I am grateful to the Chairman and members of the committee; it is an honour to be here. I am joined by Ms Suzanne Collins, our head of public relations; and Mr. Rodney Doyle, our chief operations officer.
I appreciate that we have been asked to appear before the committee to discuss some topics of current public interest relating to the power system, and I will address these matters directly in our submission. First, I wish to provide a short reminder of what EirGrid does and what we are about. We operate the power system on a 24-7 basis across two jurisdictions on the island of Ireland, thus ensuring people have safe and secure electricity at all times, supporting social and economic growth. We are also responsible for planning the power system of the future, much of which is set out in EirGrid’s strategy, which was launched in two years ago and which underpins the Government’s decarbonisation ambition for the electricity system as set out in the Climate Action Plan 2019 and the forthcoming climate action plan which is imminent.
Our strategy has five key objectives. The first is to connect to new renewables. We expect to connect approximately 10,000 MW of renewables in the next decade, predominantly onshore wind and solar power, and a new generation of offshore wind predominantly from the Irish Sea. We currently have approximately 4,500 MW of renewables on the Irish system.
Second, we must upgrade the network across the country to handle more renewables as well as greater demand for electricity. This means more wires, more pylons and substations and the deployment of new technology on the wires. Recent decisions by EirGrid to place major elements of the new network underground supported by significant public feedback on the matter will support the deliverability of these new projects.
Third, we must engineer solutions that will allow the power system to function in a stable manner at approximately 95% renewables, on an instantaneous basis, if we are to achieve the Government target of 70% of electricity from renewable sources by 2030. I note the NDP publication yesterday, which has set the target of 80% of electricity from renewables in 2030.
Last April we reported that Ireland received 43% of all electricity from renewable sources in 2020, which is an extraordinary achievement and world-leading. We look forward to pushing the boundaries in the next decade.
Fourth, we must become more interconnected with Europe, particularly, but not exclusively, in a post-Brexit world. In this regard, we must deliver the proposed 700 MW Celtic interconnector between Ireland and France by the middle of this decade. We welcome and support the private sector proposition for the Greenlink project, a 500 MW link between Ireland and Great Britain due for commissioning in 2024.
Finally, and very importantly, the market is important to delivering the full holistic solution and must be incentivised to deliver the relevant solutions, including technology, services, etc., on time and at the right price point to support the decarbonisation agenda. We remain on track to deliver these five strategic goals, notwithstanding the challenges in front of us.
I will talk about demand, which has been one of the most topical points in the recent past. I refer members to our generation capacity statement, published last week. We publish this document annually for the benefit of government, regulators and the industry at large. We endeavour to provide a coherent and transparent future-looking assessment of electricity demand in Ireland. The statement involves a detailed process, taking the best part of 12 months, and speaks to the demand that is required, renewables, conventional plant, where the demand will come from, generation and adequacy, which is the gap between generation and demand. We try to articulate what that gap is and suggest where solutions might best be delivered.
Every year since 2016, EirGrid’s generation capacity statement has flagged that, in our economy and as a function of the success of the economy, there has been growing demand for electricity. This creates challenges, particularly from the industrial sector. In 2019 and 2020, the generation capacity statements also flagged our concerns about the declining availability of the old generation fleet, which has served us well in recent decades. It is ageing and carbon-intensive and we need to think about plans to see it off the system. This information and data provide the regulator, who is responsible for security of supply, and market participants with a singular view of the demand and supply equation which is designed to inform decisions about what new generation is required and when it is required.
The key messages coming from the generation capacity statement last week are as follows. Demand for electricity will grow significantly over the next decade, driven by strong economic growth, which is good for all; significant increases in industrial demand, particularly data centres; the electrification of transport, involving electric vehicles; and the heating of homes. The demand increase is likely to be in the region of 28% over the decade with the potential for a greater increase, depending on the pace of growth in each of the areas mentioned. We believe it is prudent to plan on the basis of a 28% to 30% increase as a minimum and have appropriate contingency baked into the plan in case those limits are exceeded.
Covid has negatively impacted our capacity to deliver infrastructure and secure outages, not only for vital maintenance and upgrades on transmission lines, but also for generation plants where it was not possible to get technicians in from countries outside Ireland. Key specialised personnel could not travel and there is a backlog of work we have to factor into our planning over the coming years.
The generation capacity statement is clear in its messages and I want to be clear for members of the committee. Our power system requires approximately 2,000 MW of low-carbon, flexible, dispatchable gas generation over the next ten years to meet demand and, critically, support the transition to a low-carbon power system, which is our collective ambition, up to 2030 initially and ultimately to a zero-carbon power system. These ambitions are set out in the Climate Action and Low Carbon Development (Amendment) Act 2021, which was recently enacted. In the medium term, this 2,000 MW will be based on gas. There is no alternative reliable, conventional fuel. It is low carbon and we believe this technology is ultimately capable of migrating and transitioning to a zero-carbon proposition.
It is critical that the procurement of this 2,000 MW is executed with speed through the forthcoming auction process the regulator has designed and that we avoid a protracted period of dependency on high fossil fuel content and on old and less reliable generation plant. For the moment, we need to keep this old plant going until we have alternative capacity. The near and medium-term solution, to 2024 or 2025, includes the procurement, unfortunately, of temporary generation sets to allow us to protect security supply and, critically, do essential maintenance on transmission lines and generation plant.
To address the current situation, some of the older plants on the system have had reliability problems, not helped by the fact that Covid-19 has prevented repair works, etc. As these plants return, with appropriate repairs, their margins will improve. I reassure members that when those works are done we will have a secure and reliable system. There should be less concern than has been evinced in some of the press reports we have read recently.
We are pleased that the two plants we lost as a result of exceptional and unusual outages in Huntstown and Whitegate have secured the necessary parts and equipment. Those parts are in Ireland and we expect to have the plants back very shortly. To summarise the outlook for the coming winter, with those plants returning and with winter being a time when we expect to have high levels of wind in the system, there are limited grounds for concern. We expect to have a secure supply over the winter and, unless something exceptional occurs, people can sleep in their beds at night and be satisfied they will have electricity.
I will speak on the subject of data centres because it is incredibly topical and has been the subject of some comments that are not helpful, including one this week which referred to data centres accounting for 70% of demand on the power system by 2030. This is not a factual statement and does not help the conversation. First, we should acknowledge that data centres have made a massive contribution, as has the ICT sector in general, to the social experiment which has seen 2 million people working from home over the past 18 months. Business, industry and commerce are dependent on data. The collapse of the experience sector was not replicated across the rest of the economy, thanks to the fact we could all work from home. Data centres are, therefore, a critical part of the economic and social fabric of 21st-century living.
Second, Ireland is a world player in this space and the true value to the economy of data centres is well documented by IDA Ireland. Third, a significant amount of Ireland’s forecasted growth for electricity will come from data centres. However, the figure is more in the order of 30% than the mistaken 70% figure cited earlier in the week. EirGrid understands that such growth in demand must and can be accommodated by an appropriate policy framework which seeks to ensure that all parties collaborate on an approach that responds to the temporary constraints in the current system. These constraints can be resolved on an enduring basis over the next decade. The CRU’s current proposed policy framework is an appropriate response for the short to medium term. I hope the sector will look favourably on this proposal and work with us on delivering projects and working in collaboration with the transmission system operator.
I will summarise EirGrid’s position. Collectively, we must remain focused on the objective of decarbonising the power system as a key pillar of the Government’s climate action plan, notwithstanding the near-term challenges I have spoken to and which have been much spoken about over the summer. People need to be reassured that the near-term challenges will be dealt with. In addition, the delivery of a green power system is an imperative. It will also be a source of competitive advantage for our economy in the next decade, if delivered in a cost-effective and expeditious manner. In March 2021, EirGrid launched a wide-ranging public consultation on how to shape our electricity future.
The roadmap arising from this 14-week consultation will be published shortly. It will provide clarity and transparency on what needs to be done in terms of where demand and generation should be located to allow us achieve the 2030 objectives. In the interim, our generation capacity statement speaks to near-term issues and what needs to be done. We have a plan agreed with the Department of the Environment, Climate and Communications and the regulators. That plan will be executed and the people of Ireland can sleep in their beds comfortably at night in that regard.
The last critical point is the procurement of low-carbon dispatchable generation capacity is a matter of urgency. We have the plans in place, working with the regulator, to procure same. I thank the Chairman and members.