I thank the committee for the opportunity to discuss our secure, low-carbon future. I am the chairperson of the CRU and am joined by my fellow commissioners, Mr. Paul McGowan and Mr. Jim Gannon. The CRU is Ireland’s independent water and energy regulator. Our mission is to protect the public interest in water, energy, and energy safety. Our vision is for energy supplied safely; a sustainable and efficient future for energy and water; empowered and protected customers paying reasonable prices; and a secure low-carbon future.
We use the tools of economic and safety regulation to protect customers and the public, to facilitate the delivery of critical infrastructure and to ensure that competitive markets work for the benefit of customers and society. We are fully committed to delivering the least-cost decarbonisation of the energy sector, while ensuring security of supply in line with our national policy goals. We have included with our submission the CRU strategic plan and our recently published strategy paper for the gas price review project. Similar papers for our electricity price review are available on our website: cru.ie.
With regard to energy’s contribution to our 2030 carbon reduction targets, the CRU is already working towards the delivery of an electricity sector with world-leading levels of intermittent renewable generation, including significantly increased contributions from solar and onshore and offshore wind. This will be facilitated by flexible, efficient gas generation, of a similar scale to that which we have today, but used less frequently, which will provide back-up during those sometimes extended periods of very little sunshine or wind. The system will also be balanced by increased storage, interconnection and demand-side contribution. In line with European and national policy goals, we are also working to facilitate active customers and communities, who will be given the opportunity to contribute to the transition while also benefiting by reducing their energy bills.
The CRU is also committed to meeting the twin challenge of transforming our electricity system while meeting rapidly increasing demand, including from new data centres and the electrification of heat and transport. Natural gas, which will be decarbonised over time, will provide an essential underpinning for the security of energy supply, ensuring we can meet this demand as we transition to a net zero carbon economy.
It is important to emphasise that this transition will not be costless. New system services and the delivery of significant new generation and network infrastructure will be required. Our focus will be to ensure the least-cost delivery of new services and infrastructure, to enable customers and communities to contribute and to seek equity in the transition in order that customers who have the means and opportunity to invest in low-carbon options are not cross-subsidised by those who do not.
In order to facilitate this transition, it is also essential that our planning and consent processes are fit for purpose and well resourced to support the delivery of this critical infrastructure. Policy and political support for key projects, alongside best-in-class community and societal engagement, will also be vital in ensuring community acceptance of these.
We will now outline some of the initiatives that the CRU will undertake to support the sectoral targets. I will start with the networks that underpin a secure, low-carbon future. We are investing in upgrading and expanding our electricity networks, including in operational capacity and innovation. Through our periodic price review process, the CRU has increased allowed capital expenditure for EirGrid and ESB Networks by €1.3 billion to a total of more than €4 billion over the coming five-year period, with a recognition that more investment will be required in the second half of the decade to 2030. This funding package enables the delivery of new generation connections, transmission and distribution infrastructure, interconnection, and smart meters and smart technology that will facilitate our low-carbon transition and unlock value for energy consumers. The investment framework that we have developed is agile to enable new Government policy on offshore grids, while also providing strong incentives and ambitious targets for the companies to develop and adopt innovative and least-cost solutions to support the net zero targets.
We are currently working on the regulatory framework for two new interconnectors, the Celtic interconnector with France and the Greenlink interconnector with Great Britain. Along with the delivery of the crucial North-South interconnector, more interconnection capacity will be needed over time. We will also continue to work with the Department and key stakeholders on the development of the regulatory framework for offshore grid infrastructure, in line with new Government policy.
I will turn to consider markets delivering least-cost solutions. To meet our renewable electricity targets, we will need significant investment to develop the onshore and offshore wind and solar capacity required to meet our targets. We are working to support the Department in the renewable electricity support scheme, RESS, auction process to secure this capacity competitively and at least cost for customers.
The all-island single electricity market provides a competitive market for the delivery of electricity, new generation capacity and system services at least cost. The DS3 system services programme has underpinned Ireland’s world-leading status for the level of intermittent renewable generation that can be accommodated on the system at any one time, which is currently being tested to 75%. We are already consulting on the successor programme to deliver up to 95% instantaneous renewable penetration, which will require us to competitively procure a wider range and higher volume of system services. This is a crucial underpinning for our renewable targets.
The single electricity market committee is also running capacity auctions to secure the additional generation capacity required. The twin challenges of replacing a large part of our existing generation fleet, while meeting rapidly growing demand, means that a minimum of 2 GW of new gas-fired plant will be needed in the next few years. This flexible capacity is required to support increased renewables, enable us to retire older carbon intensive plant and ensure security of supply. This capacity is in addition to the increased storage and interconnection which must also be delivered at pace.
I will turn to active energy customers and communities. As the transition will not be costless, it is critical that we engage and empower customers to participate in new energy activities. While the overall price of electricity may increase during the transition, customers will have options to lower their own bills by switching their demand to off-peak times, providing demand-side services such as switching off non-essential electricity usage, selling back electricity from electric vehicle, EV, batteries at peak times, or generating their own renewable electricity and selling any excess to the grid.
The smart metering programme, which is well under way, will provide active customers with better information and smarter options such as time-of-use tariffs as well as measuring microgeneration exports. We expect that new third parties will enter the market to enable customers to easily participate through new home energy technologies and aggregation services. We will also work to ensure that our electricity markets can facilitate citizen and renewable energy communities to generate and sell or share renewable energy within communities.
With the transposition of the new clean energy package of legislation, we expect the CRU to be given new functions to create regulatory frameworks for active customers, energy communities and third parties such as aggregators. This will be a key focus for us in the coming years. We will also support the implementation of the microgeneration scheme, once it has been decided, with a view to facilitating customers and ensuring equity between customer groups. In particular, we will need to protect vulnerable customers who are not in a position to participate actively.
I will turn to secure, decarbonised gas. As we embark on a period of unprecedented transformation in the energy sector, with significantly increasing electricity demand, it is vital to ensure security of energy supply to support our economy and society. Gas is an essential transition fuel for Ireland as we move to a fully decarbonised energy system. Gas-fired generation will play a pivotal role in underpinning electricity security of supply and the secure electrification of heating and transport. As Corrib gas is in decline and in the absence of new indigenous production, we will be increasingly dependent on imports from the UK via our existing interconnectors. Implementing a strategy to decarbonise gas and ensuring secure and diverse supplies and supply routes for gas will be a key priority, noting that an increasing proportion of this could be indigenous biomethane and, in time, green hydrogen.
These are the key priorities to underpin decarbonisation in the energy sector, which are core to the CRU’s strategy. We previously had the benefit of this committee’s input in drafting our strategic plan and would welcome any feedback from the committee for the next strategic plan for 2022 to 2024, which is currently being developed.