Joint Committee on Environment and Climate Action debate

Energy Supply and Security: Discussion

Chairman

I welcome members back after the summer break. At the outset, the purpose of the meeting today is to discuss energy security, including supply and demand, electricity generation capacity, plans to best manage supply and demand and, of course, to protect vulnerable users in the coming months.

On behalf of this committee I welcome the Minister for Environment, Climate and Communications, Deputy Eamon Ryan, and his officials, Mr. Matt Collins assistant secretary; Mr. Noel Regan, principal officer; Mr. Paul McAufield, assistant principal; and Mr. Robert Deegan, principal officer. From the Commission for Regulation of Utilities, CRU, we have Ms Aoife MacEvilly, who is the chair; Mr. Jim Gannon, commissioner; Mr. John Melvin, director of security of supply and wholesale; and Dr. Paul McGowan, commissioner. They are all very welcome. I also welcome our representatives from EirGrid, Mr. Mark Foley, chief executive, Dr. Liam Ryan and Mr. Rodney Doyle, chief operations officer. They are also all very welcome today.

As usual, I will begin with the note on privilege. I remind witnesses of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or to otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks and it is imperative that they comply with any such direction. We do not have any witnesses who are attending from outside the Leinster House campus. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I want to remind members who are joining online that they are only allowed to participate in this meeting if they are on the Leinster House complex. If any member joins online, they should confirm that they are indeed on the Leinster House campus.

I will begin by calling on the Minister, Deputy Eamon Ryan, for his opening statement.

Minister for the Environment, Climate and Communications (Deputy Eamon Ryan)

I am pleased to join the committee today to discuss the pressing matters of energy security, energy prices and protecting our vulnerable consumers and businesses. The National Energy Security Framework, which was approved by the Government and published in April this year, sets out Ireland’s response to our energy security needs in the context of the invasion of Ukraine and our specific national circumstances. At the outset, I would like to emphasise the impact that the war in Ukraine is having on gas market prices and in turn on both gas and electricity bills, particularly over the coming winter and beyond. This is by far the greatest challenge we all face as we go into the winter and the following months.

With regard to the security of supply of oil, the short-to medium-term outlook has stabilised somewhat, with petroleum products availability having improved recently. We have seen a slow softening of international oil prices, although this varies. The National Oil Reserves Agency, NORA, holds approximately 85 days of oil stocks, the overwhelming majority of which is in the form of physical product, with approximately 85% stored on the island of Ireland.

With regard to the security of supply of gas, supplies from Russia to Europe have been severely reduced over the past year and continue to be a cause of concern for Europe's energy security. This has resulted in natural gas prices that are at least ten times the levels seen just two years ago. The continued supply of natural gas to Ireland has not to date been reduced or interrupted as a result of the war in Ukraine. The UK, from where 75% of our gas comes, is at a strategic advantage compared to other European countries with a diverse source of gas supplies. The European Council recently agreed a regulation on reducing gas demand by 15% this winter. This regulation requires all member states to put in place a demand reduction plan. As Ireland is not directly interconnected to another member state, it is not required to meet the mandatory reduction target in this regulation. However, preparations are under way to put the voluntary demand reduction plan in place.

With regard to the security of supply of electricity, separate to the war in Ukraine there are challenges to the security of electricity supplies in Ireland. Concerns over such risks have arisen largely due to the non-delivery of previously contracted capacity, increasing electricity demand and the increasing unreliability of some existing plants. The tight margins are evidenced through an increase in the level of system alerts on the electricity system over the past year. As stated in the Climate Action Plan 2021, the level of dispatchable electricity generation capacity needs to increase significantly over the coming years to enable us to meet reliably the expected demand for electricity. The Commission for Regulation of Utilities is managing a programme of work that was initiated in April 2021 and finalised in September 2021 to address this challenge, with the support of EirGrid and my Department.

In June, the Government enacted legislation and approved capital funding to support EirGrid's role in expediting the delivery of temporary generation capacity. I also informed the Oireachtas in June that the Government had approved my recommendation to consider the factors that have led to the current situation. To this end, Mr. Dermot McCarthy, former Secretary General to the Government and the Department of the Taoiseach, has been engaged to conduct an independent review as to how the present situation has arisen. Further, I welcome that the CRU is reviewing the capacity remuneration mechanism to make sure it is fit for purpose. In carrying out this review, it is vital that we support the projects that have been awarded contracts under the existing mechanism and that planned capacity auctions proceed.

With regard to medium- to long-term energy security, the Department is carrying out a review of the energy security of Ireland's gas and electricity systems in the period out to 2030, in the context of reaching net-zero emissions no later than 2050. This review considers potential risks to our natural gas and electricity supplies and examines a range of measures to mitigate these risks. The Department has received the final technical analysis to inform the review and I expect a consultation to launch in the coming weeks.

With regard to prices, vulnerable customers and energy poverty, the committee will be acutely aware that the exceptionally high wholesale gas prices seen since Russia invaded Ukraine have led to unprecedented increases in the electricity and retail gas prices faced by consumers. This, in turn, has resulted in a significant increase in the number of people at risk of fuel poverty. Recent estimates from the Economic and Social Research Institute, ESRI, indicate that up to 29.4% of households now spend more than 10% of their income on their home energy needs. The Government is keenly aware of the pressures on households facing these bills and has already implemented a €2 billion package of policies and measures to support energy customers. These supports included an electricity costs credit which was applied to more than 2.1 million domestic electricity accounts, a reduction in VAT on electricity and gas bills from 13.5% to 9% and increases to the fuel allowance.

The Government also greatly enhanced the home retrofit supports available to households. For example, the number of free energy upgrades for households at risk of energy poverty delivered each month is more than double that seen last year and a new 80% grant support for cavity wall and attic insulation was also introduced as a response to the exceptionally high energy prices. These supports will help to protect homeowners from energy price increases in the short and long term. However, the Government recognises that more needs to be done as prices continue to increase, and additional measures to support households are being examined in the context of the forthcoming budget. I very much welcome the announcement by the CRU last week of a range of additional consumer protections under the national energy security framework.

My Department recently published a review of the strategy to combat energy poverty, alongside a public consultation that will help to inform the development of a new action plan to combat energy poverty. The new action plan will set out a range of measures to be implemented ahead of the coming winter, as well as key longer-term measures to ensure that those least able to afford increased energy costs are supported and protected. It is intended that the new plan will be published shortly after the budget. The development and implementation of the new action plan is being overseen by a cross-departmental steering group, chaired by my Department.

The biggest energy challenge facing Ireland and Europe at this moment is the massively escalating price of natural gas and its effect on gas and electricity bills as we head into the winter. We are not alone in facing this challenge and we will continue to work very closely with the European Commission and the European Council, which will sit in emergency session next week, in order that we can frame our response in that European way.

Mr. Mark Foley

My thanks to the committee for the opportunity to appear before it to discuss the critical issues facing us all regarding energy supply and security and the solutions we can effect together. EirGrid is responsible for planning the power system for the future of Ireland. Much of this is set out in our strategy, which was launched three years ago and which underpins the Government's decarbonisation ambition for the electricity system as set out in the climate action plan.

Where the security of our electricity supply is concerned, SI 60 of 2005, European Communities (Internal Market in Electricity) Regulations 2005, clearly sets out that it is the responsibility of our regulator, the Commission for Regulation of Utilities, to protect security of supply. When EirGrid is of the view that security of supply is threatened or likely to be threatened, we will advise the CRU and make recommendations on measures to address it. The CRU will then have responsibility for taking such measures as it considers necessary to protect security of supply.

Generation capacity is procured through the all-island single electricity market, SEM. The single electricity market committee, SEMC, of which the CRU is a member, is the decision-making authority for all SEM matters. Under section 38 of the Electricity Regulation Act 1999, EirGrid, as transmission system operator for Ireland, is tasked with preparing a forecast statement for Ireland in accordance with the methodology and format approved by the CRU. An all-island generation capacity statement is produced annually by EirGrid and the System Operator for Northern Ireland, SONI. The latest iteration will be out in approximately two weeks' time. I will reference this document on several occasions in this statement, as is the critical mechanism by which we advise our regulators, the overall market and the Government as to our considered view of the projected demand for electricity over the next ten years, and our view as to the extent to which we have the necessary generation capacity to meet this demand.

Members will recall that when EirGrid appeared before them last October, we were clear that Ireland at that point in time did not have enough generation on the system to meet our predicted demand. While the two large generators that were offline returned to service just in time for the winter, our system engineers managed a system that had very tight margins and we came through that period without any loss of electricity supply. At this same session last October, the CRU pointed to the fact that approximately 500 MW of previously secured and procured generation capacity would not be delivered. Last September, the CRU published its security of supply programme of work, in which it took ownership of delivery, working in co-operation with EirGrid, the Department of the Environment, Climate and Communications, the energy industry, and other stakeholders.

Delivery of new gas generation, which can back up our substantial renewable generation resources when the wind does not blow and the sun does not shine, must be viewed as the point of success in that it builds capacity and security to enable social and economic growth for our country, as well as facilitating the transition of the electricity system to a less carbon-intensive one. The 2 GW of new dispatchable gas generation plant that EirGrid has signalled as required to support the energy transition and social and economic growth must be delivered by the capacity remuneration mechanism. Growth in demand is not the core problem in our view. The performance of existing plant and the delivery of new generation through a robust auction process is the challenge.

EirGrid's statutory role is to identify the gap between demand for electricity and the electricity generation capacity in Ireland on an annual basis over a ten-year horizon. The annual generation capacity statement, GCS, follows a methodology prescribed by our regulators and is for the benefit of regulators, Government and the industry at large. Since 2017, EirGrid has identified, via the annual generation capacity statements, increasing tightness between supply and demand and adequate generation capacity challenges. We very much welcome and support the Minister's appointment of Mr. Dermot McCarthy to conduct an independent review into the circumstances requiring emergency measures to be introduced to secure electricity supply over the coming winters. The EirGrid board, following a request from the Minister in December 2021, commissioned its own independent review and has provided this report into Mr. McCarthy’s process. We will not be commenting on this matter until Mr. McCarthy's process has concluded.

I will now address the three topics which the committee raised in its invitation to EirGrid on Wednesday of last week. On energy supply and demand, I will start with demand and I will deal with the supply element in response to the committee's second question. EirGrid’s forecast of demand, as set out in the GCS process over many years, has been within 1% to 2% of actual demand. These are factual data that we can provide to the committee if it requires same. EirGrid’s forecast accuracy of demand is not an issue.

Second, demand for electricity is growing. We are fortunate, as a country, to be experiencing social and economic growth. The total growth in demand for electricity over the past five years has been 9%. This is not excessive for a vibrant western economy and as a country, we should be capable of meeting this demand without emergency intervention. There is a move towards the electrification of heat and transport, as set out in the Climate Action Plan 2019, and specific targets for more in the Climate Action Plan 2021. Much of this growth in demand will not necessarily manifest at peak times, for example, electric vehicles, EVs. Trends in the data centre and tech load sector show demand levels increasing significantly, whereby we forecast data centres and new tech load will represent approximately 28% of demand in 2031 in comparison with 17% in 2021. However, we have a new policy proposition for data centres from both the CRU and Government which we believe provides for a controlled and orderly growth in demand over the remainder of this decade.

The committee's second question related to electricity generation capacity. The reason we are here is that we have a shortfall in electricity generation capacity and are over-dependent on old fossil fuel plant which, ideally, should have been expedited off the system in an orderly manner. The reason we have a shortfall in generation capacity is that the capacity market system has not delivered the necessary volumes of new gas-generating capacity. Gas is critical for the energy transition because the wind does not always blow and the sun does not always shine. All stakeholders, I believe, acknowledge the robustness of EirGrid's statement that approximately 2,000 MW of dispatchable gas generation is needed to support the secure transition. Where possible, we should seek to ensure this investment is in low-emissions, renewable, gas-ready technology. The reason the CRU has directed us to seek to secure upwards of 700 MW of emergency generation is to meet this gap, which was identified in previous generation capacity statements arising from the non-delivery of new gas generation.

The committee's third question related to plans to best manage supply-demand and protect vulnerable users. Last autumn, the CRU published a programme of work to increase generation capacity to provide additional stability and resilience to the Irish energy system over the next four to five years. This range of actions, agreed between the CRU, the Department of Environment, Climate and Communications and EirGrid, includes the procurement and delivery of sufficient generation capacity through the capacity auctions; extending the operation, on a temporary basis, of a number of older generators scheduled to close in 2023-24 and 2024-25; demand-side mitigation measures; and procurement temporary emergency generation capacity. I will let the representatives of the CRU speak to this programme, with the exception of temporary emergency generation where EirGrid has a very particular and critical role because of our technical expertise.

Regarding the procurement of temporary emergency generation capacity, EirGrid, having received directions from Government and the CRU, is currently seeking to procure two tranches of this generation. We are at an advanced stage of negotiations with potential providers of 250 MW to be delivered and available in advance of winter 2023-24. Unfortunately, and EirGrid is disappointed about this, it will not be available for this winter despite the best efforts of all parties involved. Second, following the enactment of the EirGrid, Electricity and Turf (Amendment) Act earlier this summer and the receipt of a CRU direction, EirGrid is working with both the Department of Environment, Climate and Communications and the CRU to advance the procurement and location of an additional 450 MW of temporary generation, to be available as early as possible. That is all I can say about it at this point in time. We are at a very delicate stage of negotiations with a range of third parties, including equipment suppliers and sites on which this equipment may be located. Therefore, it is premature to go into detail about this until contractual matters have concluded and we can provide the committee with greater certainty around the delivery timelines. However, I must say that we are all collectively committed to delivering it at fast as is humanly possible.

EirGrid's view is that we need to do four things. We must secure the 250 MW of temporary generation and have it available as early as possible next year, and in advance of next winter. We must secure the 450 MW of temporary generation and also have it available to us as early as possible. We must work with CRU and the Department of Environment, Climate and Communications so that we can be assured that the new renewables-ready gas generation plant - the 2,000 MW of which I previously spoke - is delivered as soon as possible, and that the older fossil fuel carbon-intensive plants are exited from the system. Lastly, and very importantly because it speaks to this winter, we must continue to work closely with generators to ensure they deliver high plant availability through this winter period, we collaborate on maintenance outages and we get the best out of the existing fleet over the next number of months. I commend the various actors in the system - the generators - which are working in a very engaging and collaborative manner with us to try and achieve that.

Mindful of time, I will conclude by saying that we have an immediate short-term and complex challenge around the procurement of an unprecedented amount of temporary emergency generation, which is being managed collectively by the CRU, the Department of Environment, Climate and Communications and EirGrid. We must improve the performance of the existing market mechanism to deliver new generation capacity. When we were before the committee in October of last year, we spoke about the tight winter to come. Despite the challenges we faced, we managed to maintain the balance between supply and demand at all times. As we look into this winter, we see a heightened challenge, in that we have marginally less generation available than last winter. Our greatest risk will manifest at times of very low to zero wind and low imports from Great Britain. We will again utilise the tools available to us to manage the supply-demand relationship. These include trading with our counterparts in Great Britain across the interconnectors, bringing on demand-side units and asking our large customers to use their on-site generation. I must say that the co-operation from that customer base in Ireland this year has been exceptional. We feel very confident that we can count on our customers when we call on them. We are grateful for their support.

It must be said that there will be alerts throughout the autumn and winter at times of low wind, limited interconnectivity and low generation availability. The contingency plans, which we have agreed in forensic detail with the ESB and major industrial users, are robust. We believe we can seriously count on them when we have to trigger same. Neither I nor anyone else before the committee today can offer a cast-iron guarantee for this winter; nobody can. I can say that we are very well prepared and when the wind blows, we will not have issues. The risk of end customers being impacted is increased this winter because all jurisdictions across Europe are tight and interconnectors are stressed. There will be times when it will not be just a stressed Irish system but a stressed European system. I assure the committee, on behalf of my team, that at those times we will undertake every measure available to us before end customers are impacted.

Chairman

I thank Mr. Foley and invite Ms MacEvilly to make her opening statement.

Ms Aoife MacEvilly

I thank the Chair and committee members for the opportunity to talk through the major change agenda under way in the Irish and all-island electricity market to ensure security of supply while also addressing the twin challenges of decarbonisation and rapidly-increasing demand. From 2014, the CRU and SEM committee embarked on a major redesign of the wholesale electricity project and launched the new I-SEM in 2018. Ireland received state aid clearance for the new capacity market design in 2017 and capacity auctions commenced from 2018 onwards. These capacity auctions, in tandem with the new system services and energy markets, are delivering new lower carbon and flexible capacity on the island. So far, the capacity auctions have procured significant volumes - and by that, I mean over 4,000 MW - of new gas-fired generation capacity, batteries and demand-side units, some of which is either already operational, under construction or due for delivery in a short period over the coming years.

In addition, the CRU has designed regulatory frameworks to support two new electricity interconnectors, one of which, the Greenlink interconnector, is at construction phase and due for delivery in 2024.

The Celtic interconnector with France is due for completion in 2026. However, in late 2020 and early 2021 it became clear that there were security of supply risks caused by the dropout of 513 MW of contracted capacity which was due to come into service this winter; significant increases in electricity demand, primarily in the large energy user sector; an accelerated decline in the availability of the current generation fleet; and a low market offering into the capacity auction targeting winter 2024-25.

To address this, the CRU, working with EirGrid and the Department, published a programme of work which includes the delivery of at least 2,000 MW of enduring gas generation capacity. Two auctions have been completed since the programme of actions commenced and have secured contracts for new gas-fired capacity, with significant work under way to support delivery, given that both generation and transmission network infrastructure remain particularly challenging to deliver in Ireland. We are also working on the provision of temporary emergency generation, the retention in service of older generators, demand-side mitigation measures and other actions, including the progression of the Greenlink and Celtic interconnectors, and the critical importance of delivering the North-South interconnector. A copy of this programme has been provided to committee members alongside my written statement.

The security of supply programme steering group is overseeing delivery and addressing the variety of challenges arising, such as by procuring an enlarged second tranche of temporary generation. Other mitigations for this winter include optimising our battery fleet to provide increased support for security of supply and enhancing our ability to call upon the significant back-up generation of large energy users at times of system stress.

The consequences of the Russian invasion of Ukraine are being felt across Europe and have seen a policy response from the European Commission, crystallised in the REPowerEU policy communications. These have fed into the suite of actions comprising the national energy security framework. In line with this framework, the CRU is delivering on actions addressing security of supply, emergency planning, energy demand and demand flexibility, energy cost and consumer protection.

A critical component of the work of the CRU is a continued focus on demand and, in particular, demand flexibility. This helps security of supply but is also critical to ensuring a secure low-carbon transition for Ireland, reducing the need to call on fossil fuel generators and optimising the use of renewable generation. A number of measures are under way in order to progress this, including, for example, the roll-out of smart meters and smart tariffs to empower consumers to use electricity when it is cheaper, enhancing market signals to demand-side units and the recent proposal of new network tariffs that will incentivise demand reduction, demand flexibility and off-peak consumption. Similar actions are being taken across Europe, with recent examples in Spain and Germany targeted at reducing energy consumption. Increased demand flexibility can contribute to security of supply, cost savings for consumers and our low-carbon transition, and the CRU will continue to enhance the incentives by which this can be delivered.

Turning to the protection of vulnerable customers, the CRU is keenly aware of the price increases that customers are facing and continues to work with our customer stakeholder group and industry to address these challenges. Last week, we announced a suite of enhanced consumer protection measures targeted at protecting both vulnerable customers and customers in debt. In summary, these measures include extended moratoriums on household and vulnerable customer disconnections, extended debt repayment periods for customers in debt, reduced debt repayment burden on pay-as-you-go customers and better value for those on financial hardship meters, as well as the promotion of the vulnerable customer register. The CRU will continue to track the effectiveness of these measures in order to support and protect Irish consumers.

In conclusion, the CRU is committed to working with our colleagues across government, agencies and the energy sector in order to overcome our national security of supply challenges and to protect consumers as Europe faces a period of sustained high energy prices.

Chairman

I thank Ms MacEvilly for her statement. I invite members to indicate. Most of them have already done so. I appreciate their eagerness to get in early on this issue. The meeting is confined to three hours. It is a complex and detailed subject so I ask members, as usual, to confine questions to two minutes. I will be strict in that regard but, if we have time, we will go back for second and third rounds. I ask members to direct their questions to individual witnesses, if possible. If they wish to ask a general question, that is fine. If the witnesses wish to contribute on any question, even if it is not directed to them, I will facilitate that. I ask them to indicate it to me or to the clerk and we will note that and bring them in. I have a list of members who have indicated. I will kick off, if that is all right.

The area of energy is very complex and there are challenges with respect to many aspects of it but, broadly, there are two overarching issues. There is the price of electricity and this pan-European challenge where wholesale gas prices have gone through the roof. The price of electricity is tied to that. This is what is going to affect consumers, including vulnerable consumers, in the months ahead. The other issue - the two are often conflated but they are separate - is the particular challenges we have in Ireland in terms of matching supply and demand. Every country has its own challenges in that regard. There was reference in the witnesses' opening statements to how tight it was last winter and how tight it is expected to be in the coming winter. That is broadly the agenda for today. It is important that we understand there are two separate issues for discussion.

My first question is for Mr. Foley. His statement is clear. He stated that the growth in demand is not the core problem; the core problem is the "performance of existing plant and delivery of new generation through a robust auction process" and that is the challenge. I ask him to elaborate on that because there is a narrative that the growth in demand is the problem. He mentioned it in his opening statement but it is also a question for the regulator regarding how we are where we are, with concerns in respect of security of supply. What happened and what is being done to address those concerns? We all want to come out of this meeting reassured that we are not going to have blackouts this winter and that consumers are going to be able to afford critical energy.

I ask the Minister to address the broader pan-European issue. This is directed to the CRU as well. We are seeing the wholesale gas price go up tenfold. The electricity price is linked to that. There is a train coming at us with respect to energy prices. Yesterday, the President of the European Commission, Ursula von der Leyen, said that radical reform of the market was needed. Notwithstanding the national challenge we have in matching supply and demand, this really big problem is staring us in the face. I ask the Minister to elaborate on what can be done to delink the price of electricity from the wholesale gas price. What kind of structural changes does he foresee will be necessary? In that context, what kind of measures does the CRU propose to protect vulnerable consumers?

Mr. Mark Foley

I thank the Chairman. On his comment about the complexities of this conversation, we are trying to bring clarity and simplicity. One would be excused for thinking, based on public discourse, that electricity demand has gone up exponentially or in wild proportions in recent years.

However, if you look at the raw data, which is a matter of public record, our demand for electricity in the past five years has grown by 9%. I suppose we were trying to bring some balance into the conversation. That is not off the scale for a prosperous, growing and sophisticated western economy. The additional thesis one would add to that is that we should be able to cope with this. It is not exceptional.

A second part to my comment is that if the 500 MW of procured generation capacity in an auction had landed, frankly we would not be having this conversation today because we would arguably have more than adequate supply to meet demand. We are simply trying to bring some proportionality into the conversation because it has got rather noisy and, at times,has lost sight of the facts. The purpose of it is to help with the conversation.

Ms Aoife MacEvilly

On the questions on why we are here, I probably would respectfully disagree with some aspects of Mr. Foley’s opening statement, in that we know that growing data centre demand is a challenge. That has been clear from advice that we have received from those at EirGrid, including in letters they wrote to us, which lay behind our imposition of a new data centre direction in terms of connecting data centres. We think it is part of the challenge. In fact, the ability to accurately forecast this is also challenging for EirGrid. I possibly would not accept that we have had a consistent forecasting of the scale of the challenge that we face at the moment. That is an area that we too think is worth considering and is part of the review we are undertaking at the moment where we believe there are improvements that could be made in that process.

Overall, the challenges that we outlined in terms of that rapidly increasing demand proved that the data centre demand can be delivered more quickly than we have been able to deliver generation and transmission capacity to support it. As Mr. Foley said, if we had that delivery of the 500 MW, it would not be a challenge. However, we are in the position where there is delayed delivery. That is the reality. Those delays in the delivery of generation capacity are part of the challenge, as well as that challenge around the reliability of the existing fleet, which was also mentioned.

What we are doing about that is outlined very clearly in our programme of actions. More capacity needs to be brought on quickly. It will brought on through the capacity mechanism. We are working on options to improve the effectiveness of that capacity auction. We thank EirGrid for its contribution to that process. We look forward to its response not the consultation on how we can collectively do that. We are also working on the demand side because that is part of the solution as well.

In terms of this winter, Mr. Foley set that out very clearly. As he said, there are no cast-iron guarantees at the beginning of any of winter. This winter poses particular challenges. However, we have been working very effectively with EirGrid and other stakeholders to mitigate those challenges to the greatest extent. We will remain alert throughout this winter. As new issues arise, we will come forward with solutions to address them. In particular, that further consultation currently under way on enhanced demand-side flexibility also has the potential to help solve our challenges.

On measures for customers, in addition to the protection measures we outlined, we are willing to work with the Government on any measures, as we have, for instance with the electricity credit scheme that just finished. We are working to deliver on the public service obligation, PSO, levy rebate as well, which affords some small measure of relief. However, as the Minister, Deputy Eamon Ryan, outlined, the scale of this challenge is huge. It is beyond anything we have seen and will require a whole-of-government response. This is not something that any one set of measures on its own can address. We need to work collaboratively to support customers at this very difficult time.

Chairman

Before I bring the Minister in, I wish to ask Ms MacEvilly a question on market reform. Does she want to come in on that? What is the role of the regulator now that the European Commission President said yesterday that serious significant reform is needed and the architecture is not fit for purpose? What responsibility and power does the CRU have to reform the Irish market as an Irish regulator within the broader European context?

Mr. Jim Gannon

Briefly, we are part of the internal and integrated energy market of the European Union. Therefore, many of the design aspects of our market follow those regulatory rules that we do not have the ability to change or work around, necessarily. For example, if one jurisdiction changes its own regulatory market, it can result in price reduction. However, a consequence of that can be – we are seeing the risk arise now in the Iberian Peninsula – that one jurisdiction would then subsidise the electricity of a neighbouring jurisdiction because its electricity is cheaper and it exports, because that is the way the market will allow the electricity to flow. That subsidisation will not just happen from an economic perspective. There will also be a security of supply dividend for the electricity because it is cheaper and will then flow in a particular direction. Notwithstanding the fact that there are interventions that are possible and we believe that Europe is now looking significantly at those, they need to be considered in terms of their indirect consequences. It is better if they happen at a pan-European level because that means that in all jurisdictions the same rules will apply and there will not be that arbitrage between different countries where one jurisdiction could end up subsidising another one or reducing its own security of supply. We welcome any developments at European level. We believe that is the place for those solutions to arrive and arise. We follow that and contribute in any way we can, including through ACER, the European Union Agency for the Cooperation of Energy Regulators.

It is also important to state that for us, the UK is our electricity trading partner. Therefore, it is important that when Europe is looking at its internal electricity market and how it will work between European countries, cognisance would also be given to the fact that our trading partner is now a third country. Notwithstanding the fact that the UK has agreements and interconnection between itself and the internal electricity market, we need to ensure that we are part of that dialogue and that the Irish market is recognised for operating against the framework of the internal energy market in Europe although our main trading partner is the UK. It is important that is part of the conversation to protect the Irish consumer as some of these measures are being explored at European level.

Deputy Eamon Ryan

Just to back that up, I had a meeting online with the UK minister in early August and our officials had a meeting with the European Commission yesterday on this reform. The President of the Commission, Dr. von der Leyen, said yesterday that they are now working on an emergency intervention and a structural reform of the electricity market. We need a new market model for electricity that functions and brings us back into balance. The context of that is the absolutely unprecedented increase in gas prices as a result of the war. It is directly a result of the war. It started in the middle of last year when the Russian Government started to reduce the flow of gas into Europe. At the same time, there was also an increase in gas prices because there was huge demand in Asian markets for liquified natural gas, LNG, and that saw vessels going to Asia rather than Europe. European energy markets then started to rise. We started to be aware this time or last year or earlier that this price rise issue was significant and, obviously, a concern. At the end of February of this year, when the war started, obviously that spiked even further and we had immediate crisis in respect of the oil, gas and coal supplies coming from Russia. The price explosion that occurred in March this year then led to somewhat of a reduction. However, what has happened in the past three to four weeks – people can see it as the futures market for gas is readily available on the Internet – the futures curve, the current price but also the futures price into next winter, has gone through a spike and level that is unprecedented. Nothing has ever increased like this. Not even the 1970s oil crisis had this level of price increase in this short of a timeframe. That is why, across Europe, there is now a realisation that it has to change.

This is a big debate that has been ongoing.

As Mr. Gannon said, my Spanish colleague introduced some early measures. There was a debate about the best approach in the European Council over the summer months and previously. This is not an easy thing to do, involving highly complex processes. As we change, we do not want to undermine what Ms MacEvilly mentioned, namely, the gas contracts for new generation that we delivered through an auction process early this year. We want to see that delivered. How do we deliver those while at the same time being part of this wider European forum, which to my mind is needed? An emergency meeting of the European Energy Council has been called for next week.

The Commission has not provided details on what it believes the approach should be. There are various proposals. The Greek Government has also proposed in effect a separation between a renewable electricity market and a fossil fuel electricity market; I am simplifying it. Yesterday the Commission identified that the core problem is that the gas price is setting the price on the electricity market. How do we avoid that tenfold or 14-fold increase in gas prices leading to a similar such increase in electricity prices? Next week's meeting will consider that.

These are two separate issues. The capacity issue is a real issue and we need to work on that. As Mr. Foley and the commissioners have said, we need to focus and deliver on that. Due to the external shock with gas being used as a weapon of war in this war, this price impact is ten times more significant in its potential impact on Irish householders. We need to address that in a variety of ways. Measures have been mentioned here today, including a fuel poverty strategy, obviously the budget and a range of other measures that we will need to look at. They are separate issues and it is critical that we address both, but the latter one is unprecedented and deserves our most urgent attention because it threatens Irish businesses and householders. It is not just here but every country in Europe is experiencing it.

Looking at the wholesale prices today, ours are at unprecedented levels, but they are quite significantly below the continental price partly because we are part of a separate system, the UK gas connection system. As Mr. Gannon said, that requires us to work with the UK Government as well as the European Commission and our European colleagues. It is all interconnected. The UK's gas connection with the Netherlands and Belgium is in full flow from the UK into the Continent at present. Similarly, because our French colleagues are experiencing considerable difficulty with their electricity system, the interconnectors are flowing into France at the moment from across Europe, including the UK. That has knock-on consequences for how our interconnectors work, as Mr. Gannon has said. This European system is interconnected to the network system. It is a single market effectively for gas and that is driving a single phenomenon in the market for electricity which is why this solution needs to come at a European as well as a national level.

Mr. Mark Foley

We have two statistics in the report which were questioned. We will provide those to the committee in separate correspondence in the next few days. They are statistics on demand and statistics on forecast accuracy. I just make that point because they were questioned. We will provide evidence of that.

Chairman

I thank Mr. Foley for that.

I call Senator Pauline O'Reilly.

Senator Pauline O'Reilly

I did not expect to be first, but I am willing to speak now.

All members of the committee - from both Government and Opposition sides - are aware of the issues. Representatives from the CRU, EirGrid and the Department have appeared before the committee a number of times and have answered all our questions. They have been straightforward and upfront with us on all the issues over the past 18 months. That is a matter of public record.

My first questions are for the Minister. What specific actions have been taken to address these security concerns over the past 18 months? We need to bring much more attention to the cost of electricity and gas because that is the biggest concern for people. The problem with the conflation is that people are assuming that the energy demands will have a knock-on impact on the costs, whereas I understand those costs are international. What measures should we take to help people with the cost of electricity, which, as the Minister has already said, will be 14 times the amount we have seen over the last ten years unless we do more? I know we have put in €2.5 billion, but more is required, including, perhaps, a windfall tax and other measures.

The witnesses have already alluded to this. How does Ireland compare internationally on security and cost? We sometimes feel this issue is only being felt in Ireland. It is important to point out that we are dealing with an international market and we are dealing with a war. We need to be honest with people about the impact of war.

Deputy Eamon Ryan

The Commission for the Regulation of Utilities has set out some of the timelines on this, but I will go further. Going right back, our first energy policy was set with the White Paper I was involved in back in 2007. That was followed in 2015 with a further White Paper on energy policy. In that period, we always had capacity payments for new generation. The European Commission was uncomfortable with that or had various questions around it which led, as Ms MacEvilly said, to revised rules for capacity auction, capacity systems and how energy generation can be delivered in this way. That led to the new policy for capacity auctions in 2017 and 2018, as she said, with, as I recall, the capacity auctions being completed in early 2019.

I agree with Mr. Foley that one of our fundamental problems is that what we expected to get from those auctions was not delivered for a variety of reasons. The report by Mr. Dermot McCarthy will review that. As I understand, the equipment provider in the North Wall was not able to meet the emission standards for the equipment. In Poolbeg, Ringsend and Corduff there were difficulties getting projects through the planning system in a timely manner to deliver on it. There were ESB plants. Statkraft and Energia have much smaller plants which did not proceed through the auction process.

In early 2021 we became aware that the first of the North Wall auctions would not be delivered. Later in 2021 it became clear that some of the other ESB plants would not be delivered. It started in early 2021 when we had knowledge of that. Our Department immediately convened a meeting with EirGrid and the CRU to assess what was clearly going to be a capacity shortfall. We issued a warning note to Government early in April 2021 to raise concern about the problem. It is a real concern if we do not have sufficient capacity for both our economy and the public.

In June 2021, we started the procurement process for what is now 250 MW of emergency generation to try to close that gap. Recognising that we had an emergency, we did not go through the ordinary capacity system. We were going to intervene directly to ensure we closed the gap for this winter. The 2018 and 2019 auctions were designed to provide power for the coming 2022-23 winter. The first of the projects was subject to legal challenge which delayed it. That is one of the reasons it will not be available for this winter, unfortunately, as Mr. Foley said. We reissued it in the autumn of that year.

At the early stages of this year, we agreed we would need to do a further emergency purchase - purchase rather than procurement because procurement timelines would not deliver it quickly enough. We brought the legislative proposal to the Oireachtas as directed by the CRU recognising that we had this gap. It recognised that gap and said we needed that additional 450 MW that would be done on an emergency purchase basis, paid for through the network charges. The final mechanism was agreed in the Dáil on 7 July.

Early this year, in January and March, there were two further auctions to deliver the additional power everyone here agrees we need. We need 2,000 MW of backup flexible gas plant, which will use less gas but is there when the wind does not blow. We must have a laser focus and attention on delivering that and the emergency procurement and purchase power generation, as Mr. Foley said. That is a key issue, that we must ensure we get the emergency procurement. We will have further auctions. We will respond if any of those projects do not go through. We must make sure we deliver.

Separately, and they are separate, on the arrival of the war in February, we immediately we immediately established an emergency energy security planning group. It involved the CRU, EirGrid, the ESB, the Department of Enterprise, Trade and Employment, Gas Networks Ireland and all the range of organisations needed to address what is a much bigger and more impactful crisis. That is not to say the other issue is not critical but the energy price crisis as a result of the war overshadows everything. It is absolutely dominant. We are engaged in a variety of mechanisms through that emergency planning system, with our Department leading it, to bring us through that. It includes issues around energy poverty and Government supports. Even in the past three weeks, things have changed dramatically. What was an initial high spike in gas prices then stabilised somewhat at a very high level, which was a historically unprecedented level, but in the past three to four weeks, Russia has continued to threaten to switch off the Nord Stream gas pipeline and other pipeline routes, and that is why gas prices have gone up and why there is an emergency meeting of the European Council. They are separate issues but both are being managed through our Department, the CRU and EirGrid, which are involved in strategic planning teams which meet every month, and every week we have subcommittee meetings to address both challenges at once.

Chairman

We are okay at the moment but I might speed guests along in their answers if I feel we are running out of time.

Deputy Jennifer Whitmore

My first questions are for the Minister and then I will turn to the CRU and EirGrid. When does the Minister anticipate that the review being conducted by Mr. McCarthy will be submitted to him? Will he make the report publicly available?

On prices, the Minister said we are seeing unprecedented increases in bills and in energy poverty rates. However, we are also seeing unprecedented increases in the profits for energy companies. It was spoken about a bit but will the Government implement a windfall tax to try to dampen those profits and redistribute the additional revenue back to those experiencing energy poverty?

Turning to the CRU and EirGrid, we are hearing a lot about what went wrong and who is responsible. We are seeing a bit of going backwards and forwards and some finger-pointing on that. I want to bring it back to this winter and what will happen. The CRU's opening statement referred to what the problem was. It was identified in 2020 and 2021. It referred to the programme of works as the solution. However, that programme of works is a document that was initiated in April 2021 and was published in September 2021. Obviously, we are in a very different environment now than last year, so I am surprised it has come in with a document outlining solutions that is a year old when there are new issues to be considered. Similarly, the information EirGrid has given the committee is from its energy capacity statement from last year. We need real-time information as to how critical and how bad the situation is. What is the shortfall in energy between supply and demand that is forecast for this winter? This winter is what we need to focus on. What is the likelihood of blackouts because of that? How will that shortfall be made up?

Deputy Eamon Ryan

We recognised in the spring that we needed to do an independent review. I approached Mr. Dermot McCarthy, who is former Secretary General of the Department of the Taoiseach. He started work during the summer. I expect an interim report in the autumn. I am giving him great flexibility, freedom and independence in how he conducts that review. Our intention is to make it public.

The introduction of a windfall tax is one measure. We are looking at a variety of different options. We had a meeting with the Taoiseach and Ministers for Finance and Public Expenditure and Reform yesterday. We will have to review all options. We must include what is happening in Europe as we do that. It is all part of the lead-up to the budget where we will have to take significant measures. As I said in the media last Wednesday, that is one measure we will have to consider and look at.

Ms Aoife MacEvilly

The programme of actions was published in September last year but it was very clearly a multi-annual programme. It is a very live programme. We have active steering groups and working groups operating at all levels throughout the CRU, EirGrid and the Department implementing and adapting as we go on. Mr. Gannon might speak about some of the additional measures we have taken in light of this winter's challenges.

Mr. Jim Gannon

Very briefly, the programme has to adapt as risks change and as some of the mitigation measures succeed or as some of them face more significant risk. There has been a delay, notwithstanding the great efforts of EirGrid, ourselves and others to bring the 200 MW on this winter. That has resulted in a couple of other actions being taken that are additional to the programme, including the optimisation of the batteries that we have in Ireland now, the number of which is growing, to provide greater service during times of stress. A second piece is to enhance demand-side response through a number of measures at domestic and industrial scale. Another, as Mr. Foley stated, is working with the large-scale energy users which have significant quantities of backup generation to access that at times of system stress. There are a number of different measures, but they do change over time and must be added to as risks present themselves.

That would have provided sufficient supply to allow for an open tender process but it was broadened and made wider. The regulator allowed more people in. It seems that those that were not ready bid low, won the contracts, or in elements, 400 MW, and did not deliver. It is put to me that this suited the ESB and that it was a commercial decision on its behalf because it had legacy plant that would be drawn on anyway. In other words, it was pushing somebody else out of the way for its own benefit.

I would say that the contention that Senator Dooley put to us around a commercial decision in terms of the auction is a serious issue and if the Senator has evidence to support the concern he is raising with us, we would take that very seriously. As the Senator will be aware, we conduct inquiries. If the Senator has evidence to support that contention, we would take that very seriously and we would welcome the Senator contributing to it. I will not comment further than that, other than to come back to some of the aspects of the specific qualification process and so on, and will turn to my colleague, Mr. Melvin.

Mr. John Melvin

Under the capacity market code, there is a pre-qualification mechanism. There can be a draft qualification and a final qualification. There is an appeals mechanism and final decisions are then made by the SEM committee. The initial stages of the pre-qualification are clearly outlined on page 30 of the EY report.

The Senator asks a specific question about an auction some years back. I do not recall any particular changes to pre-qualification regarding either the 2018 or the 2019-----

Senator Timmy Dooley

Was planning of grid access part of that bid?

Mr. John Melvin

If I could finish, the qualification requires one to have a grid connection. It does not require one to have planning before one can pre-qualify. That was the case for those two years. That was not changed in that period.

There is a case study in the EY report, on page 39, which outlines the ESB withdrawal of the planned capacity.

All of this is out there. It is all available. As Ms MacEvilly said, if Senator Dooley has any particular concerns, if he could pass them on to us in this regard.

Senator Timmy Dooley

To be clear, the concerns are simple. They are that the bid process that the CRU undertook allowed a broad spectrum of actors into the bid, some of whom clearly bid low - take away the other elements that I have said - and who ended up winning and being unable to deliver. The purpose, at least my understanding of bids generally, of having a pre-qualification is that one removes the potential for tyre-kickers in the first instance and those that might seek to use the bid process for other commercial purposes, in other words, to try to block access of others. It is part of an approach to ensuring that there is fairness and that one gets what one wants and does not get somebody coming in and throwing one out - market capitalisation or whatever. In light of what has happened, was the CRU's bid process fit for purpose? In another time, would Mr. Melvin have looked at the pre-qualification and viewed it a little differently?

Mr. John Melvin

That is one of the aspects of the market that the EY report recommends that we look at. We have an open consultation on that. We will review any comments received on that and make any changes that we consider appropriate. That is with regard to here-and-now going forward.

If, in regard to activities in the past, the Senator or anyone has concerns, we would be very happy to receive those.

Senator Timmy Dooley

Does-----

Chairman

I am not letting Senator Dooley in again.

Senator Timmy Dooley

In light of what happened does the Commission for Regulation of Utilities have concerns in relation to the bid system, notwithstanding the allegations I made?

Chairman

I ask Senator Dooley to be brief and, equally, if the commissioner could be brief.

Ms Aoife MacEvilly

That is, as Mr. Melvin has said, why we asked EY to take a look at this and why we are bringing forward for consultation proposals that might change that. There are pros and cons to either approach. It is a question of whether one wants that wide range of bidders coming in, in the context of the scale of what we need to procure, and giving them the certainty on the contract and then ensuring that they deliver or whether one wants to narrow it down to people who have received planning and are further along in the process and potentially exclude potential bidders. There are pros and cons to either approach but it is one of the areas we are looking at.

In one of the auctions we conducted recently, the T-3 auction which secured, if I recall, 1,300 MW, we looked to have projects that had full planning permission because there were significantly advanced projects available to compete in that auction. In response to Senator Dooley, there are pros and cons to either approach. We are consulting on that. It is absolutely something that we take very seriously.

Mr. John Melvin

In that auction we looked for sites that had a completed planning application, as opposed to full planning.

Ms Aoife MacEvilly

Yes. Sorry, a completed planning application. I beg the Senator's pardon.

Chairman

I thank the commission for that and thank Senator Dooley. I call the Senator's colleague, Deputy Devlin.

Deputy Cormac Devlin

I thank the Chairman and welcome the guests. It is good to have them in again. Obviously, our discussion is far more crucial now, given the timeframe we are in. As has been said earlier, Ireland, like most of Europe, is facing a difficult winter. Energy prices, particularly of natural gas, are a multiple of previous years.

Many of us in the Dáil, as the Minister will be aware, have warned about this situation arising and it is a pity more quick fixes were not initiated, particularly for households as we face the winter, particularly in respect of small-scale retrofitting. I note the Minister's statement about the figures having doubled on 2021, particularly for those on low incomes. However, if one looks at my own area in Dún Laoghaire-Rathdown, only 80 out of the 4,500 local authority-owned homes have been retrofitted. The window-and-door replacement programme is on hold until 2023. While progress has been made in terms of active travel, funding has gone back to the Exchequer in that county. That is merely an example of that area, as opposed to others. The Belgian Prime Minister said that we could be facing this crisis for five to ten years. I hope he is wrong but we obviously need to support retrofitting urgently over the next couple of months.

Businesses and households are facing are enormous costs and increases in prices and that is why there is much emphasis placed on budget 2023. We need to see greater increases and supports for those on fuel allowance and the continuation of reductions in VAT and duty.

In terms of additional consumer protections, while the existing ones are welcome I have serious concerns regarding what was being approved by the CRU. For example, people are being told that they should reduce their peak-time usage. That is understandable, given what we have been discussing. Suppliers such as SSE Airtricity plan to increase their off-peak rates by an eye-watering 62%. There is an anomaly in Ms MacEvilly's statement. At one point, Ms MacEvilly mentioned "an accelerated decline in the availability of the current generation fleet;" and yet she went on to refer to "the retention in service of older generators". Which is it? Is it that it is crumbling and cannot be used or is it going to be saved and continue to be used?

On the absence of smart meters and day-and-night meters in most households, the issue of peak and off-peak is problematic. Most consumers are on 24-hour electricity meters. It might be worthwhile considering a standard monthly allowance or tariff priced at a reasonable rate and give people the opportunity of a basic supply with graduated tariffs beyond that.

I have three questions for the Minister, two questions for the CRU and two for EirGrid. For the Minister, what is the Irish gas storage capacity at present? In the event - what we heard from EirGrid - of the gas rationing in the UK in the coming winter becoming a problem and considering exports through the Moffat pipeline to Ireland are likely to be rationed as a result, what emergency measures do we have here to mitigate any gas shortages? Today's edition of the Irish Independent, raises the issue about the Corrib gas field possibly continuing until 2036 and looking at renewable options.

Has the Minister met representatives of the indigenous industry since coming to office?

I have some questions for the CRU and EirGrid. EirGrid indicates the annual generation capacity statement is coming in the next couple of weeks and its representatives also highlighted that since 2017, EirGrid has identified via that statement increased tightness between supply and demand and inadequate generation capacity challenges.

Chairman

The Deputy is now over four minutes.

Deputy Cormac Devlin

How has that fallen on deaf ears for so long? I can come back in a second round of questioning.

Chairman

You have used your quota for the second round as well.

Deputy Eamon Ryan

I have met representatives of every industry involved with the energy and environmental area. With regard to the UK and gas security, there was a statement from the UK Government's spokesperson earlier in August indicating the UK has no issues with either gas or electricity supply and the UK Government is fully prepared for any scenario, even those that are extreme and very unlikely to occur. The spokesperson indicated there are long-established co-operation mechanisms with Ireland that would ensure gas supply to Ireland in the event of any emergency. We cannot rule out anything and the report to be published in the coming weeks will look at every aspect of this and ensure we have provisions for every eventuality.

The Deputy's role about local authorities is absolutely correct. We need everyone in the country really to focus on energy efficiency in everything we do. Our Reduce Your Use campaign is going to be ramped up and it is the best protection against high prices. The Deputy is correct that our local authorities have not delivered quickly enough the scale of retrofitting we need and want, and they have not been spending the budgets in both that and other areas, including active travel, to deliver efficiency and protect our people at this time. We must collectively work together, particularly for the more vulnerable households, including those with lower incomes and in inefficient homes. We must have a razor-sharp focus on those people and protect them in the next two to three years.

Ms Aoife MacEvilly

There were questions on consumer protections and smart tariffs. We have installed approximately 920,000 smart meters and we will have 1.1 million installed by the end of this year. That is the latest update from ESB Networks. That will amount to more than 50% of households, and more smart meters will be rolled out next year. We really want to optimise the use of those meters now to support customers with better information and tariff options that might help them understand the challenge of the increasing cost overall and how to save money to any extent.

As the Minister has clearly outlined, all prices are going up for all customers at a level we have not seen before. That is of significant concern for all of us. With the network tariffs we are trying to ensure there is an incentive. The peak may increase, relatively speaking and on the basis that all tariffs are going up, and it is about providing a relative incentive to move energy off peak. We are doing that through network tariffs and we will be challenging suppliers around how they are providing attractive tariffs to customers to help them understand how to save money.

We have poorer availability of the existing fleet. In some cases that is not just about the older plant, although they are challenged by being older. In some cases it arises from some of our newer gas-fired generators. We think part of this is because we are at a point, with the level of renewable penetration that we have, that some of the plants are not running consistently and in a predictable manner. They can be dependent on the wind, with less predictability, and this sometimes gives rise to challenges around their maintenance and so on. That is part of the issue and something we are working on and monitoring.

There seems to be some confusion about this. We identified the need last year and we got the support of the CRU and the Government. We got directions and went about a selective tendering process. We picked actors we believed had the capacity to do this with great and serious urgency, I stress. Unfortunately, one actor that was not in that group decided to take legal action and injunct the proceedings. The actor in question did not have the capacity to provide a solution but chose to go to the courts in a way that was very unhelpful from a national perspective. We had two choices, which were to thrash this out in court and continue or step back and run the process again in a more traditional procurement mode. We made that decision because it would create greater certainty about ultimately getting those on the bars.

Deputy Darren O'Rourke

I thank the witnesses. It is important that we are here and I welcome the opportunity for the debate. There is much concern and this points to a possible spectacular failure to manage our energy transition. People are deeply concerned. There is a Government that has been arguing against progressive market reforms at a European and Irish level and it is failing to deliver targeted supports. Its representatives are coming here today talking about a "plan" to address energy poverty, despite the fact the strategy is out of date since 2019. It is important we have the opportunity to address matters today.

My first question is to EirGrid and the CRU. Will they clarify that the buffer or head room we have for winter 2022 is 280 MW? On the demand side and on-site generation, are we saying there is capacity to do 200 MW over the winter? Will they confirm that position because this would provide the type of clarity that people want with regard to the prospect or risk of blackouts over winter?

The second question is for the CRU. Was the Government's introduction of the EirGrid and turf Bill a vote of no confidence in the CRU and the capacity remuneration mechanism? It essentially rewrites the rule book and says that the mechanisms of the CRU had delivered error after error in the winter of 2021 and the winter of 2022. We have heard the criticism from EirGrid.

The CRU mechanism will be responsible for delivering 1,300 MW between now and 2030. What confidence can anyone have that this will be right?

What lessons have been learned? What were the failings that will now be addressed? The witnesses attended this committee in October 2021 and pointed towards statutory processes, ancillary infrastructure and economic signals. It seems, nearly 12 months on, that we are still in an iterative process of learning from mistakes. I ask the witnesses to please give us some assurance that they are in control.

Mr. Rodney Doyle

The generation capacity statement, which we produce, is looking at a gap of about 260 to 280 MW. What we also do on an annual basis, before every winter starts, is produce something called the winter outlook, which looks at the specifics of the winter. To the point that was made earlier, it is a very live piece of work we do. At any point in time a generator can come back or another generator can go or force off the system. As we sit here, the GCS is saying the gap will be between 260 and 280 MW. Over the next couple of weeks, we will look again, as we do regularly, at the plant situation and determine where we are at that point in time. Through the winter, we will utilise all the tools available to us to manage that gap.

In terms of demand-side management or DSM, we have approximately 500 MW of demand-side management connected to the system. What we want from the DSM is an increase in the performance such that if we have 500 MW connected, we can rely on up to that amount. We want to see a closure in the gap between what is signed up and what delivers for us. As more DSM connects to the system, which would be good because there is potential out there, the important thing will be how much we actually get from it on the day. Capacity we can rely on for the system on the day is what we need.

Deputy Darren O'Rourke

What would Mr. Doyle say it is now, of that 500 MW?

Mr. Rodney Doyle

On any one day at the moment, because of availability, we are probably getting about 130 or 150 MW.

Deputy Darren O'Rourke

Is Great Island back?

Mr. Rodney Doyle

Great Island just came back last week and has been easing its way back in. Dublin Bay came back recently as well. During the summer, we work with the generation owners to take their outages during that period so that coming back to the winter we are in the strongest possible position, depending on the availability of the units. We have had a tight summer because we have been letting the units off from the system to do their outages. We are seeing them come back and will hopefully see more come back, which is why the update on any potential gap would be refreshed as we get closer and closer to the winter.

Ms Aoife MacEvilly

We would like to provide assurance to the members that we are delivering on our programme of actions and the actions set out in the national emergency security framework, which includes continued delivery through the capacity mechanism. That is delivering, although we do have to learn from the failure to deliver that 500 MW, which we have discussed. There is a range of reasons for that. It is challenging to deliver energy infrastructure on this island and that is something that is part of what we are learning and what we are enhancing now.

Deputy Darren O'Rourke

Ms MacEvilly mentioned energy on this island but my understanding is that it is a different experience in the North. What is different between North and South? What are the reasons she referred to?

Ms Aoife MacEvilly

Right now, we have capacity procured by the CRM in Northern Ireland. Some 600 MW is under construction. We have also delivered capacity like batteries and demand-side units through the capacity mechanisms that are in place, which are operational and supporting security of supply for this winter. We have tangible evidence of delivery under this capacity mechanism.

Some of the challenges around the 500 MW that did not deliver have been outlined by the Minister. It is clear that there are challenges around the timelines for planning processes and environmental processes, with everybody working to the best of their ability. It just seems to take longer. We support the Government's initiative around reviewing the planning framework with a view to accelerating some of those processes so we can deliver some of the much-needed capacity. That is not just around generation. Mr. Gannon spoke about this at a previous committee hearing. It is across the board. We need to support EirGrid in delivering transmission infrastructure more quickly and we need renewables more quickly. That is a general challenge. Within that, we recently published a review of the capacity mechanism areas where we think there can be improvements and we are consulting on that. That will enhance future auctions but in the meantime we have procured and are delivering significant additional capacity.

Mr. John Melvin

Since the capacity mechanism came in, 4,800 MW of new capacity has been contracted. Just under 3,000 MW of that is gas, 440 MW is battery and around 1,200 MW is demand-side units, as we have discussed already. In total, between the large non-delivery we have spoken about and other smaller failures to deliver, we would have had 657 MW that did not deliver. When we were here last October, we had contracted about 2,500 MW of capacity. Since then, in the more recent auctions, we have contracted another 2,245 MW. The bulk of that is in Northern Ireland, although I think the Deputy is aware that around 600 MW is in construction. The same capacity mechanism is delivering with a different planning and consenting regime in the timelines that are envisaged. From the most recent auctions, and this is one of the recommendations in the EY report, we have an enhanced reporting regime. We, EirGrid and the Department are regularly meeting the 1,500 MW of new gas capacity that has won contracts and the 360 MW or so of batteries that have won new contracts. Of that 360 MW of batteries, 120 MW or so is already commissioned.

Mr. Jim Gannon

We mentioned last October that there were two upcoming auctions and that we needed to make sure they secured and procured the capacity necessary. Mr. Melvin has outlined that more than 2,200 MW was secured in those. In advance of those auctions, we increased the economic signal by examining inflation to enhance the price cap. We made that change in the course of a number of short months to address certain issues. We also offered directions and letters to Gas Networks Ireland and EirGrid to ensure the grid connections, for both gas and electricity, would be delivered on time and that the ancillary utilities would be assured to those generators. That way, we would have confidence and they would have confidence bidding into the auctions that they would receive their connections on time. That was another change.

Following that, we have a consultation under way with regard to the demand-side units to look at the economic signal they are receiving. We have already mentioned that we began that review of the CRM in December of last year. I will not go into that in much more detail. We amended those shorter term auctions, the T3 and T4, to look at that longer term review and enhancement of signals, notwithstanding that we had tactically looked at changing some of those signals in those shorter term auctions. We are thinking and acting in the short term to secure the 2,200 MW but also thinking more long term about our 2030 delivery.

For the 2,200 MW there will be challenges in delivery and timely delivery. It is worth repeating that for both network infrastructure and for generators, it is a very difficult place to bring projects through a planning and licensing system. That is not just here; it is across Europe. It has been recognised in Europe through the REPowerEU document, which states that renewable energy generation infrastructure in particular, but also the networks supporting it, should be considered in the overriding public interest. It is essential for us all to make sure we all support the delivery of the type of infrastructure we are going to need to deliver our low-carbon transition. That is not just wind farms and solar farms and their supporting infrastructure. It is also the gas-fired infrastructure that will make sure we keep the lights on when the wind is not blowing and the sun is not shining. The delivery of infrastructure cannot be left behind as we fix the procurement aspects of the market. What I am trying to get across is that in the short term we have made changes to address that, and those have had some impact, but we are still examining what else is needed for the medium and long term to make sure the CRM performs to its optimum.

Deputy Darren O'Rourke

One of the main points the witnesses have made is about planning and licensing. I have heard that from three contributors. I presume that is among a number of factors.

Mr. Jim Gannon

It is among many factors.

Chairman

I thank Mr. Gannon and Deputy O'Rourke. We now go to Senator Boylan.

Senator Lynn Boylan

I thank all the witnesses for their contributions so far. My first question is for the Minister. He mentioned in his opening statement the demand side of 15% voluntary. Will he outline his view on that? Many European countries have already published their ideas around how they will reach those reductions in demand but we have not really seen anything from the Government on what it is and how it will be communicated to industry and households.

The other issue, which others have touched on, is about the EU market redesign. I appreciate there now seems to be a shift in the Government's position in favour of reform and the decoupling of gas and renewables. In June, the Minister told my colleague, Deputy Rose Conway-Walsh that he did not support dismantling the investment, regulatory and markets system. It is important that there has been a shift and that we will see reform of the market because the coupling of gas with renewables is punishing households.

What I also want to bring up with the three stakeholders here today are the RESS auctions. In March of this year, I flagged concerns that were being heard from various stakeholders. In the context of the RESS auctions, we have the highest renewable energy costs in the EU. At that stage, they were about €90 and we flagged the fact that we were concerned about the new RESS auction. We were given reassurances by stakeholders at that meeting. We were told: "Don't worry. It is a competitive process and it will deliver." Instead, what we saw is it is up around 150 MW in the RESS scheme, so it is more expensive for renewable energy than it was before. Has the Minister given any thought to the call for the task force to address the concerns around why we have the highest renewable energy costs in the EU?

This is really important. People need to know that we are paying more for our bills now because the RESS auction has delivered higher renewable energy prices. I understand the public service obligation, PSO, will go into negative in October because of the way the market is regulated in the EU. If we had delivered renewable energy at an even lower cost, households would have received a bigger return on that because the renewable energy providers in the RESS projects would be paying more back into it. It is important that we address the fundamental issues with the RESS auction that has resulted in Ireland having the highest renewable energy costs.

Chairman

I have given other members latitude. If the Senator would like to ask another question she can go ahead.

Senator Lynn Boylan

In the energy poverty strategy of 2019, the CRU was asked to carry out an analysis of what the barriers to switching were for people. I know the CRU regularly says that the best way to reduce one's household bill is to switch supplier. Age Action and other organisations such as the Money Advice and Budgeting Service, MABS, and Traveller organisations will say that there are significant barriers. Was that analysis carried out and if not, why not? Currently, 63% of people do not change suppliers. If those barriers are not going to be addressed, will the default tariff which penalises people who stay with the same supplier at least be done away with?

Deputy Eamon Ryan

We have asked Gas Networks Ireland and CRU to come back to our steering group on emergency planning with further measures. The measures under public consultation from CRU on time-of-day pricing is a good example of how we can manage demand and have flexible demand management to help us through this incredibly difficult period.

On the RESS scheme, which the Senator mentioned, I note a number of changes which are important. We have introduced a new scheme where there is effectively a cap on how high costs can reach, which was not there previously. That was an important development in terms of improving the market. The Senator is correct. I would have liked and expected to see somewhat lower prices. In answer to the question as to why our prices were higher than expected, there are a variety of reasons for this. First, the world is in a very difficult global supply chain situation, with the cost of steel and other supply constraints. The primary reason in my estimation is that the curtailment and constraints that we apply to renewables, because of a lack of grid connectivity, is one of the biggest challenges. I will be honest and say that it is a political issue for all of us. We know, in the past decade, despite the best efforts of EirGrid and ESB, it has been very difficult to build out the grid. It is neither an easy nor a popular thing to support or promote. If we do not have good, strong grid connectivity and the ability to get that through the planning system, it will have knock-on consequences for our economic development and protecting people from fuel poverty.

EirGrid has done a good job in Shaping our Electricity Future, which I have said consistently, in terms of public consultation, is exemplary. In terms of how we will start to change that narrative and story, EirGrid will come back with a revised Reshaping Europe. It will take into account what we have seen in the recent RESS auctions. We will have to start locating both generation and demand in areas that support the grid, thereby minimising the need to build out the grid.

If I were to mention one constraint and one difficulty we have, as Mr. Gannon said, it is our ability to get some of the grid connections through the planning system. That is our biggest problem in that regard.

Ms Aoife MacEvilly

We have conducted over time a number of analyses on the barriers to switching because it is a really important area. We have introduced some key measures to enhance switching activity. What we found through some of the behavioural surveys we conducted is that customers find it confusing, so how do we make it simple? They also forget, so how do we give them reminders at the right times?

The measures we introduced includes the estimated annual bill. When we talk about the advertising of new offers, for instance, or supplier discounts and so on, they must also include the estimated annual bill. Let us say that with a discount it would cost €2,000 per annum so that a person can easily compare that offer with an offer from another supplier that might be expressed in slightly different terms. If the estimated annual bill is calculated at €2,100, one can quite easily tell the difference in costs arising from those two tariffs. Therefore, it is easier to compare.

We also introduced a requirement on suppliers to provide a 30-day notification in advance of the end of the termination of an offer. This is so that customers will be reminded in time to look and shop around. They are given the information in that notification. It is a separate letter. It is not just contained in a bill. It is provided in a separate letter or email communication, whatever the customer prefers.

We also introduced an annual prompt through a separate letter or communication. If a customer has been on a default tariff for a while, he or she will get a prompt from the supplier saying: "We see you have been on that tariff for a while. There may be better value. Why don't you look at these options?" It is to get past that.

We conduct annual surveys in which we try to understand the barriers to switching. People who do it find it easy but we think there is not enough activity in that space. We also conduct communication campaigns. We launched a CRU switching campaign that we ramp up and down. We saw very significant switching activity at different times. Earlier this year, for example, we saw some of the highest switching rates that we have seen for some time. It is something that we constantly monitor and we will take action when we can support customers.

On the default tariffs, as part of the package of protection measures - we have not published the full package - we are requiring all suppliers to make their retention offers available on websites so that customers are made aware that suppliers do offer value for loyal customers. They need to make it clearer so customers can ask for that. For those on financial hardship prepay meters, it is a new requirement that they get the best available tariff from suppliers. This is to try to redress that balance which the Senator mentioned.

Senator Lynn Boylan

It is more for people who do not want to do direct debit. Many older people have an issue with being forced to set up a direct debit and they are being blocked from swapping or people who have a poor credit rating are stuck with their supplier. How do we address those barriers for those people because they are more likely to be the more vulnerable households?

Ms Aoife MacEvilly

Chairman

We will move on to Deputy Alan Farrell.

Deputy Alan Farrell

I thank the Chairman. I welcome the witnesses and thank them for their attendance this afternoon. I have seven questions.

First, I believe there is marginally less supply in the Irish market than there was last year. I have taken that from the opening statements. Is that correct? Our guests might answer that question quickly, as some of my further questions relate to it. Mr. Foley might address it first.

Mr. Mark Foley

I will pass that question to my colleague Mr. Doyle.

Mr. Rodney Doyle

I believe the Deputy means less generation capacity.

Deputy Alan Farrell

Yes, that is what I mean.

Mr. Rodney Doyle

Yes, as I alluded to earlier.

Deputy Alan Farrell

No new supply has been provided and I emphasise “new” because I realise that existing plants came back on stream in the course of the past 12 months. Surely we have the capacity to plan on the basis of a gradual increase in demand for energy supply, which we are seeing right across Europe, and yet we have not actually provided anything new. That is my first question or statement for comment. My next question relates to plant reliability and assurances that the existing grid and supply infrastructure is capable of staying online. Is there a likelihood of any outage over the course of the next 12 months, with obvious emphasis on the coming three or four months? Will the stakeholders be able to ensure that the other works that are essential to our national grid outside of supply, such as grid planning and connections, continue to receive the necessary focus they require in the next 12 months?

The elephant in the room,is the large-scale energy users. It was touched upon by the Chairman in his opening questions and indeed by the respondents. Has the Minister or the stakeholders met representatives of those large-scale energy users and what mitigation can we expect this winter, should supply become critical?

Notwithstanding what other witnesses have said today, can the Minister state whether we have a written or contractual agreement with the United Kingdom on supply? Perhaps the Minister might explain a little what might happen should an issue arise in the United Kingdom with those essential suppliers of 75% of our gas.

My final question is on the remarks of President von der Leyen in the past 24 hours. My understanding is that the Minister will be having a meeting next week with his fellow energy ministers. Can the Minister highlight, if he has had time to consider it and I appreciate that information is light at this stage, what he considers Ireland’s target for that particular emergency session will be in respect of the emergency intervention into the energy market and what we hope to achieve from that, obviously in agreement with our European counterparts? I thank the Chairman.

Chairman

I thank the Deputy and I believe the first of his questions is for EirGrid.

Mr. Rodney Doyle

I will hand that question on the new capacity to Mr. Gannon and I will take the question on plant reliability and the LNGs.

Mr. Jim Gannon

On the new gas-fired plants, there has been no such new plant on the system in the past 12 months. Batteries have come onto the system and demand-side units are also on the system. As I believe I have said before, we are looking to increasing the signals to those demand-side units to get more of them to declare themselves available because those that do declare themselves available tend to show up when requested.

Deputy Alan Farrell

I am sorry for interrupting Mr. Gannon but I skipped one of my own questions, Chairman, which relates specifically to battery, which was just touched upon by Mr. Gannon. This was on the optimisation of battery performance, which has been flagged in the opening statements which were given to us this afternoon. What does that entail and what can we expect by way of delivery in the coming 12 to 24 months?

Mr. Jim Gannon

This is going to go into a level of technical detail where I will need to toss it over the fence to either Mr. Doyle or Mr. Ryan. This relates to an effort to use batteries which might have a shorter duration of a half hour or one hour duration. Normally, we provide that service for system stability to respond to voltage or frequency changes. Now it is a question of looking at these batteries to see how they could effectively be daisy-chained so we have half an hour from one cohort and a further half an hour from another, to cover, for example, for a period of two hours over the winter peak period and to optimise them in that respect, where that is not where they might have served us before. Is that an adequate answer?

Mr. Rodney Doyle

That is a good explanation. I will deal with the plant reliability piece. It is a positive that the plants that were on outage are returning and we talked about Great Island and Dublin Bay earlier on. We hope that some other plants will come back before the winter starts, plants which have used their outages to get their maintenance done to put themselves in a good position for the winter.

On ageing plant, as one would expect, the older the plant the less reliable the supply would become. The forced outage rate - which is a rate we look at to determine whether one would expect the plant to go off the system or not and whether it was a planned or forced outage - has increased over the past number of years as plants have aged. We understand that when we are planning the system, so we factor that in to our plans then for the coming winter. When we look at the winter to come, we factor in what that means as to what we might perceive to be a gap between demand and supply at any one time. We try to maintain a buffer between demand and supply at any one time and if plant is not available, then that would eat into the buffer we have. That is when one would see things like alerts.

An alert on the system is a signal to the system to say that the buffer between supply and demand has been decreased. That is what an amber alert indicates to the system. We are trying to maintain that as best we can and then will we will do trading with our colleagues across the water to try to maintain that buffer.

Returning to the point that as we come into this winter, if plant goes off the system or if we have low wind days, then that will put more pressure on the system and that heightens the risk to the supply.

Deputy Eamon Ryan

Deputy Réada Cronin

I thank the witnesses for the presentations. Is the CRU collecting data on prepay meters? When a prepaid meter is being installed, is it a smart meter? I am worried about people who are suffering energy poverty self-disconnecting. Can that be tracked using a smart meter? Can we collect that kind of information, in order that the CRU knows if people are self-disconnecting? We see people die on the streets every winter in Ireland. We do not want people dying in their homes on top of that.

I have another question around the energy poverty strategy that has expired. We need one. We need to reach out to groups. I am pleased the moratorium on vulnerable customer disconnections is being extended, but how is that classified? An ever-increasing cohort is vulnerable to energy poverty. The last time we had the Minister of State, Deputy Noonan, before the committee - which the Minister might be interested in - we talked about the fact that some Travellers had not received the €200 of electricity back. Whatever about being cold in one's home, anybody who has spent a night in a caravan during the winter on a cold night is absolutely rigid and freezing. We already had a tragedy in Carrickmines. We do not want a tragedy with Travellers dying in their caravans.

We have been out and about and the only story in town, apart from bus na scoile, is energy costs. I have been talking to many SMEs. They feel that while the red carpet is rolled out for data centres and FDIs, there is very little for them. The European Commission announced approximately €200 million for businesses. We will need to add to that. There will need to be a financial support package for small businesses.

The reason the witnesses are here today is that we are in the middle of a climate crisis. We are talking about it from that aspect. Data centres and these companies are using considerable electricity and energy. We were talking earlier about decoupling gas from wind energy, which I hope the Minister, as a Green Minister, will push very strongly in Europe, because people have to see a national dividend from the number of wind farms and the amount of wind energy that we are able to produce in Ireland. There has to be some kind of a national dividend for companies working in Ireland. Many bad faith actors are trying to muddy the waters around the fact that those prices are coupled. They should be decoupled.

Will the Minister elaborate further on the plans he has for meeting a 15% demand reduction? If we do not reduce our demand by 15%, are we are looking at rationing of electricity?

Could the Minister talk about that as well?

Deputy Eamon Ryan

The strategy on combating energy poverty did not conclude in 2019. It is being continuously implemented, and we now have a progress review and public consultation in place. We will get that delivered in time to influence budget decision-making, which will be the critical part. It involves three very significant tranches where we increase not just the fuel allowance but another mix of social welfare contributions. As well as the credits, this will be key in the response into next year.

Senator Alice-Mary Higgins

The Minister identified the wider factor. The energy crisis is taking place inside a climate crisis, which has not gone away and which is intensifying. He mentioned dependence on fossil fuels, which, of course, includes gas, with the single exception of green hydrogen, which is a minority option. Gas is a fossil fuel and one that is extremely volatile in terms of pricing as well as being dangerous in terms of the environment and the human rights risks that attach to gas as we have seen. This has been identified. It is still not clear how the policies we are discussing today are designed to address the energy crisis and the climate crisis. In that regard, I would like clarity around the position Ireland will take on 9 September, because it is not clear to me. We know Spain and Portugal pushed successfully for a separation in pricing on gas and electricity.

They made a situation whereby electricity prices coming from renewables, such as solar in their case, would not be set according to the price of gas, and that has been estimated by analysts that the measure will lead to a 20% to 30% reduction in bills for 10 million Spanish customers. The measure also sends a very positive signal about renewables as something more reliable and better.

Spain, Portugal, Greece, France, Italy and Belgium are calling for the decoupling of gas and electricity prices. They will bring that position to the meeting. I am concerned that the Minister has made references to the UK and our existing gas contracts. Will Ireland be on the side of that necessary separation or will we see the same thing, which unfortunately the Irish Commissioner contributed to, with the blurring of the taxonomy whereby gas is getting blended into the space in terms of sustainables?

I am quite concerned about one of the comments made by Mr. Gannon today in which he seemed to include gas under renewables, which we know it is not. He mentioned renewables, the need to intensify renewables, and he mentioned not just wind and solar but also gas infrastructure. In that context, where will Ireland be in that meeting? I ask because this issue is really important. It is more important than solely just us and concerns consumers. In that context, when Mr. Gannon previously spoke to this committee, he indicated that the CRU would be happy to provide analysis on the Energy Charter Treaty but it had never been asked to do so by the Department or the Minister. Given that the Intergovernmental Panel on Climate Change, IPCC, has recognised the Energy Charter Treaty and specifically named it as why we may not be able to make the green transition, and now there is the danger of energy policy in terms of those emergency interventions that Ms von der Leyen is calling for, the Energy Charter Treaty represents a risk not just in terms of being able to make the right policy decisions on climate but the right policy decisions for the people of the countries in terms of energy usage, energy security and public need.

I want to discuss the data centre issue very briefly because it is crucial. Demand reduction has been mentioned a lot, but actually the measures that are coming in and that we have heard outlined are largely things such as change of use of time of day, which is the idea of doing washing and cooking late at night, and the idea that emergency or backup generators will come in, including, for example, in the new Amazon centres, which we know are diesel generators. What is the actual demand side reduction - not demand flexibility around surge, particular moments of busyness, the bad day or the day the wind does not blow, which we hear about a lot, but actual demand reduction? I ask because I am concerned we still seem to be okay with a policy where the equivalent of 140,000 households is being added in terms of energy demand by data centres each year. On the phrase that a 9% increase is not that bad for a prosperous, growing and sophisticated western economy, why is it okay for us to have plans for increased energy demand, which will rely on things like diesel backup generators and emergency extra gas imports, when we know from the IPCC that in fact it is these western economies, and indeed the big companies, the very large profitable companies that are building data centres, which should take the first hit when it comes to energy reduction in demand, given that the rest of the world has had the worst impacts of climate change? How can we justify that idea of expanding demand? An option the CRU specifically had in front of it last year - one of its own options, option No. 2 - when considering the options on data centres was not to have any more connections until safe and secure connection could be guaranteed. The CRU chose not to take that option. I would like to know why that option was not taken.

Chairman

I call the Minister who will be followed by the regulator and then EirGrid.

Senator Alice-Mary Higgins

The Minister mentioned local authorities. Why, when they have taken the initiative, such as South Dublin County Council, for example, which has said concerning data centres that it wants a pause to get things in terms of its concerns, has the Government pressed against that rather than supporting it?

Deputy Eamon Ryan

What I have seen in south Dublin, and it is a good example, is the waste heat from a data centre being used to heat the local hospital, local university and local council offices. Going back to what I said earlier about the obligation on large energy users to be part of the solution, I believe it is possible for us to develop solutions where we both have economic development and low-carbon, secure and sustainable energy supply, and having flexible demand, waste heat being used, and backup generation supporting the grid and located in places that complement our needs in terms of grid security rather than the needs of the developer is the way to go.

Senator Alice-Mary Higgins

Is there analysis of the kinds of data processing? When it comes to the crunch, are we talking what gets prioritised? Is it Amazon Web Services, for example? I do not mean any one company. Is it around a commercial profiteering? Where is the analysis on that?

Deputy Eamon Ryan

It is hard for the CRU or EirGrid to get down to the level of looking into what is in the file. I know, however, that we had a meeting, I think last week, where EirGrid discussed some of these issues and the example of having data centres which could possibly turn on or off in complement of renewable power. For example, over a large wide regional area, we might look to complement the use with where the renewable energy is abundant and available, and that is the sort of demand flexibility concerned. When it comes down to the issue, that is a separate issue in terms of which data are considerable valuable to collect. There is a real issue in that, but that is not for EirGrid or the CRU to manage and deliver.

The Senator made the point that, in this immediate price crisis, where gas is being used a weapon of war, we cannot ignore the fact that the climate crisis is also adding to the problems we have because, in truth, in an integrated European network system, which is what we are in, the rivers in Europe are running at historic lows at the same time as one-third of Pakistan is under water. I say that because those low water levels in European rivers mean it is not possible to move fuels up and down the River Rhine, that nuclear plants must switch off as they cannot get the cooling systems their secure supply needs, and hydro in Norway and elsewhere is not available because we have seen changing weather patterns affect the fundamentals of the energy system.

Mr. Jim Gannon

Chairman

We do not have time for an argument on this because there are still six or seven committee members and non-members who wish to contribute. I propose we continue until 3.30 p.m. Senator McGahon is next on my list but Deputy Bríd Smith needs to leave soon so I ask Senator McGahon to give way to the Deputy first.

Deputy Bríd Smith

I thank Senator McGahon and I thank everybody for their contributions. It is a fascinating discussion. I want to go to the Minister first with what is both a criticism and a question about the core of what he is arguing here today. Repeatedly he has mentioned the war in Ukraine as being at the root of the problems we are facing. We are here today to discuss the supply of electricity and the Minister has repeatedly mentioned it in terms of the price. What is really good about this is that the Minister, Ms Ursula von der Leyen, EirGrid and the CRU have all finally admitted that the market is a problem. The mechanisms in the energy market are a problem. The Minister argues that they need to be reformed. Nobody is questioning whether the market can be reformed or arguing that maybe it is time that states took ownership of this crucial part of society, the supply of energy. I contend that is what needs to be done. However, the Minister is saying that we need to give the question of the price of gas our undivided attention. This undivided attention will be, as has been argued by others, along the lines of separating out the cost of renewables and other forms of energy production from the cost of gas. That is not rocket science. It is, however, how the market has worked up until now so I really welcome the change of heart and the change in approach to the market.

Never once in his speech and not until he was asked directly, did the Minister mention the question of data centres and their energy usage. We are here today to look at what we can do about supply but 14% of our supply is going directly into data centres. Globally, we are an outlier in terms of our approach to this topic. In line with what Senator Higgins has just said, I would argue and put it to the Minister and others here that our policy around facilitating data centres is absolutely insane. It is not just that the Minister has sat down with them and had a discussion and they have looked at back-up generation and this, that and the other. In the here and now, we have given a commitment over the next two to three years to connecting eight mega data centres to the grid, using up another 1.5 GW of energy. This is insane and it has nothing to do with the war in Ukraine or with the price of gas. We are talking about supply and I would like all of our guests to address that. The Minister's solution to the lack of energy coming on stream is to call on people to reduce their use.

He is calling on them to look at different tariffs for when they come home to make the dinner and wash the kids' clothes, to reduce their use and to do things differently. Where is the call on the data centres to reduce their expansion and their use? That is not coming from anywhere. It is unbelievable stuff. The only call is for them to get diesel back-up which, as the Senator has said, flies in the face of our policy to reduce emissions in light of the climate crisis.

I specifically want to ask a question of Mr. Foley from EirGrid. In both his written submission and his replies today, he has said that growing demand is not a problem and that it does not present any kind of crisis. I looked back at the statement EirGrid presented to the committee in May 2021. Data centres were mentioned 16 times as being at the heart of the problem of growing demand. A warning was given that something had to be done. Why has there been a change of heart within the last 12 to 14 months? Data centres were a problem 14 months ago when they were only using 30% of the energy they would demand at their peak and would only add more pressure if they were to use all of it and we have now signed agreements with eight more mega-users. There is something amiss in the policy and in how it is being presented.

The only person I heard admitting that there is a problem is Ms MacEvilly from the CRU. I would like to ask her about that. She said that the growth in demand of 9% in the past five years is a problem. Does she know how this increased demand compares with other countries in Europe or elsewhere? That is important. Are we as much of an outlier in that regard as we are in the way we facilitate the growth of data centres?

As a final point, can we please look at the question of how we are going to deal with the energy crisis and energy prices for ordinary people who will be hanging on our every word today? There is not a single proposal that will give them any comfort as regards what will happen over the winter. I would like to hear something concrete from the Minister, EirGrid and the CRU.

Deputy Eamon Ryan

As I have said, the focus here has been on supply issues and the very real issues in respect of generation capacity, our auction system and so on. However, we could not meet here today without recognising that the challenge facing our people, a challenge which is absolutely beyond compare, is the high price of energy. That is separate and unrelated. It is related to the war in Ukraine. That is the source and cause of the problem. That is why gas market prices are now at 14 times their historical average. We could not sit here discussing issues of energy security and energy policy without recognising that.

The solutions to this will not be easy. As we have said over the last year, we will not be able to cushion every blow. However, there will be social welfare measures and other budgetary measures. The "Reduce Your Use" campaign is another measure. It is important that we give our people help, including direct help with insulation, solar panels and a variety of other measures. It is also important to help them reduce their use and it is important that those 900,000 homes with smart meters, a figure that will reach 1 million by the end of the year, are clever in tapping into cheaper tariffs. That is one of the real advantages. Time-of-use tariffs are a practical way to solve problems with bills because the problem of bills, which is beyond compare, is the biggest problem facing not just this Government, but every government in Europe. We have to focus on that and to be honest about it. We have to articulate it and understand what is happening. Included in that will be going to the European Council next week but to be upfront and honest about it, I do not expect a miracle cure to come out of that meeting because the gas price is where it is. I make no apology for broadening this out to look at that issue if I can.

With regard to data centres, in fairness, from my recollection of the last two years since coming into government, EirGrid came to me early on, in the summer of 2020, and said there was a real problem. If I recall correctly, we pretty much stopped committing to any new connections in September 2020. However, as a State, if we had made a decision prior to that and offered a connection, we did not revoke that offer. In general and where we can, as a State, we do not go back on our word.

Deputy Bríd Smith

Does that apply even in a crisis?

Deputy Eamon Ryan

Mr. Mark Foley

I have two comments in response to Deputy Bríd Smith. I made a comment, which I stand over, to the effect that, in the round, I do not deem 9% growth in electricity demand over the last five years exceptional for the type of economy we have. We should have been able to accommodate that. If we had gas generation, we would not be having this conversation today. That is a simple statement of fact.

To the Deputy's second point, in which she attributed remarks to me from last year, I am looking at my statement from last year. Our job is to plan the system looking forward and to advise on what is needed. We do not decide policy. Our job is to deliver on Government policy. The statement we made last year was that, on the basis of the data we had in front of us, we saw an increase and growth in demand for electricity over the next decade of the order of 28% to 30%. That comprises demand from industry, electric vehicles, homes converting to electricity-based heating and general economic growth.

That is the analysis we have done. We do not create the numbers; we look at what is in front of us and report that. We use that as a basis to inform how we plan the system on the generation and grid sides. Our job is not to challenge or question Government policy, but rather to figure out how we can bring effect to Government policy.

What we said in last year's statement is that this is deliverable if we have the gas generation we spoke about. If we bring the gas generation we spoke about on board, as well as onshore wind, offshore wind and solar, and EirGrid delivers the grid, we can deliver the gigawatts, as set out in my colleague's report on shaping our electricity future. This is a deliverable proposition but we all need to get behind it. The prize is a power system with 80% renewables in 2030, as set out in the climate action plan. Our job is to put all of these things together, rather than to question or challenge Government policy.

Deputy Bríd Smith

I wish to clarify a point. I did not ask Mr Foley what his job is. Rather, I said there was a completely different tone and set of arguments in his May 2021 report compared with the submission he made today. Data centres were mentioned 16 times in that report. He explicitly said that pressure was being put on the system by increased demand from data centres.

Mr. Mark Foley

I am reading the report here but I will not get into that. We set out the future demand based on the data that were in front of us. We did not pass judgment on that because it is not my job or that of EirGrid to do so. Our job is to figure out how it might be done, and that is what I spoke to last year.

Deputy Bríd Smith

I thank Mr. Foley.

Senator John McGahon

I have five or six questions. The first few are directed to the CRU and EirGrid and the next few are to the Minister.

Absolutely. To follow up on the Minister's comments on a windfall tax, it is something I am not opposed to but I would like more clarity around the concept. When he talked about the proposition to define the term "energy company" for the purpose of such tax, there is a distinction between the companies because they operate in various stages of the energy supply chain, including extraction, generation and supply. How do we define exactly what an energy company is? I am conscious that suppliers are price takers in wholesale markets. Where exactly do we propose the distinction between a windfall profit and the ordinary operating margins of those energy companies lie? I would be interested in knowing where that distinction comes in and from what point onwards these companies would begin to pay tax.

On the wider aspect, what mechanism is proposed for the introduction of such a tax? How will it be levied? Is there a period of time during which the Minister would like to see the tax implemented? What does he anticipate would be raised for Revenue by the introduction of such a tax?

Deputy Eamon Ryan

We will have to await discussions with the Department of Finance and take into account what is happening in the European Union, which is changing by the day. The arrangements were one of the subjects we discussed yesterday and we will continue to discuss that with the Minister for Finance. We do not have the final details yet.

Senator John McGahon

When does the Minister expect the final details?

Deputy Eamon Ryan

Everything on this issue is a matter of urgency. It is a matter of weeks rather than months.

Senator John McGahon

I thank the Minister.

Mr. John Melvin

With regard to T-3 and T-4 winners in the auction, the auction is held ex ante and everybody understands the rules. The rules of the auction are that it is not index linked. The auction clears, and entities participate, on that basis, understanding those are the rules of the auction. At the time the T-3 auction was undertaken, it was significantly in advance of any events surrounding Russia-Ukraine.

When the T-4 auction was taken, it was in the context of the events surrounding Russia-Ukraine. People who bid in those auctions under the rules thereof had the choice to bid or not. The auctions do not have an indexed mechanism. We have a duty to have competitive auctions with comprehensive outcomes as best we can. Rules of auctions need to be understood and are understood by the bidders at the time they bid. Events can overtake things. In that light, there is a capacity market code which governs the way auctions run and capacity market payments are made. There is a proposal to be considered with regard to indexation along the lines the Senator has described.

We have an accelerated reporting regime available to all the T-3 and T-4 entities to come in to meet us, the Department and EirGrid and explain to us any issues they are having. Not all entities participate in that but all are welcome to do so. If any entities have concerns about barriers in their way with regard to developing their T-3 or T-4 auctions, they are welcome to come in to that process. We will engage with them and, in a whole-of-system way, do what we can to ameliorate any concerns they have about developing their projects.

Senator John McGahon

Excellent, that is very reassuring.

Senator Erin McGreehan

I thank the Chair for his indulgence, as I am not a committee member.

The Minister spoke recently at the energy summit. He referenced the work of EnergyCloud and how we should use the surplus renewable energy rather than dumping it when, as we all recognise, there are so many people in energy poverty. I looked at the retail value of what was dumped in 2020, and it is way over €300 million. As the witnesses know, that figure is rising. Has the Minister sat down with the CRU or EirGrid to discuss making EnergyCloud work for people in fuel poverty? I put a similar question to EirGrid and the CRU. Do they have a plan to utilise that wasted energy and mandate energy companies to reduce the rate of wasted energy?

Deputy Eamon Ryan

I suppose the Senator is referring to where wind power is not available because of curtailment and constraint and is not sold into the market but generated and spilt. Maybe EirGrid will come in, but my understanding is it is a physical constraint. It is not traded because the grid cannot take it. The grid is central and key.

As to how EnergyCloud works, I am not familiar with the specifics of overcoming the physical grid constraints. There has been much innovation by EirGrid regarding carrying more on existing wires but I am not familiar with that particular proposal. Maybe Dr. Ryan-----

Dr. Liam Ryan

I am happy to come in. We are active and working with EnergyCloud. It is a great initiative to try to help people in fuel poverty, in particular, and where we are looking at energy we cannot use because it is constrained or curtailed on the system, how that can be redeployed to protect the more vulnerable in society. We are active in that space and currently looking at how that energy could be deployed. One challenge and constraint we have is that wires from a region are not able to take that power out of the region into other areas. There, in particular, we see a quick benefit in the deployment of the EnergyCloud solution.

Curtailment is where the system can only take a certain amount of energy, otherwise it becomes unstable. We are pushing the boundaries of that. We can currently operate the system where 75% of our instantaneous electricity can come from renewable sources. As we look out to 2030 and that time horizon, a key thing, as we have talked a little bit about today, is having a balanced portfolio. That is when we talk about 2 GW or 2,000 MW of gas generation which would be also renewable gas-ready into the future, so the potential is there to get to a zero- or net-carbon system and be able to redeploy more energy towards the more vulnerable in society.

Mr. Jim Gannon

We have also met with EnergyCloud. Around 12 or 14 months ago we had a general discussion around the concept and made some suggestions as to how it might work better. We met them recently. They have taken on board some of those suggestions and we have arranged, or will arrange, a meeting between the technical team to understand how the product would work with the retail market, and make sure there are pathways available and no barriers.

Deputy Richard Bruton

I should say I have allowed a piece of land I own to be part of a planning application for renewable generation. I say that so there is no question of not declaring that fact. I do not think it prejudices me but I want to put it out there.

It is important to go back to the definition of "energy security" to underline the Minister's point. It is "uninterrupted availability of energy sources at an affordable price". The price crisis the Minister has outlined is important to this discussion. I thank those in the room for their commitment and passion, working under intense pressure for a long time in a very different situation from the central prediction of where we would be in trying to plan our energy. The war, the heatwave and Covid have been significant. I acknowledge the work people around this table are doing.

This is a crisis. There is a famous quote from Rahm Emanuel to the effect that we should not waste a crisis and that it is a time to do great things. Are there urgent things we should be doing concerning which, up to now, there have been barriers, inertia and reluctance, but which we should be putting plainly on the agenda in a crisis situation? Do we need a national resilience campaign in the face of the extraordinary change which will occur over the coming winter? I think of things like smart meters not being fully utilised because of data restrictions. Should we be finding a way through that? Smart controls are in 1.5 million of our homes. They do not have that. We do not promote sharing platforms. Should we re-examine remote working and the hubs and use this period to make significant changes?

I do not have all the knowledge but the circular economy, on which I have done some work, is about rethinking the way we do things. This is a unique opportunity and I think the public are with us in this. They know the Government cannot compensate them for everything that is happening but sectors should be willing to step up to significant change in the way they think about their activities. That is my primary question.

If we go to a system where, as the Minister described, the pricing of fossil and renewables is different, how disruptive would that be to the way we have managed our affairs? Has thought been given to how we make that transition? That would be making sure wind or solar is not excessively rewarded at a time when gas prices are very high. It would go to the windfall issue.

I have a very specific question. Is it possible to mandate that vulnerable users, however they are defined, would be provided the most competitive available regime for their situation?

There is a danger that we portray the data centres as the villain in all this. While there are short-term difficulties in meeting the demand in the system, in the long term Ireland will generate substantial wind energy off our Atlantic coast.

We have built a significant competitive advantage in the whole data management area. It is not against our interests to see data management being done in Ireland. The question relates to the short-term constraints it imposes on us. We need a strategy that is both short and long term for what is a genuine opportunity in the long term but is a short-term pinch point for us at the moment. That is something to try to keep in mind.

Deputy Eamon Ryan

I agree with Deputy Bruton's sentiments regarding the officials here. People should realise that in managing this issue or crisis but also in having managed the Covid-19 pandemic and Brexit, public servants across the board have been through a series of crisis management periods. We should not ignore the fact their work in that regard has been incredibly stressful and pressurised, so it is appreciated.

Returning to the Deputy's second point about not wasting a crisis, as per Rahm Emanuel, the Deputy is right to focus on energy efficiency because it is the cheapest first tool in reducing people's bills. I agree it is down to the most simple and basic things, such as the insulation of homes and availing of that 80% grant if someone does not have sufficient attic insulation and cavity wall insulation. It is not going to solve all the problems but it might reduce energy use by some 25%. That is not insignificant at a time when energy prices and bills may increase fourfold.

If I was looking at another system change we could do at the moment, I would look at rolling out those smart meters as fast as we can but also being advanced as a country in terms of switching everything on and off and having really good time-of-day pricing. It is a win-win in the sense it helps protect the system security, using power late at night when we do not have the same constraint or curtailment issues, but also it reduces the bill. That is the real benefit from it.

The idea we could have good data and electronic management so that devices are easily programmed is one of the other system changes coming out of this that could have huge long-term as well as immediate benefits. There are two pieces of legislation that are centre stage. The European Union is in the middle of its legislative process with the energy efficiency directive and the renewables directive, and it is implementing those at the greatest speed. That sets the guideline towards a circular, energy-efficient economy, and that is what we need to deliver. We need to deliver the legislation and the mechanisms in record time.

Ms Aoife MacEvilly

I fully agree on the scale of the challenge and the call on us all collectively to do more and to do things differently. When we get together as part of the emergency plan that is the national energy security framework and groupings around that, we are being called on to deliver at pace and to do things differently in the crisis that is ahead of us. Some of the things we have been doing include our consultation on the network tariffs, which is different and we have called that out. It is a short consultation and it is a big change but we think it is necessary in the face of what we are looking at. Equally, we introduced protections around vulnerable customers without public consultation, only targeted stakeholder consultation, which was acting with agility and pace in the face of the crisis, which included reiteration of the requirement for suppliers to provide the most competitive tariff to vulnerable customers and which, in fact, expanded that to those on financial hardship prepayment meters. There is more we can do and we will be called upon to do it. Mr. Gannon might want to touch on some of these areas.

Mr. Jim Gannon

There are a couple of things. We need to embed demand response. Whether that is across smart meters, with small and medium enterprise through smart meters, or with larger industrial consumers, for all, it will increase the use of the renewable electricity we have and will take advantage of times when we have significant supply. That will become ever more important as we progress towards 2030. It will reduce costs for all if we can increase and embed demand-side response as part of our transition and it will support security of supply. That is something that is ahead of us. It is something that is being implemented right now. If we can embed it in people's natural lives and make it easy for them to do, it will have a significant impact.

I repeat a point I made earlier. Infrastructural delivery in this country is challenging. Europe has signalled that member states should consider decarbonisation infrastructure and the grid supporting it as being in the overriding public interest. That is a very clear signal from Europe and is one we need to consider. Given the type of transition we are talking about, where the electricity grid will be a meshed network, not just with a number of point sources going dendritically out to users but something that is far more interactive and comes from more dispersed and diverse types of generation capacity, it is essential we are able to progress infrastructure in a more efficient way in this country while not taking away those fundamental rights around consultation awareness among our communities and other stakeholders. It is essential that is tackled and it is there for us right now and signalled from Europe.

Mr. Mark Foley

We are procuring 450 MW of emergency generation where we basically park the rule book and say we will do it a different way because we need to, so there is something in that. Government passed legislation in record time and a construct was developed which we are working on. We are doing something here that is very unorthodox because we have an emergency. That is just a point. We should reframe the capacity and the numeration mechanisms so we get projects on time with the right technology.

We should have a nationwide education campaign on energy reduction and climate action, not dissimilar to the way we captured the imagination of the country around Covid-19. That was very successful, particularly in the first six months of the Covid crisis. It was exemplary, and credit is due to the Government at the time.

We need to accelerate offshore wind because we get wind out there which we do not have on land some of the time. We have to do everything we can to start getting offshore wind farms built. We need to accelerate urgently more batteries and systems services. Every 1% of system non-synchronous penetration, SNSP, we get, we leverage existing renewable plant that is there. It is invested in its own cost. We need to get the SNSP levels up. The way we do that is we get new system services aggressively onto the system so this can then drive the higher levels of SNSP.

Lastly, the demand-side units are not delivering for us. We have 500 MW of contractor capacity, approximately 130 of which shows up. It is not acceptable. We need to get them up to 80 or 90% or tear up their contracts and have an alternative contract framework. They have got away with this for too long. They are either in the mix and will help us or they are not. They cannot be half in and half out. Those are my suggestions. Thank you for the opportunity.

Chairman

If I could come in on Deputy Bruton's question on the opportunity, none of the witnesses has mentioned hydrogen and its potential. Is there an opportunity there to accelerate utilising hydrogen, notwithstanding that we would be probably one of the first to do so? Is there an opportunity for us to take a leap forward and be a global leader in providing hydrogen for balancing and storage?

Dr. Liam Ryan

There is definitely an opportunity around hydrogen from a flexibility onto the grid perspective. At times when we have an excess of generation over demand, hydrogen can be used for long-term storage. In reconstituting that back into conventional generators, it can offset the current fossil fuels they run on. It gives us double flexibility, which is something we need on the system. It gives us the long-term security of supply as well. It is very important we look at those.

The other item I will take the opportunity to mention in the context of the question that was posed is that we also need to be looking at this as a global solution where potentially we have some large global players who may be able to move their demand from one jurisdiction to another. Where we have a lot of renewables in Ireland at certain times of the day, that demand could be utilised during those times, and at other times, if there was high renewables in perhaps California or another jurisdiction, we might have low levels. It would be almost like a virtual interconnector over time. This is just thinking outside the box a bit and thinking of it as a global solution rather than just an Irish one.

Mr. Jim Gannon

Briefly on hydrogen, it is worth considering that, given the scale of resources we have, it is highly unlikely we would be able to export electricity only through wires. Hydrogen should be considered not just a domestic opportunity for balancing energy but also a significant opportunity for us to turn our natural resources into national wealth and develop an export economy around hydrogen and its derivatives, like ammonia.

Chairman

It is good to hear that. I think those are all of Deputy Bruton’s questions.

Deputy Richard Bruton

There is the making of something in all those answers that would give people a certain reassurance at the moment when there is much unease out there.

Chairman

As nobody is in a hurry, I have asked the clerk to request that we stay here until 4 o’clock. Deputy Fitzmaurice wants to come in, as does Senator Lombard, and-----

Deputy Michael Fitzmaurice

I think Senator Pauline O’Reilly is before me.

Chairman

No, as we are still in the first round, Deputy Fitzmaurice may go first.

Deputy Michael Fitzmaurice

First, I thank the Chair for allowing me in and I welcome the witnesses.

Mr. Foley and Mr. Ryan spoke about hydrogen and offshore. We are in a crisis at the moment and it looks like we will be over the next year, 18 months or two years. Give us a realistic target for offshore and for when they think that hydrogen will be workable. That is my first question to them.

Very quickly in respect of hydrogen, we see a number of pilot projects in Ireland, in Northern Ireland and around Europe. My best estimate at this point in time as to when this will become commercially available is within a time horizon of 2028 or 2029.

Chairman

The other questions were by and large to the Minister.

Deputy Eamon Ryan

That relates to the earlier conversation on why that additional 2 GW was included in the sectoral emission agreements by the Government. It is to push and promote turning electrons into molecules, as a way of describing it, be that hydrogen, ammonia, methanol or other mechanisms.

With regard to planning, there is an example, which Mr. Gannon mentioned earlier, which is our emergency purchasing of this back-up gas generation. We have availed of section 181 of the Planning and Development Act to make sure it proceeds in a manner that will allow us to deliver it for the winter of 2023-24. The review of the Planning and Development Act that was mentioned earlier is critical because part of the problem is that our European rules in planning are, to my mind correctly, there to support good protection of the natural world. However, in our planning system, the planning laws have been revised so many times that the position is often complex and contradictory. That leaves it open to judicial challenge and to a whole range of other measures that stop development. That planning review is therefore critical. I do not believe, however, that we should abandon the fundamental principles of protecting the environment at the same time. Much as I would love to see those 70 turbines in Derrybrien turning to get us through this process and period, the considered view, having looked at it and considered it in real detail, is that we cannot ignore issues. This goes back to what I said earlier on in respect of the State, which is that you stick to what you say. The example of Derrybrien was a significant, specific example of the non-application of good environmental planning and practice. We cannot ignore that. We cannot go against the European rules. It was therefore decided not to proceed and not to ignore the court judgment.

On a couple of specific issues, part of the solution here is the new generation that will help us through. Edenderry is running as a biomass plant, although I cannot remember the exact size. I think it is 100 MW. That will be running 24-7 on a biomass basis if it is on the merit order. With regard to the heat pumps, we are introducing a pilot scheme for heat pumps under the warmer homes scheme this year. Increasingly, we have to stop putting in any new fossil fuel boilers.

Deputy Michael Fitzmaurice

Is the scheme still putting in 95% oil and gas?

Deputy Eamon Ryan

We are, but on the basis that a survey must be done to make sure that it is in those specific circumstances. As for where we are going with the heat strategy in particular, to go back to what Deputy Bruton said about not wasting a good crisis, we have to stop putting in new fossil fuel boilers. We have to make sure that all of our schemes and systems support that switch. We cannot afford to do it on either an environmental or an economic basis. Fossil fuels are too expensive.

Deputy Michael Fitzmaurice

There was one question that I forgot. Is there any capacity here in the agricultural sector whereby we can put up panels and help in a large-scale way? Has this been looked at to help the agricultural communities to get involved in this to help in a time of a crisis?

Deputy Eamon Ryan

We are doing exactly that. We have three phases. In respect of microgeneration, householders can now sell power back to the grid. All suppliers have to offer them that price and that capability. We are going then to what we are calling microgeneration on a slightly bigger scale, of up to 50 kV, where someone might have larger premises such as a barn, a business premises roof and so on, where there are large amounts of solar. We are out on consultation on the third phase of this at the present time, which is small-scale generation.

In terms of capacity that can reach 5 MW and means a farmer will not have to go through the auction process and all these complex systems. We need quick ways to do this, for farmers in particular. This is another element of the agreement we got in the summer on sectoral emissions, which provides for an additional 3 GW of solar. Much of that could come from farms setting aside power from solar. That is obviously subject to grid connection, which is why grid is key. That is outside the auction system. It is easily and more immediately deliverable and it will be key. It has huge potential not just for farmers but also for any business with a large surface roof area.

Chairman

I thank the Minister and Deputy Fitzmaurice. We are coming to the end of the first round and we are running out of time. A number of members and non-members want to contribute again and I will take them all together. If there is any time remaining after that, I will put their questions to the witnesses. Otherwise I will ask for responses in writing. I invite Senator Tim Lombard to contribute.

Senator Tim Lombard

I thank the Chairman for the opportunity to address the witnesses.

I will start with grid capacity, the last issue raised by the Minister. One of the key issues for the smaller generation sector is that it has a vital say in this. At the moment, there is no grid capacity in many places, as I discovered during the week in west Cork.

An announcement was made today that the timelines for the gas field off County Mayo would be extended, which is a significant development. I ask the Minister to give his view of other pending licences in the system. In particular, I mention Barryroe, which is in my part of the world and for which a licence application has been with the Minister for the past few months. Does the Minister believe that project will play a vital role in ensuring we have our own natural gas supply?

I understand we have four gas connections, although I am open to correction about the number. I think we have two with Scotland, one in Mayo and one in Cork. We had the amazing once-in-a-lifetime sight for three or four days earlier in the year of cranes taking down the Kinsale gas platform. The gas mains infrastructure is still in place and it is a significant piece of infrastructure for the State. What is the solution for that piece of infrastructure? Will it be used for carbon capture or is there a proposal for a floating LNG terminal in the harbour? What role will that strategic piece of infrastructure play when it comes to natural gas?

The Minister mentioned solutions, including home-grown solutions. Anaerobic digestion has been mentioned in recent months and years as an important part of any solution. We have 12 anaerobic digesters working in the State at the moment and there are 58 in Northern Ireland. Three weeks ago, I visited the site of an anaerobic digester in Timoleague in west Cork, which is near Barryroe. It took six and half years to get it through compliance issues. Is there an issue with planning? Should we take the opportunity to ensure we have a planning process that can deliver such infrastructure quickly?

On potentially charging more for energy at times of excessive use, particularly between 5 p.m. and 7 p.m., I seek an assurance that this will not have a major impact on the work of members of the agricultural community at that time of the evening, specifically the milking of cows and other practical tasks. I seek an assurance that farmers will not fall within the remit of that.

Deputy Eamon Ryan

I ask the CRU to answer the Senator's last query and to indicate whether it has done an analysis in regard to that matter.

On the potential role of offshore exploration, many commentators are saying that if only we had offshore oil and gas exploration, we would be out of this problem. I do not believe that is true. Of the 160 or 170 times we have drilled at real expense for hydrocarbons, we found them to be commercial three or four times. The easier and more obvious sites have been picked so everything after this is a 50:1 outside bet, hugely expensive and is not the future. It does not give us security and is not likely to deliver gas or oil any time soon.

As I said, the State sticks to what it says. We said we would not issue any new licences, we would treat all of the existing licences within the terms of those licences and we would do exactly what we have always done to assess the ability of the developers to adhere to the conditions of the licence, as set out in legislation. This is what my Department has correctly done and will continue to do. There is no favour shown and no straying from the provisions we have already provided for but there is no certainty that would deliver even if a project were to proceed.

In terms of other infrastructure, the Senator is right that the Kinsale platform has been taken away and it was one of four sources. We have a legacy and history in this country of mining in other areas where we did not mediate and left sites, with the result that we had clean-up problems further down the line. We have to make sure we clean up properly.

With regard to the storage and energy security study I mentioned, that will be published in the next couple of weeks. It is not the main recommendation. I expect we will be using geological for a variety of complex reasons around the nature of our geological caverns and so on. There are potential sites around the country but they are very limited and I do not believe that is going to be centre stage in the next stage of our development.

What I think will be hugely important is the development of anaerobic digestion. Again, to refer to the sectoral emissions agreement this summer, we have agreed something like 5.8 TWh of energy coming from biomethane and anaerobic digestion, which comes from a mixture of grass, food waste and slurry waste. If I recall correctly, that could involve up to 210 anaerobic digestion sites. That could provide about 15% of our gas needs and would give us some security. Members may correct me if I am wrong about that. Anaerobic digestion is very much part of the security system we need to have in place. It has huge benefit potential for Irish farming because it gives a diverse and separate income and builds on what we are good at, which is growing grass. It also complements animal husbandry and the management of the waste products. I believe anaerobic digestion is a critical and central part of this. As I said, we do not want to waste a crisis and that will be one of the areas we need to roll out at scale and speed to give us a local and indigenous gas supply.

Mr. Jim Gannon

The network tariffs will see a rise for all. This will be focused on the very large energy users sector. The rises for the domestic sector - some of those who milk cows might be in the domestic sector and some might be SMEs - will be smaller and will be weighted towards the peak hours of between 5 p.m. and 7 p.m.

The Senator raised a point around the connection of renewable energy generation, for example, photovoltaics on farm roofs. I note the ongoing work by ESB Networks, in particular this year, in piloting a programme to see how that sort of connection can be processed faster it has been historically for mid-tier rooftop-scale generation, that is, on an area bigger than a house but not necessarily at utility scale like 5 MW in a field. The ESB is significantly through that process and it expanded the pilot scheme for a period towards the tail end of this year. We are working with the company to make sure that is sped up and made more accessible.

Chairman

I am very happy with the level of engagement. Many non-members and members have turned up and we are almost out of time, with only slightly over ten minutes left. Those who have indicated a wish to speak in the second round will have a maximum of one minute each. There will probably be a few minutes for our guests to respond to the most pertinent and important questions. I ask that they undertake to respond in writing to any questions that they do not answer.

Deputy Whitmore will be followed by Senator Dooley, Senator Higgins, who will join us from her office, Senator Pauline O'Reilly, Deputy O'Rourke, and Deputy Cronin.

Deputy Jennifer Whitmore

The Chairman was very strict with me in the first round but became more lenient as we went along. I ask him to remember that.

Chairman

I lost control earlier.

Deputy Jennifer Whitmore

I had hoped we would hear a plan for this winter and we would have in hand a plan setting out what the gap is as regards security of supply and how and when it will be addressed.

Unfortunately, we have not seen that and that does not give me much assurance. I was also hoping we would have a plan in relation to energy prices and how individuals and businesses would be helped in the coming weeks. We are coming into a budgetary process but the Minister's party colleague, the Minister for Children, Equality, Disability, Integration and Youth, Deputy O'Gorman, has been clear as to what measures will be put in place in relation to childcare. Regarding energy pricing, people need clarity and assurance that the Government will assist them. It would be good if the Minister would outline the measures he will roll over. Many of the tax measures are up in October. Will the Minister clarify whether they will be rolled over?

On protecting vulnerable customers, will the CRU expand the current criteria to include financially vulnerable? That is a major issue that is not included at the moment.

I do not agree that the blackout levy coming down the road should increase for everyone. There has been a fundamental failure by the people in this room to ensure security of supply for the coming winter. There has been mismanagement of large energy users and I do not think individuals and small businesses should be made to foot that bill. I ask the Minister to take that into consideration.

Senator Timmy Dooley

The question I had has been asked and answered. I thank everybody for their presentation and recognise the effort they make on all our behalf.

Senator Alice-Mary Higgins

On retrofitting of social housing, what measures will be taken to expand and bring forward the 30,000 ambition, which was quite low, within the Government retrofitting scheme? Rather than looking to loans and the market development, there is an opportunity and need this year to ensure the most vulnerable users, namely those in social housing, have retrofitting accelerated this winter.

Could I get a written note on the Energy Charter Treaty? The 20-year exit would mean that if we looked at the exit next year - Italy has exited on its own - then by 2043 we would be in a different position in terms of policies. I am concerned about hostages to fortune being put in place, in terms of us being free to make energy policy. The Minister said we have to follow through on the commitments we have made, but more hostages to fortune are being given in more data centre connections and more long-term projects in relation to gas, for example. I would like a written note on the Energy Charter Treaty, the potential exit from it and the potential implications of the contracts we are signing.

On social housing, 30,000 is a low ambition. Will that be increased and brought forward?

Senator Pauline O'Reilly

Hydrogen had not been mentioned until Deputy Bruton contributed. That was an omission because it is critical. Now that we have the sectoral ceilings, 2 GW of offshore renewables are to go into hydrogen. This may have been mentioned but I did not catch it. When is the hydrogen strategy to be published? Is now the time to really invest in pilots around hydrogen? I note Mr. Foley's comments that 2028 is when we may see some hydrogen, but now is the time to invest in pilot schemes across the country.

Ports are part of the infrastructure required. We are to have 5 GW offshore now and 7 GW by 2030. We have the potential for between 70 and 80 GW off our shores. Ports require investment a long time in advance of when they have to deliver the blades. We are reliant on them.

Deputy Darren O'Rourke

I will pick up on Deputy Whitmore's point on the plans. We need those, although I recognise the constraints in terms of the budgetary cycle, for security of supply, generation capacity and price. It is causing inordinate panic among communities and households. There is a constant feeling of impending doom surrounding further price hikes. The news cycle is full of this stuff. People are waiting for the next increase. Government has a job to do in terms of providing information for people. There are benefits in terms of a price cap, where there is clarity. The approach the Government is taking does not provide that but there is a huge need to adequately inform people. The Government should bring in the energy companies and hold them to a line as to what increases are coming and when. It should stop treating them with kid gloves.

On the retrofitting plan, it would be completely unforgivable as we start into September to miss targets by the end of the year, particularly for those people at risk of fuel poverty.

Deputy Réada Cronin

In relation to the windfall tax, we seem to be being softened up that this will be minimal, even though profits have been maximum. It is as if it is an act of solidarity and I do not think that will be tolerated.

The CRU spoke of optimising large-scale battery storage. Can we get confirmation from EirGrid that the grid will be able to manage that?

It is welcome that the Government will support the decoupling of gas and green sustainable energy because there was a big question mark over that.

Chairman

There are just a few minutes left. I will afford our guests an opportunity to comment on the questions but ask them to be very brief. If they do not get to questions, I ask them to respond in writing.

Deputy Eamon Ryan

In response to Deputy Whitmore, the critical point in terms of plans, where we are going and what we will have it to do is set out in an electricity capacity problems policy statement from last November, among several. The critical one was the national energy security framework set out in April this year, at the start of this war. It has worsened but much contained in that has to be delivered. It is about the delivery of real plans such as time-of-day pricing, which I support because it gives the opportunity to people to reduce their bills and helps our security. It is a win-win. It helps our grid stay stable and meet generation capacity at the same time. We have to deliver and continue to evolve that framework, particularly with regard to European policy.

I agree with Senator Higgins that our focus in terms of what we further need to do should primarily be on families on low incomes in houses that are not very energy efficient. If we are to focus on additional measures and make sure with local authorities we are doing them, that is probably most important because they are the most exposed in a high energy price world. It is about the delivery of elements around social protection and the more vulnerable.

In response to Senator O'Reilly, the hydrogen strategy is out for consultation and closes at the end of this week. Anyone can give their views and contribute to it. We have to turn that around and get it out before the end of this year. It will take a number of years before we start seeing the deployment. It is the latter part of this decade, as Dr. Ryan said, but it has a part to play. Critically, we have to ensure any new generation capacity we purchase is compatible with hydrogen. Talking to some of the original equipment manufacturers, OEMs, selling this kit, the first thing they said was whether it was or was not hydrogen-compatible. That is the way the industry is going and the way we need to go.

Ms Aoife MacEvilly

On vulnerability, the definitions are currently in legislation but we are open to working with others around whether they could be broadened.

On network charges, we are committed to trying to protect domestic households to the extent we can. We welcome members' comments in the context of the current consultation we are holding on those.

We agree on pilots around hydrogen. We will continue to fund Gas Networks Ireland in some of those activities and there are also innovation funds through the network charges system that can help get this moving in the right direction.

Chairman

I thank Ms MacAvilly. Does Mr. Foley want to have the last word?

Mr. Mark Foley

We picked up on one matter to do with batteries and grid capacity that Dr. Ryan will speak to. He will speak generally about the notion of plan-led planning.

Dr. Liam Ryan

One of the key things we published regarding shaping is that we need to move towards a plan-led model, where we co-locate the generation and the demand so that we can have that holistic solution. We have a massive programme of work on planning the grid for which we got a lot of support through PR5 funding. That work is in flight. We are progressing with speed in building out the grid to enable the transition and to make sure we have a secure, reliable power system into the future.

Deputy Jennifer Whitmore

Is that implementation plan on the site? It was promised by the EirGrid representatives the last time they were before the committee.

Mr. Mark Foley

I said it will be done by the end of the year. We will meet the commitment we made to the committee previously. That is all.

Chairman

I thank Mr. Foley and Dr. Ryan. It is just after 4 p.m. I thank all our guests for coming in today. It was an incredibly thorough discussion and very complex in parts. I thank members and non-members for their contributions, which were very valuable. We could probably stay here for a few more hours to tease this out more but we will not. We might have the witnesses in at some future date as things progress. I thank them once again.

The joint committee adjourned at 4.01 p.m. until 1 p.m. on Tuesday, 13 September 2022.

Joint Committee on Environment and Climate Action debate - Tuesday, 30 Aug 2022

Energy Supply and Security: Discussion

Mr. Mark Foley

Ms Aoife MacEvilly

Mr. Mark Foley

Ms Aoife MacEvilly

Mr. Jim Gannon

Mr. Mark Foley

Ms Aoife MacEvilly

Mr. Jim Gannon

Mr. Jim Gannon

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Mark Foley

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Mr. John Melvin

Mr. John Melvin

Mr. John Melvin

Ms Aoife MacEvilly

Mr. John Melvin

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Dr. Liam Ryan

Mr. Mark Foley

Mr. Mark Foley

Mr. Mark Foley

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Mr. John Melvin

Mr. Jim Gannon

Mr. Jim Gannon

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Ms Aoife MacEvilly

Mr. Mark Foley

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Rodney Doyle

Mr. Jim Gannon

Mr. Jim Gannon

Mr. Rodney Doyle

Joint Committee on Environment and Climate Action debate -
Tuesday, 30 Aug 2022