JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT (Sub-Committee on Job Creation Through Use of Renewable Energy Resources) debate -
Tuesday, 20 Jan 2009

Energy Crops: Discussion with IFA.

Chairman

We will hear a presentation from the Irish Farmers Association on the potential for growing and using energy crops in Ireland. I welcome Mr. Pat Hennessy, chairman of the IFA farm forestry committee, Mr. J. J. Kavanagh, IFA south Leinster vice president and renewable energy spokesman, and Mr. Seán O'Leary, IFA Munster vice president and climate change spokesman. I welcome, in the Visitors Gallery, Mr. Thomas Ryan, Ms Geraldine Sullivan and Ms Elaine Farrell, who is very well known to us as Oireachtas representative with IFA. We thank them for facilitating us this morning.

We are under a time constraint as both today's sessions of the Dáil are of historic importance. For that reason, we politicians must not be long-winded. I am sure that is good news for the witnesses.

Members of the committee have absolute privilege but the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official, by name or in such a way as to make him or her identifiable.

Mr. J. J. Kavanagh

I thank the committee for giving the IFA the opportunity to make this presentation. My area of responsibility is the renewable energy sector and the biomass and renewable transport bio-fuels area. My colleague, Mr. Seán O'Leary, Munster vice president, is responsible for the areas of microgeneration and anaerobic digestion and Mr. Pat Hennessy, IFA forestry chairman, covers the forestry area.

The economy, after a period of growth, rapidly deteriorated in 2008 and fell into recession mid-way through the year. There have been many contributory factors to this decline. The country faces a period of uncertainty. However, it is clear that economic recovery will depend on revitalising and expanding the productive sector. Renewable energy production offers an opportunity to expand employment, particularly in rural areas, while addressing energy security concerns.

In the midst of economic downturn Ireland faces a significant challenge in meeting environmental commitments on renewable energy generation and emission reduction. The current EU proposal is that 16% of all energy consumed in Ireland must come from renewable sources by 2020. In addition, under the Kyoto Protocol, reductions in greenhouse gas emissions are required by 2012. Ireland has a target of 62.8 million tonnes of CO2 emissions by 2012, with further reductions required by 2020, under EU proposals. In 2007, Ireland's renewable energy use was approximately 3.3% of the total while emissions were 68.2 million tonnes of CO2 , or 13% above the 2012 target. The target has been set by Ireland through the EU proposal that 16% of all energy consumed should come from renewable sources by 2020. However, the energy White Paper has set its own independent targets for renewable energy consumption, resulting in an overall target of 18% by 2020. The White Paper targets are set out in detail in the printed presentation, copies of which have been circulated to members of the committee. The target for use of renewables in electricity is 40% by 2020 while the achievement in 2007 was 9.4%. The target for heat is 12% by 2020 while 3.4% was achieved in 2007. The transport bio-fuel target is 10% by 2020 while we achieved 0.5% in 2007. Our target for 2020 is 18% and, so far, we have achieved 3.3%.

In recent years, there has been growth in the production and use of renewable energy. In 2007, the percentage of energy consumed from renewable sources was 3.3% of the total. Utilisation remains low, particularly of bio-fuels in transport. In 2007, only 0.5% of total transport fuels used were bio-fuels. Through the efficient utilisation and management of the natural resources available, the agriculture and forestry sector has significant and positive contributions to make towards the achievement of Ireland's target for renewable energy and emission reductions. The sector has particular potential for the generation of renewable energy. Managed correctly, renewable energy production will not adversely affect food security or cause volatility in food prices.

Mr. O'Leary and Mr. Hennessy will expand on the opportunities that microgeneration, anaerobic digestion and forestry have to offer. The IFA proposes that, to maximise the contribution the sector can make, support structures must be put in place to facilitate and encourage renewable energy production. In addition, a number of overarching issues must be resolved to create an equitable policy environment within which the contribution of agriculture and forestry is actively measured and recognised. Bioenergy is a new market, requiring investment in infrastructure, specialised equipment and training to create a viable market. An integrated programme of funding is needed to create confidence in the supply chain.

Biomass offers farmers the greatest opportunity in the context of a renewable electricity target. To achieve a 30% co-firing target alone will demand an estimated 1 million tonnes of biomass per annum. If the 2020 target of 8 MW was to be achieved using specialised energy crops it would demand in excess of 400,000 hectares and there would need to be a significant increase in biomass resources.

The White Paper has set out a minimum heat penetration target of 5% for renewables by 2010, increasing to 12% by 2020. Taking into account the 30% co-firing target in peat stations by 2015, the tables which we have provided to members give an indication of the land area required if specialised renewable energy crops are to be used to satisfy these targets. The dramatic growth in emissions for the transport sector, allied with our increased dependence on import energy, has been a key driver behind the EU transport bio-fuel targets. The potential of road transport bio-fuels to abate greenhouse gases has been widely contested. However, EU research has clearly demonstrated that employing up-to-date technology and efficient design of modern processing facilities, using crop residues to produce combined heat and power, will achieve greenhouse gas savings of up to 90% from ethanol and wheat, 60% from pure plant oil, PPO, and 40% from biodiesel from oilseed rape.

The limited amount of land currently available for feedstock will be a factor. However, moving to second and third generation will substantially increase feedstock and it is critical that first generation technologies are built in order to allow a seamless move to newer technologies when they become commercially viable.

The energy White Paper has a transport bio-fuels target of 5.75% market penetration by 2010, increasing to 10% by 2020, as shown on the graph. The main production of indigenous bio-fuels has been of pure vegetable oil from oilseed rape, some has come from bio-diesel and small volumes of ethanol have been produced from whey. No commercial production of ethanol from energy crops has happened as yet. Oilseed rape production reduced from 7,000 hectares in 2007 to 4,000 in 2008, a dramatic increase in world cereal prices being the key influencing factor in this swing. It is likely that there will be a bigger swing to oilseed rape production in the medium term but prices will be a key determining factor. Oilseed prices tend to follow crude oil prices.

The bio-fuels mineral oil taxation relief is a bio-fuel excise relief package, valued at €200 million and targeted at placing 163 million litres of bio-fuels on the Irish market by 2010. This represents a 2.2% penetration of the transport market and would abate 1.2 million tonnes of CO2 over the lifetime of the scheme. Ireland's transport sector recorded a 7.2% growth in energy consumption during 2006 and a similar 7.1% in energy related emissions, making it the fastest growing sector in this regard, with €5.5 billion spent on oil products to fuel the transport sector. The road sector is 99% dependent on imported fuel and oil freight transport is the biggest contributor to growth in energy use.

Using first-time technologies, a 5.75% substitution rate represents a significant opportunity for farmers. It is estimated that every 1% substitution of road transport fuel will require approximately 32,000 hectares of tillage and production on 1,800 hectares to achieve the energy target in the White Paper. The use of recoverable vegetable oil and beef tallow would reduce the requirement by approximately 20,000 hectares. There are considerable opportunities in the renewable energy sector.

My two colleagues will now present their papers on micro wind energy generation, anaerobic digestion and forestry.

Chairman

I ask the delegates, Mr. Seán O'Leary and Mr. Pat Hennessy, to summarise their papers because members would like to ask questions. The presentation given to us is good and will help us to understand the matter.

Mr. Seán O’Leary

I again thank the Chairman for giving me this opportunity. My responsibility relates to climate change and I know members have received the policy document. My presentation will focus on job creation, something in which we all have an interest, given the current economic environment. I will speak about anaerobic digestion and micro wind energy generation.

It is estimated that in the next decade over 80,000 jobs will be created in Germany in the anaerobic digestion sector. There will be a reduction of 100 million tonnes of CO2 and a 16% increase in the supply of electricity produced by anaerobic digestion. This is due to forward thinking on the part of the German Government and something we should consider, as there is little joined-up thinking in Ireland. Departments have different responsibilities and we could examine this area to formulate an overall policy.

The Wind Turbine Manufacturers Association in Denmark analysed job creation in the wind energy sector and found that 22 jobs were created by each megawatt of installed capacity: five jobs are created in installing the turbine and 17 in manufacturing. These areas should be focused on. We estimate that there are 6,000 initial strategic locations in Ireland where farmers could establish micro wind turbines in a way that was not visually intrusive. We have proposals in the document that deal specifically with planning difficulties. We could deliver enough electricity to meet the demands of 32,000 householders each year, thereby reducing emissions by the equivalent of over 2 million tonnes of CO2 over the expected life of the wind turbines, which is 20 years.

The strategy provides a significant opportunity for farmers to meet their electricity needs and sell the excess to the national grid. Prior to Christmas ESB customer service made an initial offer of 9 cent per kw/h as a domestic micro generation tariff. The offer has been confined to domestic customers which excludes 12,000 IFA members who receive electricity from Bord Gáis. This sector is deregulated. An offer that automatically shuts out the potential of the agriculture sector is to be regretted. The Commission for Energy Regulation is taking the views of stakeholders, on which the committee could focus. It is planned to spend over €11 billion on renewable energy but we will fail if this offer is confined to domestic customers of the ESB. There are other anomalies relating to planning and so on.

We now operate a single market on the island of Ireland. The existence of two sets of incentives north and south of the Border is to be regretted. In the United Kingdom microgenerators receive two payments. One is to the producer for displacing conventional power generation and fulfilling the renewable power obligations of power companies which are responsible for emissions. This is paid on all the electricity produced by the microgenerator. Currently, this payment is 5 pence per unit and will be doubled in March this year to 10 pence. In addition, the microgenerators receive a payment for electricity exported. This payment is currently 7 pence per unit and will also rise to 10 pence in March, giving a total payment of 20 pence per unit. A new Act in the United Kingdom will introduce a refit tariff of 20 pence per kilowatt hour. This ties in with our proposals. We seek a refit tariff of 22 cent per kilowatt hour, similar to that applying in the rest of Europe. We also seek a number of other incentives, including a doubling of the existing capital allowance reliefs to €50,000 and smart and net metering which are vital if this proposal is to get off the ground. The cost of feasibility studies and application fees for grid connection are disincentives to those who want to get involved in the sector. I hope the committee will look at this issue.

We are very positive about the microgeneration sector and anaerobic digestion. It ticks a number of boxes. We must reduce our greenhouse gas emissions and dependence on fossil fuels. We also have renewable energy targets and believe this would be a cost effective way of achieving them. In the present environment we are not looking for money up-front. We are seeking incentives, particularly in the form of a refit tariff and the easing of planning restrictions. Farmers will always take opportunities which are presented to them. We are not looking for anyone else's money. We want to invest our own and provide a long-term sustainable future.

Mr. Pat Hennessy

In Ireland 700,000 hectares, or 10% of our land, is covered by forestry, of which 40% is owned and managed privately. Currently, about 14,000 farmers are involved in forestry and 16,000 jobs are directly linked to the sector. The potential for job creation in energy supply is massive. Research in other countries shows that for every job created in the fossil fuel sector we can create 39 jobs in the wood energy sector. Teagasc research shows that 40,000 hectares of farm forestry is ready for thinning. This land was planted in the late 1980s and early 1990s. This forestry could produce 2 million tonnes of biomass for the energy market. If converted to quality woodchip, it would have a current market value of approximately €150 million and heat 3,000 hotels and leisure centres. I urge the committee to look at the many hotels in County Donegal which have converted to woodchip and are saving up to 50% on their heating bills.

There has been significant growth in the biomass sector in recent years. Sustainable Energy Ireland estimates that the use of wood biomass increased by 300% in 2007. This growth has mainly focused on the wood pellet market, while the woodchip market has been slow to take off. This is due to the lack of scale in the local woodchip market and the slow development of woodchip facilities. The firewood market is also becoming very important. COFORD estimates the available wood biomass resource will reach 3 million green tonnes by 2015. The increase in production will mainly be sourced from the expanding private forestry sector. Farmers need to be supported through an integrated biomass mobilisation scheme to bring this resource to the marketplace. The current level of support for the road scheme, with road grants opening and closing every few months, is not very good for developing the sector. We also need drying and storage areas for timber and woodchip.

The major barrier to the development of viable on-farm energy enterprises is the lack of scale in the local market. Typically, Irish towns do not currently have the scale of woodchip installations to sustain a woodchip supply enterprise. There are concerns that the lack of available credit will impede the development of the commercial wood energy sector which is based predominantly on the ESCO energy supply company model. This is where a company instals machinery, supplies the woodchip and charges the customer on a kw/h basis.

The private sector has been the driver of the wood energy sector, supported by the Government through schemes such as the greener homes scheme, the reheat scheme, etc. The Government needs to take a stronger lead by expanding the heat fuel conversion programme to include all public buildings to create the perception that both it and local authorities are behind the bioenergy market. The slowdown in the construction sector provides an ideal opportunity to divert skills to develop a sustainable indigenous bioenergy sector in Ireland. There is potential for job creation in forest road construction, logistics, wood harvesting, wood management and wood fuel production and its associated services.

Ireland spends in excess of €20 million per day on imported fossil fuels, with minimal downstream benefit to the economy. This is no longer acceptable when we have the resources and technology to meet some of our energy requirements and create sustainable, local, green collar employment opportunities. Forestry is here to stay.

Deputy Dara Calleary

I welcome the delegates and compliment them on their document, particularly the one we received before Christmas. On the broad issue of renewable energy, is the IFA willing to become involved as a partner? I noticed the phrases "microgeneration" and "non-visually intrusive". Unfortunately, wind turbines are visually intrusive, whatever way they are designed, particularly those outside the microgeneration sector. The delegates mentioned barriers but one of the greatest barriers is planning and our resistance to turbines and other things we regard as visually intrusive. Is the IFA willing to become involved locally in projects carried out by reputable operators who have done their best to follow the models recommended by the Western Development Commission and others? Will it support these projects in the face of objections from some of its own members which may have more to do with the fact that the IFA is not promoting certain developments?

How does the ESB customer service offer of 9 cent per kilowatt compare with that in the rest of the European Union? If the delegates do not have the answer today, perhaps they will get back to members with a reply in due course. They also said they had identified 6,000 strategic locations across the country in which farms could establish microturbines. Can they provide the sub-committee with details of these locations in order that we can feed them into our work?

Deputy Mary Alexandra White

I am delighted the IFA has attended this morning. Have the delegates identified the percentage of farmers who might want to take part in biomass or biogas projects? I am particularly interested in wood crops and short rotation coppicing with willow which gives an extremely quick return for farmers, particularly on marginal land and land that is boggy or swampy. I know there is a very good project in the north east. Has there been any input from the IFA membership on this, particularly regarding short rotation crops? We need to get green technology jobs going quickly. We must ensure they are sustainable and give better prices to farmers in the green sector.

On bio-fuel, I drove here this morning in my pure plant oil car, which is powered by Killure Eco Cereals in Kilkenny. Much research is going on relating to second generation bio-fuels, particularly lignocellulose but we must be cognisant of the fact that there is competition between food and fuel. Teagasc and Mr. Bernard Rice did much work in this regard but second generation bio-fuels could allow us have a large percentage of tillage and use weeds and grasses for lignocellulose technology. I am interested in hearing the views of the delegates on this issue.

Deputy Damien English

I thank the delegates for their presentation, which presented food for thought. I may come back with more questions later but I will first give my initial thoughts. The IFA has done much research on this and leads the field, despite a lack of help that I perceive. This country is way behind where it should be in this sector but the delegates are doing their bit to move us along; they are only asking for encouragement.

In terms of market analysis of the end product, what drives the IFA's decisions? Are they based on evidence of what will be purchased or on what is easier to grow? Is the ease of entry to the market, with a lack of support and grant aid, an issue in this regard? We have spoken much of woodchip but I am not convinced it will be as successful as is expected from the point of view of the consumer. Some people have difficulty keeping woodchip dry in their houses and it has become expensive in the past year. I am not convinced that we are on the right road with this and wonder if market analysis has made the IFA concentrate on this. I think the IFA may have gone in the direction of woodchip because it was not encouraged to take other roads.

We carried out a quick study in Goesting last year and there are good initiatives in Austria where recycled wood, rather than purpose-grown wood, is put to good use in large district heating systems. Perhaps that should be done here. Instead of the IFA encouraging the selling of woodchip to individual houses, it might be better and easier to manage if it were sold to large district heating systems. We must ensure there is proper demand for the product.

We found the growing of crops, such as grass and corn, to create bio-gas for electricity very interesting. It struck me that this would be suitable for Ireland, given traditional farming methods here. What are the thoughts of the delegates on this issue?

I have raised with professors from Dundalk Institute of Technology the matter of the type of wood that farmers were advised to grow 20 to 30 years ago. There is now a large stock of this but what kind of quality does it have and to what use is it best suited? I assume that at the time Coillte and Teagasc advised IFA members to grow certain types of wood. Did we grow the right kind of wood and are we growing the right wood for the future? Who is advising the IFA? I understand the delegates may not have all the answers today but we can get them on another occasion.

Regarding wind generation, when the delegates refer to microgeneration I presume they mean turbines that are larger than domestic generators. Could the IFA partner a manufacturing company to supply wind turbines and associated equipment at a good price? Such things are very expensive and when one includes mortgages and loans one sees that economies of scale would be beneficial.

I am concerned about over supply in the wind sector. This does not apply so much to microgeneration but to large-scale production; plans far exceed what this country can accommodate without exporting some of the energy, which we cannot do. Even if we could export energy we might end up producing too much. I fear that people will be caught out by spending much money on plans to produce wind energy and end up unable to sell it. This may not occur at the micro level but people operating at the middle level could get caught. What are the thoughts of the delegates on this issue?

Deputy Michael Fitzpatrick

I would like to hear how farmers are adapting to this new scene. Farmers are very adaptable and have changed over the years from dairy to beef production and so on. How are they adapting to this?

Mention has been made of joined-up thinking at Government level. How much joined-up thinking have we had at grassroots level among farming groups and rural communities?

The IFA proposals involve a huge undertaking for farmers. The cost of getting involved is high and one wonders how it can be made to pay. How is the IFA dealing with that question?

Mr. J. J. Kavanagh

I will ask Mr. O'Leary to deal with the first lot of questions.

Chairman

I know the IFA has a very good research unit. Perhaps it could send the committee answers to questions we do not have time to address. Some of the information sought sounds very technical. Ms Elaine Farrell is in constant contact with us and will refer back to us.

Mr. Seán O’Leary

With regard to the position in other European countries, the United Kingdom will shortly introduce a refit tariff of 20 pence per unit. In Germany the tariff is approximately 22 cent. In the document we produced before Christmas we sought a refit tariff of 22 cent per kilowatt hour because that is what pertains throughout Europe and it has provided an incentive in other EU countries. The technologies have been available for many years. We are not talking about new technologies, as might be the case in other sectors. These are existing technologies which are constantly being improved.

The bases for choosing strategic locations are usage on the farm and the scale of the farm. To make a microgenerator workable a farmer would install it primarily for his or her own use and sell the excess, rather than investing in a system to produce electricity as a business venture. The most important use of a microgenerator is to reduce the farmer's costs. The ratio of own use to sale of energy will change from place to place but that is the basis of the system. We are not talking about a massive business. The production of energy is secondary to farming. When I spoke of the production of energy for 32,000 households, I was thinking of somewhere like Galway city. There is that potential.

With regard to location, suitability criteria are not nailed down. Pig farms, for example, would be ideal for anaerobic digestion. A dairy unit of more than 60 or 70 cows might be suitable. A larger livestock farmer might also consider investing in one. We have the raw materials in the form of land and wind. Other factors will determine who can take advantage of them.

The question of planning permission was raised. Every producer would not have a big wind farm. We are pitching the scheme at the level of two or three smaller turbines. Deputy English referred to existing wind farms which have too much output and are in difficulty. A gentleman from County Mayo contacted me two or three days ago. Having made the investment, he ran into problems. People considering investing should contact bodies such as ours in time and take all available advice. It is important to investigate the possibility of grid connection, for example. Microgeneration has an advantage in this regard because it can work off the existing system rather than putting new systems in place.

Mr. Pat Hennessy

Deputy English asked about types of wood and the use of recycled wood. We do not recommend the use of recycled wood. Problems arise in systems which use recycled wood because it can contain preservatives and paints. Accordingly, one cannot guarantee its consistency.

We grow blanket spruce across the country. We have been growing 30% broadleaf spruce since the early 1990s but it is much slower to grow. Therefore, hardwoods will not come on stream for a number of years, whereas spruce thinnings are coming on stream now. The quality of our spruce for construction purposes is as high as anywhere else in the world and we have the potential to grow it faster than anywhere else.

Mr. J. J. Kavanagh

We were asked how farmers would adopt the proposals. They are looking for opportunities. The green sector enjoyed good prices in 2007, although it was decimated in 2008. If we could invest in some of these crops, it would steady the market and farmers would look at doing so if there was a return on their investment. There is also a huge problem with security of supply, as we are very dependent on imported fuels. Last week people in Lithuania would have been very cold because their gas line was turned off. We should not leave ourselves open to such problems. We should have security of supply, at least for ambulance and fire services.

We lack a road map on how to get to where we want to be. Therefore, it is important that the Government provide one, showing the way forward for ten years. As a farmer considering investing money in biomass which is slow to establish and yield returns, I need a ten-year view of how the industry will go. An entrepreneur hoping to invest would also need guidance. The oil price has fluctuated from $137 per barrel last year to $40 today. Volatility in the market will kill the sector if we do not have a road map and the right structures in place. I do not see oil staying at $40 per barrel because we do not know how long supply will last.

Chairman

I thank Mr. Kavanagh.

Mr. J. J. Kavanagh

I apologise for rushing and would welcome more debate on this matter at another time.

Chairman

I have two questions, to which Mr. Kavanagh can reply at a later date. In Güssing the wood was used and the residue taken back by farmers and utilised again. What is his view on this? Can he furnish us with a list of crops he recommends as the most advantageous for the purpose of meeting the targets? We hope to have the report in October or November. Therefore, we will invite Mr. Kavanagh back again for a more extensive and comprehensive discussion. While his presentation was comprehensive and there is a lot of interest in the subject, today's discussion has not been helped by our time constraints. I hope we will achieve the integration for which he calls.

Deputy Damien English

On a point of clarification, I did not mean to refer to recycled wood but the unused part of the wood when products are made.

Mr. Pat Hennessy

There is no such thing as waste in wood — every particle and fibre has a use.

Deputy Damien English

Yes

Mr. Pat Hennessy

Residues from sawmills are useful for wood pellets.

Chairman

I thank Mr. Hennessy, Mr. Kavanagh, Mr. O'Leary and all their colleagues in the Visitors Gallery for their assistance in the sub-committee's deliberations. This is an area that has many potential advantages for the rural economy. It will increase agricultural productivity, create local employment and utilise local crops. The produce of land would be utilised locally, providing jobs in the process of growing biocrops which would be used in the generation of heat and power. When this heat and power are consumed locally, it will facilitate the creation of further jobs by providing cheap and sustainable energy for local entrepreneurs and job creators. This is a major pillar in creating and maintaining sustainable local rural communities, which is very important in the economy. The sooner we get it up and running and decrease our dependency on external suppliers and entrepreneurs the better for us.

The emphasis of the sub-committee is on creating jobs and providing sustainable livelihoods for people in their own communities. We thank the delegates for their assistance in this regard and consider that our objective parallels their own. We will defer the discussion on the research paper on renewable energies until the next meeting.

The sub-committee adjourned at 10.20 a.m. until noon on Tuesday, 17 February 2009.