as an organisation in four main areas, as outlined on the slides. Our strategy is to continue to make optimum use of our existing businesses which are largely mature, some of them being in decline. From this base we intend to develop in the areas of new vectors in predominantly renewable energy sources, environmental cleansing, wastewater and air treatment systems. We also propose to enter the waste management sector, which will give us the opportunity to lead the way in the controversial area of waste to energy production. This strategy has now been approved and we are much more comfortable about proceeding.

I will explain the rationale for entering these areas. Ireland is dangerously dependent on imported energy sources. We want to play a role in growing and developing indigenous sources such as biomass and starting the process of experimenting with, and succeeding in, co-fuelling with peat. We provide approximately 3.5 million tonnes of peat for Powergen. The three new power stations currently producing about 320 MW of energy are converting, in internal conversion efficiency terms, at a percentage rate in the high 30s. The old stations converted at a percentage rate in the low to mid-20s. Therefore, we are producing approximately 30% more electricity from the same amount of peat, bringing about a significant reduction in CO2 emissions per megawatt produced. As peat is a finite resource, we are anxious to commence the process of co-fuelling and move away from dependence on peat as a source.

Waste to energy production presents another opportunity for us. We are also interested in the hydrogen and biofuel technologies which are the subject of much discussion as they become feasible. We want to play a role in the form of committed research and development and piggybacking on some of the technologies already available. We own the first commercial wind farm in Ireland in County Mayo, a small wind farm which produces approximately 6.5 MW of energy. We have obtained planning permission in respect of a figure of 320 MW which potentially would make it one of the largest wind farms in Europe. We are anxious to proceed with its development in partnership or as the most appropriate way to bring critical mass in terms of wind energy into play as effectively and efficiently as possible. It is an incremental process because 320 MW stations will not be built at the same time but we would like to start building them as soon as we overcome the grid connection issues in north Mayo.

We are also focused on utilising our own competencies and asset base to be pre-eminent in waste management. We want to deal with waste from collection to optimum disposal. As a company which concentrates on leading edge technical solutions we want to lead the way with emerging technologies in reducing the amount of waste going to landfill and minimising the impact on the environment. We are already active in wastewater and air treatment systems in Ireland, the United Kingdom and the USA, mainly through the use of bio-based technologies. We are majoring on emerging bio-cleaning technology, the use of membranes in water treatment and service and laboratory areas.

In all of these areas we are committed to research and development, as appropriate. There is a knee-jerk reaction to the use of peat in this country. We do not defend it as a high CO2 carrier but it is a native fuel which reduces our dependence on imports. If we can use it more effectively, as we are doing at the moment by producing 30% more electricity than previously, and learn how to co-fuel with it effectively, we can provide a substantial indigenous alternative to imports. We are not alone in this. In Germany, for example, coal and lignite account for a figure of 20% of the entire energy requirement. Therefore, we should not apologise for using peat which we have available in abundance and are using wisely. We know CO2 emissions are an issue but we can compensate by our contribution to renewable wind sources and the use of biomass.

All of this development requires Government policy support and presumes effective regulation. We are only learning the regulation business in our small market. We must ensure players are encouraged to play and investment incentives are provided, as appropriate. Improvements in infrastructure are key. On wind energy, we hear much about the amount the grid will take but it all depends on the type of grid used. We wish to highlight this as something the Government can help with and on which it can focus.

We have based our long-term projections on making a significant contribution to meeting Ireland's future energy needs. We are glad to declare this to the committee to create public awareness. We will be happy to answer any questions members may have.

Is there an estimate for the level of reserves?

Mr. Hourican

My colleague Mr. Seán Grogan might be able to give the precise figure.

Mr. Seán Grogan

At current rates of consumption, there are 70 million tonnes of recoverable peat reserves per annum for 20 years.

Nationally.

Mr. Grogan

That is purely Bord Na Móna's resource.

Has Mr. Grogan any idea what the size of the national reserve is because turf is also being dug in County Kerry?

Mr. Grogan

It is difficult to be precise but a rough estimate would be 15 million tonnes of recoverable peat reserves owned by others.

That gives a figure of 85 million tonnes. For how many years would that last?

Mr. Grogan

At the current rate of consumption, just over 20 years.

What fuel has Mr. Hourican in mind to co-fuel with peat to bring down emissions?

Mr. Hourican

There are many. We have contracts to supply three modern power stations. We have a lot of peat from which we make money but we are prepared to play a role in developing alternative sources if we are given an opportunity to do so. Wood and meat and bone meal represent alternatives, with biomass products such as canary grass and other fast growing alternatives with which we are experimenting on our own cutaway bog. Another significant and viable alternative is sewage sludge. Partly dried sewage sludge.

Senator MacSharry referred earlier to the northwest region which has no gas pipeline. What opportunities, if any, are open to the northwest region in terms of electricity generation which would ensure the construction of a gas pipeline? Could such a pipeline be developed and co-fuelled with Bord na Móna products?

Mr. Hourican

There are a number of possibilities. It will first be necessary to increase capacity in the northwest region which is currently limited to 80MW in terms of transmission. Bord na Móna has planning permission for 320MW of wind energy.

The big question is how to store electricity. As far as I am aware, the nearest thing to a battery for electricity is hydrogen. We are interested in experimenting with that proposition. A possibility is the manufacture of hydrogen from wind which, when not needed on the grid, can be used in a hydrogen burning station for other fuels. That would ensure a balanced approach to addressing the problem. We see opportunities in the northwest region in terms of its contributing significantly to the power proposition and developing alternatives there.

Bord na Móna will be aware that Cork University has undertaken a great deal of research on hydrogen and hydrogen storage.

Mr. Hourican

We are aware of it. We propose to set up a centre of excellence for the advancement of hydrogen in Ireland and will be to the fore in investing in it. Such a proposition, which is approximately ten to 15 years away from commercial reality, will be costly even though hydrogen is currently being used for transport systems. These things can only happen if there is committed, sustained investment and promotion of emerging technologies. Bord na Móna believes in the potential future for hydrogen. It is a long-term burn but we look at projects in a 25 to 30 year context and are quite comfortable this proposal can be achieved.

Mr. Hourican mentioned that Bord na Móna has a windfarm in County Mayo and is developing another in the region. Does the board have planning permission for the 320MW turbines?

Mr. Hourican

Yes, we have. My colleague, Mr. Colm Ó Gogain, will deal with that matter.

Mr. Colm Ó Gogain

Bord na Móna has had the required full planning permission for nearly two years. However, there is a problem in terms of holding issues and connections to the grid.

How many turbines are involved?

Mr. Ó Gogain

Approximately 180 turbines.

The problem is one of connectivity to the grid.

Mr. Ó Gogain

The problem is that the current line is only 110KV and we need a 220KV line to operate at full capacity.

What are the ESB or other companies doing in terms of upgrading the grid?

Mr. Ó Gogain

Nothing at the moment. There must be major infrastructural development throughout the country.

Has Bord na Móna been given a date by which it might be in a position to move on this?

Mr. Ó Gogain

We are sitting on the best renewable energy project in Europe. It is the largest single site in Europe with a very good wind regime. We have been waiting two years for connectivity.

Is the Eirgrid Meentycat site located near the proposed new windfarm?

Mr. Ó Gogain

No, it is further north in Donegal.

My apologies, Mr. Ó Gogain is correct. I thought it was in County Mayo.

I wish to clarify that Mr. Ó Gogain is saying that Bord na Móna is ready to roll with a project which will produce wind energy but that it cannot get connectivity to the grid.

Mr. Ó Gogain

Yes, that is the current position. We had planned a phased development of the project.

When does the planning permission run out?

Mr. Ó Gogain

We are fortunate in that it runs to 2012. As stated earlier, we commenced the first commercial windfarm with 21 turbines ranging from 300KW to 450KW. Current capacity stands at approximately 2MW to 2.5MW. Technology has improved in the past 15 to 20 years. We have planning permission in a similar location but are awaiting connectivity. The grid connection process is difficult for us and others with wind projects to access.

Is that because the grid has not been upgraded? Am I correct in saying approximately €3 billion has been spent on upgrading the national grid?

Mr. Ó Gogain

There is an imbalance in the grid with regard to its ability to adapt to the variability of wind energy. That is a national issue. Ireland has more wind capacity than most European countries yet we are not targeting it. We will shortly achieve our 2010 requirement of 13.2% renewable energy. That is only the tip of the iceberg.

It has become clear from our meetings over the past few weeks with various stakeholders that we are not concentrating on rolling out the national grid to sites at which windfarms could be located.

Mr. Ó Gogain

Bord na Móna is currently exploring other locations in the midlands that have suitable wind regimes and are close to 110KV connections. However, the issue that arises is the inability of the grid to carry renewable energies of a variable type like wind.

Mr. McArdle

Bord na Móna is well resourced financially. Its debts are only €20 million and it has borrowing capacity of €127 million and reserves of more than €190 million. We are ready to move on this project and would like to go ahead with it. Part of our diversification is to move towards wind energy and to prolong the company's active life. We are financially ready to roll with the project.

Is Bord na Móna a semi-State body?

Mr. Hourican

It is a public liability company in State ownership.

What is the position of ESB?

Mr. Hourican

It is a statutory corporation.

Is Bord na Móna dealing with Eirgrid in terms of connections?

Mr. Hourican

One requires a good imagination to figure out the relationship between Eirgrid and the ESB. We are told they are totally separate entities but that ESB owns the grid. I do not know, if ESB owns the grid, how Eirgrid will make independent decisions that affect the rest of us. That is a challenge for the current owner of ESB.

I wish to clarify that Bord na Móna and the ESB are State-owned companies?

Mr. Hourican

Yes, they are.

Bord na Móna is ready to roll with and invest in the project. Ireland as a country needs the additional energy — it has been stated several times that we need approximately 6,000MW of power. Bord na Móna is ready to roll out 320MW over a phased period but is not getting co-operation from the ESB or the regulator for same.

Mr. Hourican

I had best be precise in my reply. ESB is an important customer for Bord na Móna in terms of feedstock for the two new power stations. Technically, Eirgrid is causing us the problem, not the ESB.

But Eirgrid is wholly-owned by the ESB.

Mr. Hourican

I am still trying to figure that out and have heard many stories about Chinese walls and locked doors in that regard. We are dealing with serious business issues and we must use every opportunity to sort out the problem.

Is the regulator providing any assistance in this instance?

Mr. Hourican

I alluded in my opening remarks to effective, efficient regulation. We are only now learning the regulation business in this country. The market is a small one. What applies to big markets does not necessarily apply to small ones. I have heard one must choose between Gate A and Gate B for wind connection into the existing grid. Bord na Móna has a foot in Gate A but could be waiting years for access to the grid under the current system. We are faced with the challenge of being a little more pragmatic and effective in moving things forward. Until a couple of sacred cows are slaughtered, we will not be going anywhere.

Is there, in Mr. Hourican's view, any joined-up thinking on the energy policies we should be adopting?

Mr. Hourican

There is a disconnect on this. ESB is an eminent organisation wishing to be an effective generator. Gas is the preferred option but that has led to a situation whereby more than 90% of our energy requirements, mainly gas and oil, is imported. It believes its remit, in terms of providing people with electricity, is an all-Ireland one and that is fine. However, the bigger picture is long-term sustainability of that approach. The safety and security of electricity supply for this island country should be based on how much indigenous energy we can produce while ensuring minimum damage to the environment.

We also need to reduce our dependency on fossil fuels.

Mr. Hourican

Yes. I do not wish to be critical of the ESB but we must bear in mind the bigger picture in terms of our role in the immediate to long-term future. It is Bord na Móna's wish that in 20 years' time all the new technologies such as hydrogen, fuel cell technology, bio-fuels, co-fuelling of peat with other less CO2 emitting fuels an so on, will play a role in ensuring we are not too heavily or dangerously dependent, as is currently the case, on imported energy.

Mr. Hourican stated that Bord na Móna would like to get involved in waste management, optimal disposal and so on. Is he speaking in that regard of incineration?

Mr. Hourican

One must consider incineration as an available and, in my opinion, unavoidable method of dealing with waste treatment. There is certain waste for which there is no other treatment but incineration. The problem then comes down to how one incinerates and the technologies and equipment employed to ensure safety of incineration. We must also address the disposal of ash following incineration. We already handle ash disposal from all the new power stations. We have applied for planning permission on a 5,000 acre site, approximately 20 kilometres west of Dublin, which will initially service domestic and industrial waste in County Kildare.

Bord na Móna will not shy away from the best solution provided it is acceptable and safe. As a company that prides itself on the quality of its technology and delivery, it believes that, in partnership with private sector companies, it could provide a safer and more acceptable solution to some of these problems, including incineration, than could anybody else.

Is Bord na Móna actively pursuing the possibility of constructing incinerators?

Mr. Hourican

We are taking a number of steps in that direction. We are commencing with landfill, composting, separation and treatment.

What does the board propose to do in regard to non-compostibles and non-recyclables?

Mr. Hourican

Looking to the future, it will be impossible to avoid moving towards incineration.

I am not necessarily against incineration. I am interested to know if this is a priority issue for the board and if it has made any move in that direction.

Mr. Hourican

We have no active projects on incineration.

We must be careful about what we say during our deliberations. Bord na Móna will be aware the issue of heat and energy derived from incineration is an important factor in many countries such as Denmark.

Mr. Hourican

It is in Finland too.

I visited Nyberg in Denmark some years ago, a city powered by heat and energy from an incinerator.

Mr. Hourican

There are several examples of such operations in Northern Europe.

Is Bord na Móna considering such an option?

Mr. Hourican

Ireland has climate issues in terms of the use of combined heat and power, CHP. The ESB attempted such a project in Lanesboro a number of years ago using glasshouses in which tomatoes and so on are grown. These projects are very much dependent on the commercial proposition and encouragement given. It is in this area that legislators and Government have a role to play.

Mr. Grogan

Peat could be used as the primary fuel to carry waste and could aid in the recovery of energy from waste. One can design a particular type of boiler to facilitate same.

That would involve co-fuelling of compost with all other energy-giving products.

Mr. Hourican

Yes, any source of energy. Most waste streams are also a source of energy.

Mr. Hourican

It is a matter of mixing the correct sources and primary fuels. We believe Irish fuelled peat is a primary fuel.

Does Bord na Móna own any generating stations?

Mr. Hourican

No, though we own the first ever commercial windfarm in Ireland. We do not currently own any solid fuel powered stations.

Is Bord na Móna, as a company, interested in developing such a concept?

Mr. Hourican

Yes. We power our own briquette factories and have some practical knowledge of the use of peat for power generation. We feed the three state of the art stations. We make no secret of the fact that we believe one of the next steps for us, in partnership with key operators in the private sector, is to move towards assembling a bundle of powergen capacity comprised mainly of renewables but also, perhaps, of peat and co-fuelled peat.

Does the board anticipate any difficulty in having such a project approved by the regulator?

Mr. Hourican

The existing peat arrangement for the next 15 years has been agreed. I do not believe the regulator would have any difficulty, in principle, with such a project.

Would Bord na Móna prefer to purchase an existing power station or to build one?

Mr. Hourican

Our preference would be to commence by purchasing one.

What is the CO2 emission per tonne of peat?

Mr. Grogan

For each tonne of peat consumed, approximately 0.9 tonnes of CO2 are emitted.

This has been an interesting discussion. It appears there is more to Bord na Móna than meets the eye.

It was mentioned earlier that the board's supply of peat will run out in approximately 20 years. I presume it is also trying to increase consumption. Given current levels of consumption and possible future consumption that supply could, realistically, run out in 15 years.

Mr. Grogan

The board will not be seeking an increase in consumption. The offtake is based on current configuration of power plants, which is fixed. There is a natural decline of peat fuels in other sectors of the board's business. For example, the peat briquette market, which also consumes 300,000 tonnes of peat a year, is declining at a rate of 5% to 6% per annum as people switch to convenience fuels.

Bord na Móna is amazingly resilient bearing in mind its peat supply will run out in 20 years and it is rightly looking to diversify. Its list of achievements and proposals is impressive. Is the board involved or investing in researching different fuels for co-fuelling or are they merely options for the future?

Mr. Hourican

Bord na Móna is involved in several projects. My director of environmental policy will deal with that question.

Mr. Ó Gogain

We have a long history in this area. We undertook a great deal of trial work some 20 years ago on short rotation composting of willow. We developed the machinery and carried out many field trials in that regard. I was only a young lad working in Bord na Móna at the time. The willow was burned in Cahirciveen power station, a small but convenient 5MW station. We have, in the past two years, moved back into this area as the need for co-fuelling emerges. We are currently carrying out short compositing willow trials, growing canary reed grass and hope in the spring, given suitable weather, to develop miscanthus. An ideal solution for us would be finding a product that will grow on bog that has not been cut out. Such a compatible product would mean we could co-fuel and transport the materials on our rail infrastructure. We are engaged in ongoing work in this area.

In regard to other bio-fuels, we have not done any work except to keep abreast of what is going on. In the absence of a suitable and attractive market environment, it is difficult to make decisions on it. We are examining the role of ground water and air to air heat pumps as well as the use of wood in heating systems. We would be confident and competent in all those areas.

If we are serious about the use of renewable energy, we need an infrastructure that will carry renewable energy as well as incentives for people to adopt this new way of thinking. Appliances that burn solid fuel or wood are significantly more expensive than those which use oil.

Mr. Ó Gogain mentioned that Bord na Móna was the first body to run a commercial wind farm in County Mayo. Am I correct in presuming that Bord na Móna cannot do anything on that site because it cannot get a connection to the national grid?

Mr. Ó Gogain

Unfortunately, not only Bord na Móna but anybody interested in harvesting wind energy has a problem with the grid infrastructure. We have other active projects, but what is frustrating is that we could bring them to the same stage as the County Mayo project, having invested significantly in them and then be powerless. If nothing else comes from today's proceedings I would hope for a recognition of the need to configure the grid infrastructure to optimise the use of renewable energies.

It would be interesting to hear Mr. Ó Gogain's opinion on the public image of Bord na Móna not being really "green" as peat is not a sustainable energy source.

Mr. Hourican

I am glad to get the opportunity to put this in perspective. Ireland has an abundance of peat. Bord na Móna was set up in the 1940s, and its precursor in the 1930s, to exploit peat for the benefit of the nation. Initially peat was used for domestic heating, with the development of sod peat and later milled peat for use in the generation of electricity. If I am correct, Bord na Móna owns approximately 8% of the peatlands of Ireland, which is between 92% to 93% of the commercial peatlands. I have no time to develop this point now, but it is about surface area.

The current policy of Bord na Móna is not to drain any new bogs but to work on the bogs that are open. Members might imagine it as a big cheesecake sitting on top of the land. We have started so we have to finish. Bord na Móna is committed to transforming itself from this base into a renewable energy company as well as providing solutions for environmental cleansing. I think that is a wonderful story.

Bord na Móna is a State-owned company which has been straining at the leash for several years to get going on these developments. We have received approval recently to become involved in these areas, where we believe we can make a major contribution to a cleaner environment. The company should not need to apologise for its origins. Some 20% of the energy needs of Germany are being serviced from its national resources of lignite and coal. In the 1970s approximately 38% of electricity was generated from peat, which is now down to 7%. We are quite happy to accept that burning pure peat is contributing to CO2 emissions. If we can create 320 MW from wind energy and start co-fuelling and stretch the peat instead of using it in its pure form, we are taking steps in the right direction.

I wish Bord na Móna the best of luck. It is very interesting to hear those remarks.

Will the company change its name to Bord na Gaoithe?

Mr. Hourican

It is funny that the Chairman should say that. On one of our off-site days when we were discussing our new mission, the image and name of the company were raised. We feel, rightly or wrongly, that Bord na Móna is associated with resilience. It is a solid former semi-State company still owned by the nation with a bright new mission and its image and culture willprevail over a long time. Bord na Móna will be agreener company.

I ask Mr. Hourican to give an overview of the company's activities, such as its solid fuel and the horticultural activities, as this will save the joint committee having to bring its personnel in on another date to discuss the annual report. Has Bord na Móna received any support from Sustainable Energy Ireland in terms of grants for research and development or has the company applied for such grants?

Mr. Hourican

Bord na Móna is now separated into cluster businesses. Mr. Seán Grogan is the director of peat and allied businesses, dealing with briquettes, horticulture and feedstuff for electricity. Mr. Grogan will give a brief resumé of what is happening in his area. Mr. Colm Ó Gogain is the director of environmental businesses, the bundle of new and emerging businesses with operations not only in Ireland but in the UK and USA.

While Mr. Ó Gogain is thinking of what he will say, perhaps he might outline in more detail at this stage what a suitable marketing environment means when telling us about his brief.

Mr. Grogan

I will deal first with Bord na Móna's energy business. This is a simple business which produces and supplies peat for feedstock to three electricity power stations at a rate of 3.1 million tonnes a year. Two of the power stations were recently renovated and recommisssioned by the ESB, one at Shannonbridge and the other at Lanesboro, both of them mounting 250MW. We have in place contracts to supply those stations for a 15-year period. The other power plant is a 125MW plant based in Edenderry which takes 1 million tonnes of peat per annum and is owned by a large German utility called E.ON. In addition we provide approximately 400,000 tonnes of feedstock for the production of briquettes.

The fuels business has a turnover of approximately €100 million per annum. Its three main business streams are as follows. The first is peat briquettes for residential heating which accounts for 200,000 tonnes of briquettes for household use per annum. In addition, Bord na Móna is the largest importer and distributor of bituminous coal and smokeless fuels for home heating today. We have an oil distribution business primarily for residential heating. That is quite a healthy business, but the market for solid fuels is declining at a rate of 5% to 6% per annum.

The horticulture business is primarily using peat as a growing medium in the production of plants, flowers and vegetables. There are two sectors, one of which is for hobby use and we export more than 90% of what we produce in that sector. We use a different metric measurement in terms of outputs. We produce and sell about 1.5 million cubic metres per annum. We have significant contracts in place with large multiples in the UK and it is a major logistics programme to distribute that quantity of material. We are the largest single volume carrier of any product out of Ireland. We also have a bulk terminal in Dublin Port, from which peat is exported to France, Holland, Italy, Belgium and Egypt. Those are three core businesses, each of them quite profitable. They are the cash cows to generate new business.

Mr. Ó Gogain

I will account for my stewardship in the environmental area. We specialise in two areas, odour control and wastewater control. We use biological solutions based on our own scientific research and have patents on all the technologies associated with them. We operate across the wastewater sector, from single houses to significant municipalities in the United Kingdom. We have technologies appropriate to all levels and compete on the open market. Odour control covers both the industrial and wastewater treatment sectors. We have cell or biological technology which deals with the odours in wastewater plants. Odours are also emitted by composting plants, for which we have peat-based technologies as a biofilter. While we are operating in many European markets, Italy is our key market.

With regard to our markets in the environmental area, we have a vibrant business unit in the United States which we entered seven or eight years ago dealing with single houses, small group schemes and wastewater treatment. We have a series of businesses in the wastewater, odour control and maintenance sectors of the wastewater industry in the United Kingdom. Many plants have been installed in the past 15 years but capital investment is in decline. There is an opportunity for investment in the upgrading of plants in which we are operating. We also have businesses in Ireland. Through our technical service department, we supply consultancy, monitoring and significant competency and laboratory analysis services to the market.

Research and development have been the key in getting us to where we are and they are ongoing because environmental standards are tightening all the time. The technologies we use are being upgraded and enhanced to meet the next generation of technology. Three weeks ago at the international wastewater exhibition in Birmingham we brought a membrane technology to the market and have great belief it has significant international capacity and potential. We have brought a successful and simple solution to the market. There is ongoing development as we grow these businesses.

A suitable market in the renewable sector was mentioned. Ireland is trying to get people to change their habits. Solid fuel burning was the old habit. Then with the increase in disposable income and the advent of dual income families, there was a move to convenience fuels such as oil and gas but, given the increase in CO2 emissions and the Kyoto Protocol obligations, there is a drift towards renewables. However, change will not happen unless people are encouraged because of the cost involved. Wood-based appliances are significantly more expensive. Hybrid and electric cars are also much more expensive. A reassessment of the excise and VAT duties on such products is needed in order that they can be competitively priced and become the norm. Unless there is significant consumer demand for them, their availability will reduce and prices will be high. A market must be created through subsidisation of appliances and recognising that biofuels are more expensive than conventional fuels. These products must be more competitively priced. A programme was launched some time ago under which there was an excise rebate in respect of 16 million litres of biodiesel but that is only the tip of the iceberg. A more significant initiative is needed to effect major change.

That has also come across clearly from other groups which have made presentations.

Mr. Grogan has stated the company was held back from getting involved in a number of the other renewable technologies. How was it restricted? With regard to why Ireland has not moved to date on coal firing in power stations, there was a difficulty regarding supply contracts to the existing plants. Is that still a problem? If the fuel is available and the economics make sense, is there a reason the plants could not transfer tomorrow to coal firing? If they could, what is the maximum level that could be attained?

Mr. Hourican

The Deputy asked whether we were held back. We had been seeking a new mandate. As it stood, our mandate was to exploit the peatlands. A semi-State plc is an oxymoron because we can only operate within our specific mandate. However, we have succeeded in obtaining a fresh one from the owner and have three long-term supply contracts.

Is that mandate from the Minister for Communications, Marine and Natural Resources?

Mr. Hourican

Yes.

Had Bord na Móna asked him for a new mandate?

Mr. Hourican

Yes, we had been asking for five years and finally succeeded in obtaining it.

What was the reason for not giving the company a new mandate?

Mr. Hourican

In some cases the wheels of decision-taking grind exceedingly slow. I am five years in this seat. I came in full of youthful enthusiasm and I am now almost worn out but, suddenly, I have a new lease of life because we have obtained it. I acknowledge the support of all concerned, including the two Ministers who have given us——

There was a release of new renewable energy.

Mr. Hourican

Yes. Therefore, we are not confined to extracting and marketing peat. We had limited success in coal and oil distribution, for instance, because we had bought companies in these fields. However, commercially, we have contracts to supply 3.5 million tonnes of milled peat for Powergen. These are take or pay contracts. If we had no alternatives to offer, we would be disadvantaged commercially. If our contracts had not been changed, we would make less money, while still being confined to selling peat. We would be much happier if we operated the stations or if we were free to experiment with the owner regarding co-fuelling which will displace our peat and, therefore, reduce our profitability.

If it is to be co-fuelled, Bord na Móna only wants co-fuelling with wood products——

Mr. Hourican

We would like to compete with the alternative suppliers. We would be happy to compete with others for those alternative fuels.

What prevents the company from bidding for supply contracts?

Mr. Hourican

Until we obtained our new mandate, we were not allowed to produce anything other than peat.

Is there a reason those three power stations could not move to coalfiring tomorrow.

Mr. Hourican

No.

How much could each of them produce?

Mr. Grogan

We have done initial work and, therefore, are not coming from behind. We did demonstration work on one of the power plants at the beginning of last year. Over the course of one week we put through approximately 4,000 tonnes of wood-based material with peat and suffered no deterioration in performance with mixtures of up to 25% of wood displacing peat.

Currently, the three power stations emit approximately 3 million tonnes of carbon per year.

Mr. Grogan

It is 2.7 million tonnes.

The current market price for carbon is approximately €25 per tonne.

Mr. Grogan

I see on the CER website that CO2 will trade at €16 per tonne next year.

It currently trades at approximate €25 per tonne, does it not?

Mr. Grogan

It depends on the availability of supply. The projection for next year is that it will trade at €16 per tonne.

There is currently a cost to the State of approximately €60 million in respect of carbon emissions from peat stations. Any switch will save us money.

Mr. Grogan

I do not take a different point of view from the Deputy. Technically, we can only switch from peat to co-fuelling. While we must, as a commercial body, consider the financial implications for the company, we are open to discussion with parties which want to participate in so far as we can facilitate this.

Could one go as high as 50%?

Mr. Grogan

I am told they have succeeded in achieving that figure in Finland.

Mr. Hourican

I wish to ensure Deputy Ryan is aware that we are as anxious as anyone to move away from any proposition which results in the emission of more CO2 than is necessary.

I am fascinated. I remember looking years ago at the medical and environmental control devices for which we could use peat. Is there not a real argument to be made that rather than burn it, we should diversify into global businesses in which we can provide environmental control systems? Given that it is a limited resource which we are depleting, the more we can co-fire the better able we will be to use peat in alternative technologies.

Mr. Hourican

The Deputy's question requires a complicated answer. While his suggestion is very laudable, it would be a difficult commercial proposition for us. Less than 50% of our turnover comes from peat and we are only beginning to see the effects of the change in the mandate. In 15 years I hope peat will represent a very small proportion of our activity and what we burn.

We will finish on that point. A meeting of my party is about to commence upstairs which I should attend for my own sake. I wish Mr. McArdle every success as chairman of the company. I also wish Mr. Hourican and the other members of the team every success. We are grateful for their most helpful and informative presentation and look forward to engaging with the company again.

I welcome Ms Louise McDonnell, chief executive officer of Ballina Chamber of Commerce; Mr. Greg Jackson and Dr. Helen McHenry of the Western Development Commission and Mr. Dara Calleary. The committee will hear a short presentation which will be followed by a question and answer session. I draw the attention of witnesses to the fact that while members of the committee have absolute privilege, the same privilege does not apply to those appearing before the committee which cannot guarantee any level of privilege to witnesses. Under the 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 realise we have left this very late and while I have a further meeting to attend, it is important we record what Mr. Jackson has to say. My colleague, Senator MacSharry, has been very forceful in seeking the extension of the gas grid to the north west. He has been making points here on the subject for a long time which it is important to reflect in the committee's report at the end of this module. We have Mr. Jackson's documents which will be considered as part of our report. We would like to hear briefly from him now.

Mr. Greg Jackson

Ms Louise McDonnell, chief executive officer of Ballina Chamber of Commerce, will introduce the section.

Ms Louise McDonnell

I thank the Chairman for inviting us to attend this afternoon. I am joined by Dr. Helen McHenry. It should be noted that Mr. Jackson is also a member of the Ballina Chamber of Commerce infrastructure committee as well as the Western Development Commission. Mr. Dara Calleary is The Chambers of Commerce of Ireland's regional development officer for the BMW region.

Our presentation focuses on the development of gas infrastructure in County Mayo with specific reference to a report commissioned by Ballina Chamber of Commerce to examine the feasibility of bringing a gas spur to Ballina. Mr. Jackson will deal with the specifics of the study but, first, Dr. McHenry will discuss the importance of a gas supply in a regional context.

Dr. Helen McHenry

I wish to indicate the benefits of a gas supply and its importance to regional development and consider current energy policy and its effect on the connection of western towns to the natural gas grid. It is important to note that County Mayo has endured significant energy deficits, with no access to natural gas supplies, and experienced significant difficulties with the electricity transmission grid.

Gas is an efficient energy source that reduces production costs in a range of industries, especially when used in a combined heat and power, CHP, system. It is the cleanest of all fossil fuels with the lowest greenhouse gas emissions. Its use gives better fuel quality. It is an ideal fuel for supporting the use of intermittent renewables such as wind energy. There has been a major industrial uptake wherever it is available.

A gas supply is important for regional development. As the gas grid has expanded, gas supply availability is now taken for granted in many areas and the lack of gas infrastructure in a town can become a disincentive to new investment. Industries without access to a gas supply have a restricted choice of supply options. They face higher emission charges and will face increased costs, thus becoming less competitive. As areas without natural gas supplies will find it harder to attract new industry, investment in gas infrastructure brings long-term benefits.

Manufacturing industry is particularly important in the west where there are both traditional manufacturing industries such as food processing and advanced manufacturing industries with clusters of pharmaceutical and health care companies, some of which are high energy users. These and other industries need quality, modern and efficient power sources as their energy supply is important to their competitiveness.

Good quality energy supplies are also important to attract other advanced manufacturers to the region. Natural gas supplies can allow us to attract such industries. They allow us to improve energy infrastructure quickly without some of the problems associated with planning for electricity transmission. They can also support generation in an area which can help improve the transmission system.

Under current energy policy, energy infrastructure is provided at arm's length from the Government by Bord Gáis Éireann, ESB Networks and ESB National Grid which operate in the market regulated by the Commission for Energy Regulation. The Western Development Commission believes policy for developing infrastructure should not be subservient to that for developing the market. Developing infrastructure is a policy issue and policy decisions should influence regulation.

Today we will mainly talk about gas distribution pipelines, those pipelines or spurs that bring gas to individual towns. Transmission pipelines are the longer, larger pipelines for transporting gas across the country. In 2003 the Commission for Energy Regulation published its gas distribution connection policy for new towns. The policy involves investment appraisal methodology for new towns connecting to the natural gas network. The appraisal method comprises a net present value test, the NPV test, of estimated costs and revenues. The NPV must be positive if a town is to be eligible for connection. Unless the policy stance changes, none of the western towns is eligible for connection to the Bord Gáis Éireann Mayo to Galway transmission pipeline.

Many of the towns which now have access to the natural gas network were connected when the criterion for assessing connection was not so strict. Towns in the west which up to now have had no chance to access natural gas infrastructure face stricter rules and higher hurdles in the investment appraisal of their connection. This is not equitable. Our concerns over this and the lack of access to a gas supply for western towns prompted the Western Development Commission to work with Ballina Chamber of Commerce on the issue and support the Enercomm study of the feasibility of gas connection for Ballina.

Mr. Jackson

Ballina Chamber of Commerce has been aware for some time that the towns in County Mayo do not currently qualify for connection to the gas line. We commissioned this detailed report, choosing the consultants Enercomm International because they had already worked for Bord Gáis Éireann and the CER. The consultants spoke to every significant industrial and commercial entity in the area to establish the likely demand and liaised with the CER and BGE as to standards for capital costs and a methodology for appraising feasibility. The report is robust and conservative by any measure. At a recent meeting with the CER it commented that we had identified the key issues that would have to be reviewed in the context of the connection of new towns to the gas network. Specifically, the report looks at current CER rules for measuring feasibility of connection of a new town and applies these rules to the case study of Ballina.

The CER methodology is central to our case. As explained by Dr. McHenry, the CER applies a return on investment appraisal methodology called NPV which sets revenue from commercial and residential users against the capital and operating costs of a new connection. It is normal and acceptable in commercial applications of this method to recognise revenues over the useful life of the asset, known as matching maturities. In the case of gas infrastructure, the useful life is 40 years. Despite the asset having a 40 year lifespan, the CER's methodology only allows for seven years' revenue from commercial and industrial clients in the calculations. When further considering that the CER defines industrial and commercial clients to include schools, hospitals, churches, Government buildings, hotels and offices — not exactly high risk sectors — the seven-year rule seems bizarre. This guillotine approach is clearly inappropriate and central to the reason new connections in County Mayo are not deemed feasible under current rules. The seven year rule effectively suggests the commercial life of any subject town would completely stop in seven years and as of midnight in year seven there would be a commercial armageddon and no further revenue would accrue from the gas line from this sector, which is completely irrational. The British gas market, when appraising new infill towns, will use a timeframe of up to 20 years for industrial and commercial clients.

These inappropriate rules raise the bar to an impossible level. In any commercial analysis many of the towns in County Mayo would qualify, yet it is impossible to do so using the current method. Clearly, the feasibility method is unfair vis-à-vis other towns connected prior to the introduction of these rules in 2003. Examples are Clara in County Offaly and Virginia in County Cavan. The current rules are too strict and may restrict the market in the long term.

The key findings of the Enercomm report are that the sharing of operating costs with a cluster of towns, when several towns come together to connect to the pipeline, makes this more feasible. It would make sense for Ballina, Westport, Castlebar and Claremorris to connect at the same time. It is a clear finding of the report that the connection of Ballina to the gas network would be more than viable using a rational viability method and assuming the sharing of costs.

Corrib gas is a natural resource that will bring benefits to the whole island. County Mayo is proud to be the bearer of this wonderful asset but we expect a fair and viable distribution of this resource once it comes ashore. Doubling the industrial and commercial timeframe from the current seven years to 14 would render theBallina case study viable while still being significantly less than the 20 years used in the British model or the 40 year lifespan of the asset. Ballina, Westport, Castlebar, Claremorris and some other towns should qualify for connection. This would benefit all other towns throughout the county.

I thank Ballina Chamber of Commerce and the Western Development Commission for producing this report. An entire area of the country is being ignored when it comes to natural gas supply. Without any Government subvention, a distribution line connecting by way of a spur to these towns would be self-financing and the only factor preventing this is the unusual criterion whereby we must calculate the benefits over a seven year period.

Mr. Jackson

It is slightly less. A seven year term is used but because it is a start up scenario, there is an inevitable ramping up period while everyone gets connected. This could take up to three years. Effectively, only the last four years of full usage are taken into account in revenue terms. By the time everyone is connected, four years of revenue must cover all the costs of an asset that will last for 40.

In terms of international best practice, Mr. Jackson mentioned that the UK has 20 years. Does any country have a seven-year rule or less?

Mr. Jackson

Not that we are aware of.

Is Mr. Jackson saying there will there be no subvention or that closer to the time €20 million may cover it?

Mr. Jackson

There is no question of that. This is done by commercial analysis. All the costs as recommended by Bord Gáis are taken into account in this report and it is estimated that it will cost €120,000 per kilometre to put this distribution line into the town of Ballina. The consultants add up all the costs and in measuring the revenue they are being very conservative. The DKM report for Letterkenny assumed a certain level of usage per head of population of 200 therms whereas the Ballina one assumes 150 therms. Everything is taken into consideration. One simply applies the revenue one gets to the cost of putting in the facility. If it achieves a certain return on investment it makes commercial sense that it should proceed. If costs are measured over the appropriate term, it is viable and needs no subvention.

When the members of the board of Bord Gáis were before the committee I asked whether there were any plans apart from building the line supplying towns in the region. At that time the answer was "No" because of the commercial mandate of Bord Gáis under the Gas Acts. Mr. Jackson seems to be suggesting that has changed and that he has used its costings. Has Bord Gáis merely gone through the motions of costing the project in the hope that nothing will proceed, or is there a genuine wish to proceed? While there was an announcement in principle by Government in the past to continue the line through Sligo and Donegal, I heard a rumour that a recent study done by DKM in Letterkenny has hinted strongly that based on cost the Letterkenny pipeline should not proceed. Is it possible that Bord Gáis is going through the motions to cover the fact that it has no intention of going to Ballina, much less Sligo and Letterkenny and onwards?

Mr. Jackson

It is my understanding that the hands of Bord Gáis are tied. If it has to abide by the seven-year rule it will not happen because it will not be viable. When the initial policy was presented in 2003 various submissions went to the CER regarding changes that might be made, some of which were from Bord Gáis. Dr. McHenry will refer to that. Nearly all the submissions suggested that the seven-year rule was insufficient and that it would be more appropriate to use a ten or 15-year rule, although international standards set it at 20 years. It is my understanding that Bord Gáis would be delighted to proceed under those circumstances. It would make commercial sense to do so because there would be a return on investment. It is not possible for anybody to make a return on investment if it is truncated to seven years.

From what has been said, it seems no subvention would be necessary. It is something we should strongly recommend, particularly if the regulator is here tomorrow. The committee knows my view. In the context of the national spatial strategy, whether or not subvention is necessary, I support the extension of the grid onwards to the other major centres in the interest of balanced regional development. I know the Chair is a Cork man, but the last time the committee met I stated that we have a resource in Mayo and, like the great British colonialists, we are plundering this resource in the west and bringing it back to the motherland in Cork. We want to get away from that.

Credit is due to the people of Ballina and the Western Development Commission for producing this report. It is an example that could be followed by others. I hope that when the regulator is here tomorrow this committee will raise those questions and recommend that when the report is published this should proceed, with subvention, to Sligo, Letterkenny and the other areas.

We have all expressed views on this area of our country which has been disenfranchised in terms of the available resource. We hope to correct this deficit in our report. Whether it becomes national policy or not will be a matter for the Government of the day.

There is one difference here. What company would back a proposal if it is only allowed to project its income for seven years? I do not know which economist came up with this but it is ridiculous.

Who came up with the seven-year rule?

Mr. Jackson

Various submissions were made to the CER.

Will Senator MacSharry raise that tomorrow?

I welcome the members of the delegation. This is a very impressive report. Ballina and north Mayo should be grateful to them for making the effort to put this kind of proposal together for the committee.

The seven-year rule was not introduced by way of statutory instrument from the Government. It is within the remit of the existing energy regulator who, in effect, has laid this down. I agree with my colleague on the seven-year rule. Would it be advantageous if the costs were shared with other towns or would it still not be possible to comply with the seven-year rule?

Mr. Jackson

Under the existing methodology if the cost is shared between two towns the negative result of the test is approximately €1.4 million. If the industrial and commercial term is increased from seven years to 15 years that would have a positive impact of approximately €1.6 million. That alone would make the connection feasible. The sharing of costs between the towns is still essential. It costs approximately €350,000 for one cluster per annum, which is a significant cost over the term. If that is shared between three towns it is cut by one third.

There have been major debates, not here because it is not possible, but in the House and also on the streets regarding Corrib gas and the five Mayo citizens who were jailed. One aspect of that debate was infrastructure for Mayo. One could examine the infrastructure for the north of England and Scotland and the famous Shetland deal which I remember discussing on local radio a couple of times. Are there any avenues whereby Government and the various companies promoting the Corrib field could provide special supports or subventions for Mayo, Sligo, north Galway, the whole north-west Connacht region in return for the infrastructure coming ashore in Mayo? A support group in the Erris area has been highlighting what could be done for the district but perhaps people have not been ambitious enough in lobbying for some very fundamental infrastructural support for Mayo. This issue arose when we were dealing with Statoil. Has the chamber had any discussions in that regard?

I was on holiday in Westport when the census figures were published and noted the increase in population. I know it has been a hard battle for groups like the chambers of commerce to develop the economy of Mayo and perhaps the Government has never done enough for that part of the country. Is there any way in which there could be an infrastructural payback in support of Ballina, Castlebar and Westport and all the surrounding towns and districts, including the Erris area, in return for this major infrastructural development coming ashore in the region?

Ms McDonnell

It has always been the policy of the Ballina Chamber of Commerce that the people of the region should benefit from this natural resource which is located off the coast of our county. We wanted to put the feasibility study in place so that rather than merely saying, with a nod and a wink, that it would be very nice to bring the gas to Ballina there could be an educated argument setting out that we do not need a subvention, given the costs of the project and the payback. As it stands, commercially it is a viable option, and the people of the county should benefit from the natural resource off our coast. It is not good enough that Bord Gáis is building a pipeline which by-passes all the towns in the region.

I apologise for being absent for much of the debate.

The Deputy had to be in the House.

I could not be in two places at the same time. Perhaps bilocation should apply to the gas pipeline as a viable option.

We spoke previously in this committee about the activities of regulators. I said there are more regulators here now than was the case in the southern states of America after the American Civil War. I am not sure they are of great benefit because it appears they are a soft go-between between the Minister and the general public. Certainly they are not accountable to the House, and they do not appear to be accountable to the Minister.

Two points should be borne in mind. First, in the construction of any resource, regardless of the way the gas is brought ashore or the route it takes, one can be assured if there was a resource off the east coast, it would not travel inland without visiting some of the towns. As is the case with Kinsale gas, a resource found off the coast of Cork would not be allowed to travel through the country while by-passing all the towns in the province, nor should it. Equally, the seven year measurement is not relevant because, even if there were no resources offshore, in the event of there being abuse of gas and an abuse of interconnectors in the future, it is necessary to have a network linking all the towns, as is the case in the rest of the country. If this does not happen, the economic development required in the region cannot and will not take place.

I support my colleagues in that regard. I speak as someone who was born not too many miles from the town of Ballina. It is sad that so much debate had to take place on an issue that appears to be so simple. It is not as if one has to be a nuclear physicist to understand the issue. All the towns in my area have natural gas and the pipeline is already in place. There is a proposal to have an interconnector bringing gas from Russia at some stage. All the towns in the country should have equal access to this gas, particularly if it is being brought ashore at one point. If it is being piped to a central location, it is obvious the towns en route should benefit from it. I strongly support the proposal and we should do everything possible at this level to resolve the issue.

Has the regulator received a copy of the report?

Mr. Jackson

We met the regulator and presented him with a copy.

Given the important work that has been carried out, members of the committee will require more time to study the matter. I thank the representatives for appearing before the committee. We are all conscious of the deficit in infrastructure. As my colleagues said, this will be reflected favourably in our report to ensure there is a fair distribution of gas throughout the country.

The joint committee adjourned at 5.55 p.m. until 10 a.m. on Wednesday, 16 November 2005.