I welcome the Minister of State to the House and wish him well in his new role. I congratulate him on his new portfolio and wish him every success.
Energy Resources: Statements.
Thank you, a Chathaoirligh. I welcome this opportunity to speak to Members of this House on the two important issues of security of energy supply and the development of renewable energy sources. Recent events in the Ukraine have brought these issues to the forefront of many people's minds.
In common with other member states of the European Union, Ireland is consuming more and more energy products. Across the community, production is insufficient for the Union's energy requirements. As a result, external dependence for energy is constantly increasing. This, of course, reinforces the need to research and develop renewable energy sources as a matter of priority.
As a statutory independent body, the Commission for Energy Regulation, CER, plays a key role in ensuring security of supply. Its functions include regulation of both the gas and electricity markets, assuming the key monitoring and oversight role, and taking any measures it deems necessary to protect the security of supply. It also has responsibility for the preparation of the annual gas capacity statement and approval of the form of the ESB national grid's generation adequacy report.
In accordance with the requirements of the Electricity Regulation Act 1999, ESB National Grid, EirGrid, published its most recent generation adequacy report in November 2005. This report informs and augments policy developments going forward. It sets out estimates of the demand for electricity for the period 2006-12, the likely production capacity that will be in place to meet this demand, and assesses the consequences in terms of the overall supply and demand balance.
The generation adequacy report 2006-12 states that sourcing new generation capacity from 2009 is prudent. The generation adequacy position should be manageable from 2006 to 2009 provided that new generation stations come on stream as expected. This is contingent on electricity generation plant availability significantly above the average level of performance achieved over the period 2003 to 2005. It is also dependent on there being no unexpected plant closures from the current generation portfolio.
Under the Gas (lnterim) Regulation Act 2002, the CER has responsibility for monitoring the security of natural gas supply. The commission is also required to publish an annual gas capacity statement. This statement also provides a seven-year rolling forecast of capacity, flows and customer demand in order to assess the adequacy of the Irish gas transmission system.
The gas capacity statement considers whether projected supplies of gas from indigenous sources, imports and storage are sufficient to meet forecast demand. A key finding of the 2005 gas capacity statement is that, even under unusually extreme weather conditions, the transmission system will cope with forecast demand.
In its role as the natural gas transmission system operator, Bord Gáis Éireann has developed contingency plans in the event of any curtailment in gas supplies. These plans include switching gas-fired power generation plants to alternative fuels, seeking voluntary reductions in consumption from large industrial gas consumers and utilising BGE's reserves from the south-west Kinsale reservoir.
I am advised by the CER that the availability performance of some of the existing older ESB generation plant is giving cause for concern and has been for some years. Performance improved towards the end of 2004 and during the first half of 2005. It did, however, disimprove in the second half of 2006. This disimprovement, caused by the breakdown of several large generation units, means that at times during the winter the margin between demand and available generation has been lower than the design level.
ESB National Grid works with generators to schedule necessary maintenance outages at times when margins are highest. It is also able to call on electricity imported from Northern Ireland and from Britain, via Northern Ireland, to supplement electricity production in Ireland. In any emergency situation the electricity transmission system operator has in place a number of specific emergency plans to deal with an incident quickly and effectively. These include power system restoration and capacity shortfall plans, which involve prioritising supply to critical users such as key telecommunications, security, communications, transportation and medical facilities.
In 2002, the CER conducted a public consultation process on investment in new electricity generation capacity. The CER decided to conduct a competition to bring additional capacity onto the system. Aughinish Alumina and Tynagh Energy were the successful bidders in the competition. As a result, significant committed new thermal generation capacity of up to 536 MW is scheduled to be brought on stream next month to augment the current installed capacity of 5,500 MW. Tynagh, County Galway, at 384 MW and Aughinish, County Limerick, at 152 MW, are currently undergoing full commissioning. In addition, in October 2004, Viridian, Huntstown Power Limited, announced its intention to proceed with a second new 400 MW generating station at Huntstown in north County Dublin.
The issue of security of gas supply has re-emerged on the political agenda. Fortunately, the Russia-Ukraine situation did not have a direct impact on gas supplies to Ireland. Gas flows for all shippers and suppliers through the transportation system continued to operate normally and in line with nominated quantities.
Currently, Ireland imports over 80% of its gas supply from the United Kingdom. Last year, the UK became a net importer of natural gas, relying on imports via interconnectors to mainland Europe and on liquefied natural gas, LNG, imports to boost its own indigenous supplies. My Department, the CER and Bord Gáis Éireann, BGE, are all in regular contact with their counterparts in the UK. I have been assured that in the event of an emergency any reduction to our supplies will be proportional, fair and balanced.
As our gas imports from the UK account for only 4% of the total UK market, a supply interruption is unlikely. Were it to occur, however, BGE has estimated that such a reduction in supply could be effectively managed by switching gas-fired power generators to alternative fuels. The CER's task force on emergency procedures is currently reviewing the need to strengthen procedures in place in the event of a supply interruption. It is essential that the impacts upon electricity and gas customers from any such supply curtailment scenario be minimised.
In common with other EU countries, Ireland has commercial reserves of natural gas that are held by licensed natural gas shippers and suppliers. At current levels, BGE's Kinsale reserves would supply a significant amount of gas for a limited period. This is in addition to stocks held by BGE in the UK.
The CER is currently in discussion with Marathon Oil Ireland Limited about the development of a commercial natural gas storage facility at south-west Kinsale. The CER has recently completed a public consultation on the proposed regulatory regime for the storage facility. It is planned that the storage facility will be operational by mid-2006. Scope for a common approach with our Northern Ireland counterparts on storage and liquefied natural gas has also been identified.
Electricity and gas interconnection remains a fundamental part of the Government's energy strategy. It will provide increased security of supply, competition and integration of the Irish energy market into the wider European energy market. The Government remains fully committed to progressing the development of east-west electricity interconnection with Great Britain as a matter of priority. At the Minister's request, the CER has explored the options for such development. The CER appointed consultants to advise on the financial, technical, commercial and procurement aspects of the development. A consultation process was undertaken with parties who expressed an interest. The report of the consultants, which is now complete, includes a comprehensive technical and legal review and an analysis of regulatory and procurement aspects. A decision on how best to take the east-west electricity interconnection project forward, be it on a regulated or a hybrid regulated-merchant basis, is the next step in the process.
With regard to North-South electricity interconnection, a joint intergovernmental endorsement was given in 2004 for plans put forward by the CER and the Northern Ireland Authority for Energy Regulation for the construction of a second North-South electricity interconnector. The transmission system operators are currently working on phase 1 of the project, including technical issues and route selection. This phase is likely to be completed by early 2007. Phase 2, the construction phase, will then commence and it is estimated that the interconnector will be operational by 2012. The proposed interconnector will provide increased system security and reliability and enhanced competition. North-South interconnector development will also facilitate the development of a fully functioning single electricity market.
An all-island energy market, closely interconnected with Europe, requires the development of a holistic market in several areas of operation. Harmonising a common approach requires a convergence of systems and practices for both gas and electricity. To achieve this aim, in August 2004 the CER signed a memorandum of understanding with its counterpart, the Northern Ireland Authority for Energy Regulation, NIAER, for an all-island electricity market. The memorandum describes the set of principles agreed by the regulators that will underpin the development of an all-island market. The potential benefits of a mature single electricity market or SEM include, inter alia, greater security of supply, a larger single market with competitive prices and open and transparent competition at all levels of the marketplace.
With regard to gas, the Government approved in September 2001 the making of an Exchequer contribution of not more than £10 million, or €12.7 million, on completion of the gas network in Northern Ireland, which would include extending the natural gas pipeline from Belfast to Derry and the construction of a South-North pipeline. This proposed contribution by the State recognises that a cross-Border gas infrastructure is an essential part of the agreed North-South aspiration for an integrated all-island energy market. In the intervening period, work was completed in 2004 on the Belfast to Derry natural gas pipeline extension. Work is well advanced on the construction of the South- North pipeline and the project is due for completion this summer. Payment of €12.7 million will be made to the Department of Enterprise, Trade and Industry of Northern Ireland on completion of the works.
Ireland has a rich vein of renewable energy resources, the development of which is an essential part of the Government's overall energy policy. The available large hydroelectric sites have already been harnessed as the most efficient form of electricity production from renewable energy sources. Future growth requires us to direct investment to other renewable energy technologies.
The proven alternative technologies at this time are wind power, small scale hydro and biomass technologies, including landfill gas. The most competitively priced of the alternative technologies in the last decade has been wind-power. Ireland, in line with the global trend, has concentrated on that technology as the initial growth sector. However, unlike hydro plant and other conventional technologies, wind-powered plant cannot be precisely regulated to match consumer demand. It can only produce electricity when an adequate wind resource is available. It is imperative, therefore, to see technological progress in other technologies if substantial movement towards other renewable energy technologies is to continue.
The recent increases in the prices of oil and gas have acted as a catalyst for global investment in new solutions and have focused the public's mind on the high costs of energy. In Ireland, our competitiveness is particularly exposed due to our reliance on fossil fuel imports. Increasing the amount of renewable energy in the domestic energy mix is therefore even more persuasive as part of an ongoing programme to redress this significant imbalance.
The current programme commenced with the alternative energy requirement programme, AER, in the mid-1990s. The programme supported the construction of new renewable energy powered electricity generating plant. The national programme was succeeded in 2001 by a key EU directive, commonly known as the renewables directive. The directive sets indicative targets for the increased consumption of renewable energy by each member state. In the case of Ireland the indicative target is to increase green electricity to 13% of total consumption by 2010.
In 2004, the last full year for which figures are available, renewable energy increased its contribution to gross electricity consumption in Ireland to 5.2%, from 4.3% a year earlier. The most significant factor is that wind-power overtook hydro power for the first time in terms of renewable energy resources harnessed in 2004. The Government's target is to meet or preferably surpass the 13% target by 2010. This is a challenging target and when delivered will represent significant progress.
In the areas of renewable heat and transport, my Department is introducing a range of new initiatives to promote the use of alternative, environmentally sustainable fuels and heating systems. The EC biofuels directive sets non-mandatory indicative targets of 2% market penetration for biofuels by the end of 2005 and 5.75% by the end of 2010.
Ireland, like most member states, is still at a very early stage in developing biofuels policy. In 2005, my Department introduced a pilot mineral oil tax relief scheme for biofuels projects which has helped to kick-start market development of biofuels. Eight innovative biofuels projects were approved under the pilot scheme and the production and sale of a range of biofuels on the Irish market has already commenced as a result of this initiative. Of the eight projects, four are pure plant oil, three are biodiesel or other biofuel and one is a bioethanol proposal. It is estimated that the pilot scheme will result in 16 million litres of biofuels being placed on the Irish transport market by next year.
Following on the success of this scheme, a second more ambitious scheme was announced in the 2006 budget. The new scheme will run over a five year period, commencing this year. This will place Ireland firmly on the map in terms of European biofuel production.
In the area of renewable heat, in the 2006 budget my Department announced a major new multi-annual grants package of €65 million for renewable energy projects. The package will include grants for domestic renewable heat technologies such as wood pellet boilers, solar panels and geothermal heat pumps; medium and large scale biomass boilers for the services, business and industrial sectors; a programme of investment in combined heat and power; and grants for the development of biofuels facilities in Ireland. These initiatives complement the existing programmes being rolled out by Sustainable Energy Ireland and are designed to make renewable energy more accessible to all sectors of the economy.
In renewable heat and transport, the Government has made major strides in the past year. We intend to shortly launch the various schemes announced in the budget and these will impact directly on motorists, householders, and businesses. Ultimately, the Government's aim in this regard is to reduce emissions, increase the availability of indigenously produced heat and transport fuels and provide a low-cost alternative to traditional fossil fuel heating systems. Ireland's bio-energy sector is growing rapidly and a market for bio-energy products is swiftly emerging.
Security of supply policy does not seek to maximise energy self-sufficiency or to minimise dependence but to reduce the risks linked to such dependence. The overall challenge is to gain a balance between economic and environmental needs while diversifying the various sources of energy in order to minimise dependence on a single source of supply. Ireland and the European Union must now face new challenges characteristic of this period of profound transition for the European economy.
Matching supply to demand is crucial to ensuring security of supply policy. Ireland's modest domestic energy resources and its geographic distance from other countries make security of supply an especially important issue. Assuring security of energy supply while simultaneously protecting the environment requires a multifaceted approach with an optimal supply mix.
I welcome the Minister of State to the House and wish him well in his new brief. I have been calling for this debate in the House for some time and I am glad we are hearing statements on the issue today because energy is of profound importance.
I presume the latest Deloitte & Touche report, which I understand the Minister for Communications, Marine and Natural Resources received prior to Christmas, will help frame policy in the future. We have not heard anything about the report's findings. Will they be revealed to the public eventually or are they so confidential that they will remain within the Department? The Joint Committee on Communications, Marine and Natural Resources has been examining the area of energy for quite some time and intends to produce a report on the issue. That the joint committee is deliberating on the matter indicates its importance. Members of the joint committee should have access to the consultants' report, as it would help the committee in framing overall energy policy for the future.
There have been a number of leaks in respect of how the report questions the dominance of the ESB in the marketplace. Perhaps the report will not be revealed because having the ESB and its dominance criticised is regarded as unpalatable coming up to a general election in 2007. In such a situation perhaps a Government would not attempt to confront the issues raised by the report. Hiding the consultants' report for this reason would be regrettable. If we are to frame energy policy, it is imperative that we examine the ESB's dominance in the marketplace.
We discussed the recent liberalisation of the electricity market but that liberalisation has not made a great difference in the marketplace due to ESB's continued dominance. It has not made a whit of difference to the domestic consumer. In the context of a domestic consumer receiving his or her ESB bill every month, all he or she sees is one particular supplier supplying electricity. Will the Minister of State elaborate on whether we will ever see the consultants' report? Will the findings be revealed? I am sure there was an excessive cost in producing the report. I would hate to see it gathering dust as it should be used in framing future energy policy.
From time to time, the House has held debates on the issue of energy sources with the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey. Unfortunately, when one puts forward a constructive proposal or suggestion, one is criticised for supposedly trying to close down power stations. As any consumer would tell the Minister of State, there is a public service obligation section in all of our ESB bills. The validity of this obligation from the Government's point of view is in light of peat power stations and other alternative sources of energy.
It is a compensation mechanism within the bills. However, it is worth bearing in mind that the energy regulator, in answer to my questions, regards the public service obligation as an anti-competitive practice. As such, the Government should question whether it should retain the public service obligation. The dividend the Government receives from the ESB each year is in excess of the total amount retrieved through the obligation.
To a certain degree all of the regulators have been good for politics and Ministers in that they have taken the heat on electricity prices. The Minister had ultimate responsibility a number of years ago and the buck stopped there but there is now a buffer zone in the form of the regulator. If there is any criticism, the regulator will be subject to it. We have witnessed a considerable increase in electricity charges over recent years. High energy users from different parts of the country such as Intel, Wellman International Limited, Aughinish Alumina Limited and many others attended the joint committee. They could negotiate with the ESB previously but can no longer do so as the energy regulator dictates the prices. Many of these companies now say that, due to escalating electricity prices, Ireland is not as good an option as an industrial environment as it was previously. They have witnessed their indirect costs increase significantly, especially as heavy users of electricity.
One must recognise that, within the basket of fuels, we have a dependency on imported products. What happens in gas or oil producers such as the Ukraine or elsewhere impacts directly on the consumer and the ultimate user here. The Electricity Supply Board and the energy regulator state that many of these costs must be passed on to the end consumer. The chief executive of the ESB, Mr. Pádraig McManus, recently addressed the committee and indicated that he expected electricity prices to decrease by 4% in 2007 due to the all Ireland market. He also indicated that the basket of fuels involved in the production of electricity will impact on the cost of electricity. It would surprise me if the consumer experienced a decrease in the cost of electricity.
I have spoken on the topic of wind energy over a period of time. In this context, the national grid section of the ESB recently stated that it feels confident the 13.2% target figure will be reached. It is also confident enough wind energy projects are on stream, either those that have already been physically created or those waiting for final approval in the system. There is tremendous frustration among people promoting wind energy about the long gestation process from applying for planning permission to getting connected to the national grid and producing a small number of megawatt units for the electricity network. A stop-start regime seems to have operated in this respect for some time. The regulator tells people to stop so that the project can be examined. The ESB, as the primary producer of electricity, would view wind energy production as intermittent, a factor in the equation of this country's energy supplies.
I have met frustrated people who entered the market with an alternative energy project. I am sure the Minister of State has met them also. An example would be upland areas suitable for the initial location of wind meters in order to gauge the situation before embarking on the lengthy process described above. I spoke with a gentleman who, as late as August 2004, paid over €500,000 directly to the ESB to access the national grid. He is as far from finishing now as he was then despite needing to pay that money up front.
I welcome the discussion about wind energy involving the public and Ministers and the fact that people are excited about the concept but the issue is a jigsaw with many pieces and different players, such as the ESB, local authorities and the energy regulator. No one is putting the jigsaw pieces together, a view I recently expressed to the energy regulator. I have also expressed this view to the ESB and local authorities.
While the ESB spokesperson might state it has enough wind energy projects in the pipeline at national level, to what degree is this message communicated to local authorities and promoters applying for planning permission to the local authorities through the planning process? It is frustrating that many cases will never get connected to the grid. Why should they prepare impact assessments for county development plans that are being produced to identify the locations for suitable wind energy projects? Someone somewhere at some stage who has the proper type of capacity will want to get into the system. They should not spend a lot of money at that stage to prepare a planning proposal for approval.
It is exciting to talk about the issue of alternative energy but we need a type of joined up thinking that is not currently in evidence. Will the Minister of State examine the matter with his officials? We may speak about alternative energy sources such as wave power, wind power or biomass but the most credible source in the public's view is wind power. Wave power has been tried but has not proven successful despite much money being spent, leaving us with the options of biomass and solar energy.
Everybody understands the scale of economic and environmental difficulties if Ireland does not address the energy crisis. In order to neutralise the effect of global warming, it is generally agreed that the level of global greenhouse gas emissions must be reduced by 70% by 2100. As a first step the 1997 Kyoto Agreement was drawn up with the aim of reducing global emissions of greenhouse gases by 5.2% by 2012 based on 1990 levels. Under the agreement, to which Ireland is a signatory, we undertook to limit the increase of these emissions in the period 2008-12 to 13% based on 1990 levels. Without action, it is estimated our emissions would rise by 37%, almost three times the permitted level. Our emissions are currently 25% above 1990 levels. If agreed commitments on emissions are not met, Ireland will face a bill of €400 million, an appalling vista that neither I nor my party is willing to tolerate.
We must change the dynamic driving the alternative energy industry in Ireland. We must take steps to boost our production of biocrops, creating a market of biofuel, install an eco-friendly tax regime and establish a planning policy that works towards the creation of a first class alternative energy infrastructure.
Fine Gael believes the Government track record in this area is appalling and has published proposals as a response. Biofuels have the potential to provide benefits to our farmers, our environment and our economy. Most European states have kick started the biofuel industry by using setaside land for growing biofuel crops. Ireland must act now to reach European standards. Irish agricultural land offers major potential to develop alternative energy crops. In the initial stages we must be practical in developing a viable biofuel industry but it makes sense to follow the examples of other EU states that are more advanced in such technology.
Currently, the greatest potential for Irish farmers and industry lies in the development of biodiesel and bioethanol, not least because, as the Minister of State stated, such production is under way in Ireland, albeit on a small scale. We must focus on developing this area as a priority. The immediate focus must be on developing the process of fuel blending, blending standard diesel with rapeseed oil to produce biodiesel and petrol with bioethanol.
Fine Gael is calling for a number of steps to be taken to kick start the biofuel industry. These include the removal of excise duty on biofuels produced from renewable energy crops. This will reduce costs and entice more players to the market. We urgently need producer grants for producer groups, consisting of up to 50% of the cost of setting up the group, subject to a maximum of €300,000 per group. A public competition for the establishment and operation of a number of strategically located biofuel processing plants should be held. Capital start-up grants for these plants should be available to enable them to be established and begin viable processing operations. Greater links with international biofuel processors, fuel suppliers and relevant Departments, especially the Departments of Transport and Agriculture and Food, to facilitate the promotion of the biofuels industry are vital.
Production cannot flourish if there is no market for what is produced. At present, the growth of biofuels is hampered by the absence of a serious outlet in which to sell them. Biofuels are indigenous, reliable and increasingly economic and Fine Gael proposes to legislate for all motor fuels to include a blend of fuel from renewable sources. All petrol sold at petrol stations will include a 5% bioethanol mix and all diesel will include a 2% biodiesel mix. This will not require the conversion of standard motor engines and would reduce emissions from cars. It would also provide an immediate market for farmers to sell energy crops. As the benefits become clear motorists may convert their engines to allow greater use of biofuel, thus reducing emissions further. At present, Ireland's consumption of renewable energy is extremely low.
I am glad Moneypoint has been upgraded as residents in the estuary have tolerated acid rain and environmental damage. Much could be done in this area and the Oireachtas Joint Committee on Communications, Marine and Natural Resources could contribute to this debate. The Deloitte & Touche report should be published and this would assist the Department in framing energy policy. We could all contribute something to an extremely important area. Recently, we have had amber alerts and were fortunate we could use the wind generating capacity. This is a delicate phase in Ireland in terms of sustaining future productivity and the Celtic tiger. We will need more energy to be made available.
I welcome my friend the Minister of State at the Department of Communications, Marine and Natural Resources, Deputy Browne, and wish him well on his return to the Department. He has built up considerable knowledge of the area from his previous tenure, which he will put to good use.
This issue will become a greater part of our discussions in the future. Today's debate is not only about energy but also about the environment. Management of the environment is crucial to our future in Ireland and also in a world context. Considerable awareness has been garnered on the environment over the past number of years and although steps have been taken in certain countries to make changes, these may not be enough.
Like every other developing country we have become hugely dependent on oil and gas. We must ask ourselves if those sources of energy will always be available in sufficient quantity to serve our needs. We must pursue and develop other sources of energy as there is no point in waiting until supplies of oil and gas begin to run out, or become unavailable through political instability, natural disaster or other crises. We have seen such things happen in the past and paid the price through greatly inflated energy bills. We must commence practical development and further research on solar energy, wind and wave power and hydro sources.
Three key policy issues must be addressed, namely, security of supply, cost competitiveness and environmental responsibility. At present in Ireland the total primary energy requirement is fulfilled mainly from the imports of oil and gas. Only 15% of the country's energy comes from indigenous sources. Natural gas provides 45% of the electricity generation fuel mix, which is much higher than the EU average. While gas may be a relatively clean fuel, we have little or no storage facilities for it, which leaves us exposed to a danger to our security of supply in future emergencies.
Between 1990 and 2004, there was a 65% increase in oil imports to this country and in that same period, the cost of oil rose from $15 a barrel to approximately $65 at present. There is no reason to believe this figure will drop significantly in the near future. In the past OPEC countries increased output to stabilise the price of oil on the world market but this in turn has its own dangers in the faster reduction of reserves, which will hasten a scarcity. Ireland has a very significant wind energy resource, both onshore and offshore. However, in the absence of an economic means of storing the energy and the random and variable availability of wind, its contribution to a continuous electricity supply is limited. At present, this means of generation cannot be regarded as a substitute for thermal plant. However, as new technology is developed, this should change in the future. Despite those drawbacks, wind is the most proven, cheapest and one of the cleanest of available energy technologies.
Security of supply in the future is a major cause for concern. Only one electricity interconnector exists between Northern Ireland and this country, and its transfer capability is restricted. The provision of a second interconnector has been studied and costed. However, there is no indication as to when this might come on-stream. The Minister of State alluded to it coming on-stream in 2012, which is to be welcomed. It is necessary and will bring us further benefits as there is an existing interconnector between Northern Ireland and Scotland.
It is also proposed to provide two interconnectors between Ireland and Wales. This will allow for the future integration, if necessary or desirable, of Ireland into a wider European energy market, as has already happened in the gas industry. Bord Gáis Éireann already has two gas interconnectors to Scotland. In developing renewable energy sources in this country, we are enhancing the security of supply. In addition, renewable energy sources are a substitute for fuel imports.
There is also a possibility, slim though it may be, that by developing our natural energy sources to the limits I outlined, we might become a net contributor to a European grid, with consequent economic benefits for us all. One of the technical difficulties is storage. However, I am sure that this, like many other technical problems of the past, will be solved in the future.
Cost is also an important factor. In a full opening of the electricity market, all customers would be free to choose their suppliers and as more renewable energy resources go into the national grid, this will have the effect of improving choice. A number of independent generators already contribute to the grid, including Viridian, BGE, Airtricity, Aughinish and Tynagh. Hopefully this method of supply will develop further in the future, for as our demand for capacity continues to grow, so too will the need for further generation.
The concept of an all-island market is supported by many of those directly involved in different ways, including the ESB and IBEC. In submissions to the Oireachtas Joint Committee on Communications, Marine and Natural Resources on 2 November 2005, the ESB stated it was committed to integrating the island network by July 2007. This will serve to encourage competition, providing economies of scale, sharing strategic costs and providing greater security.
As I mentioned earlier, we must keep our environmental responsibilities firmly in mind, particularly in regard to greenhouse gas emissions. The greatest generator of greenhouse gases is energy supply, which was growing until recent years, but of late seems to have stabilised. The main contributors here are industry, transport, residential, commercial and agriculture. By agriculture I mean the energy used in that sector. The second biggest contributor to greenhouse gases is the agricultural industry itself. However, the amount attributable to this sector appears to have started to decline. In 2003 for instance, two sectors were responsible for 93% of the greenhouse gas emissions, with 65% attributable to energy and 28% to agriculture. This shows the need for other, cleaner types of energy to be made available.
The renewable energy contribution to the total primary energy requirement was 2.2%. This came mainly from biomass, hydro and wind, with biomass being the largest component. I wish to comment particularly on the importance of bioethanol and biofuels in general and what the future holds. In June 2003, the EU adopted the biofuels directive, setting a target of a 5.75% market share for biofuels in 2010. Last December, the European Commission adopted a biomass action plan, setting out a number of measures to promote biofuels. By December this year, a report will be published on whether the biofuels directive needs to be further strengthened.
I will return to the issue of security of supply. This issue is of increasing concern for this country, as the share of imported fuel grows, which it inevitably it will over the coming 25 years. There are security risks in many energy sectors. In the case of gas, the trans-eastern European pipelines are continually under threat from local terrorist attack. Such risks are greatest in oil, because our import share is highest in this fuel and our greatest dependence is on a few regions of the world. Oil is also the fuel which will be hit first by scarcity and involves the greatest economic risk as there are few large-scale alternatives to its use in the transport sector in particular. It is essential for us to promote those alternatives which exist. Liquid biofuels are common today and are the only direct alternative to oil use in road transport.
In tackling the problem of climate change, it is important for all sectors of society to make a contribution. However, the transport sector has found it rather difficult to find ways of reducing greenhouse gas emissions. Once again, biofuels are more or less "the only game in town" for road transport, at least in the short term, alongside the car-makers' voluntary agreement to reduce new car CO2 emissions.
We must work hard to develop other measures in the transport sector, such as rebalancing in favour of more environmentally-friendly modes or measures in the area of transport energy efficiency. One avenue to explore in more depth is the role of public authorities as consumers. In this respect, Cork City Council and at least one other local authority have given a major lead in beginning to convert their fleets, 250 vehicles in the case of Cork, to use only rapeseed oil as fuel. According to a recent newspaper report, a pilot project began in 2003, with 17 of the council's vehicles converted to run on rapeseed oil grown and processed in County Wicklow. It only cost €23,000 to convert the vehicles from fossil-based fuels and the council now intends to convert its entire fleet to the new system when it puts out tenders for fleet renewal in 2007. It will cost between €500,000 and €750,000.
One drawback is that vegetable fuels are still more expensive than diesel or petrol. On the plus side, they produce no noxious emissions and are a completely renewable resource. A slight drawback, the report suggested, is a "chipper-like" smell from the exhaust which some drivers complain about. That is a small price to pay for a cleaner environment and a healthier balance of payments. I have no doubt that as the popularity of the fuel grows, technology to make it even cleaner will emerge and it will be up to the Government's excise policies to make it cheaper and more attractive.
The EU recently proposed a directive on clean vehicles which requests a minimum of 25% of annual procurement of heavy-duty vehicles of less polluting and more energy-efficient vehicles. Once implemented, these new rules should also help in promoting the use of biofuels. One of the most obvious fleets to target is that of buses, both under the banner of CIE and also in the private sector. It is always a source of wonder to me why buses serving provincial towns do not switch off their engines when waiting at bus stops, sometimes for long periods. School buses waiting for their passengers in the evening are a particular case in point and it also applies to longer distance buses which must wait for a scheduled departure from town stops. It is an unnecessary contribution to pollution and a waste of expensive fuel in large engines.
For the reasons stated above and also because of the new opportunities offered to Irish industry and to farmers, I believe that increased use of biofuels must play a key role in Irish energy policy. Achieving the targets set in the biofuels directive will not be easy and will need a sustained effort on all sides. The European Union must put in place a policy framework that will give long-term confidence to firms considering investment in biofuel technology.
They must re-examine technical obstacles to the greater use of biofuels and implement a balanced trade framework, particularly for ethanol, so domestic producers and those in least-developed countries, as well as the tropical sugar cane producers, benefit from the developing European biofuel markets.
Industries, especially the vehicle and oil industries, will need to find ways to incorporate all kinds of biofuels — bioethanol as well as biodiesel. Crucially, there is also a need for research to accelerate the development of new biofuel production techniques capable of drawing on a wider range of raw materials.
I welcome the recent budget announcement that Ireland should set an initial target of 2% of the fuel market to be taken up by biofuels by 2008 and that we should achieve this through targeted excise relief measures. The level of excise relief will start at €20 million in 2006, will be increased to €35 million in 2007 and to €50 million in each of the following three years. This relief, when fully operational, is expected to support the production in Ireland of 163 million litres of biofuel every year. This is 20 times the current level of biofuel that is excise relieved. There are clear benefits to this initiative. The environment will benefit in terms of a reduction in CO2 emissions. It will enhance security of supply of fuels and create jobs and outlets for agricultural production. It is estimated that it could ultimately give rise to hundreds of extra full-time jobs in the State.
More and more land has been set aside under EU rules each year. We are now seeing the demise of the sugar industry with the loss of growing potential in sugar beet. Perhaps it is time, both strategically and in conjunction with the reduction in farm produce, to look seriously at the biofuel market and seek to develop it among a farming community which generally does not like to see the land lying idle.
Guarantee of fuel supplies in the future has always been precarious due to the factors I mentioned earlier, not least political instability. Add to that, the huge demand which has been created by the development of the Chinese economy and others which will rise in the Third World, we must look at the alternatives. We owe it to the people to have foreseen future difficulties and to be able to guarantee fuel supply going forward. It is one of the more pressing, although less obvious problems, we face and it is our clear responsibility to respond promptly and effectively.
I add my voice to the congratulations to the Minister of State. It is great to see him back in the House in this role which, I think, he enjoys. I was impressed by his contribution. One of the reasons I, along with Senator Finucane, asked for this debate is that we have become complacent. We have got to a point where we assume something which has always happened will always happen. Recently when I was in what one could call a Third World country, each time I went into a bedroom there were candles. The reason is they are used to having power failures. We have got so used to assuming that when we press the switch, the light will come on that we have almost forgotten the times that did not happen. In the past, that was not necessarily due to any failure on the part of ESB but perhaps due to strikes or otherwise. Back in the 1940s and 1950s, my father had to buy generators for his business because he could not have run it without them as there were regular power failures. In my business, the supermarket business, we always had to install generators because back in the 1960s and 1970s, there seemed to be regular power failures, I think, generally due to strikes. My point is that we should not assume we will always have power. That point is enhanced a little recently by what happened between Russia and the Ukraine. Senator Kenneally touched on the figures in respect of our dependence on imports to maintain our development.
I welcome the debate and the Minister of State's words, particularly the contingencies being put in place. It is a reminder to keep them to the fore. However, I express my disappointment at how badly our political process deals with long-term problems which do not have immediate political implications. We are reasonably good at responding to short-term concerns as they arise, particularly when there is a feeling that a broad range of the public is agitated about them. If the public is upset about something immediate, we act on it but if it is long-term, we put it on the long finger, and we tend to have very long fingers. We are not good at responding adequately to long-term challenges — to chickens which will come home to roost long after the current Government has given way to its successors. That is a pity not only because the long-term challenges tend to be the really important ones but because they can best be addressed in the long term. If we ignore them until they become immediate crises, it is difficult to do something about them at that stage.
A related problem is that in recent years, we have become worse at seeking our own solutions to problems which face us. If one looks back over the past ten years, it is striking how much of the legislation which has passed through these Houses has been driven by Europe. These days relatively few of our own initiatives are truly home grown. A case in point applies to the subject matter of this debate, energy. In recent years, the most prominent action we have taken in this area has been the establishment of the energy regulator which has been almost totally driven by Europe. We passed that legislation, as we were required to do so by Europe. However, we have not watched it carefully. We have not monitored how effective it has been in achieving its declared objective. If we did that, we would be faced with the question as to whether we are running our energy industry according to the right priorities.
The first two priorities, and perhaps the overriding ones, should be that we should always have enough energy available to meet demand and that energy should be available to the customer at the lowest possible cost. I looked up the Commission for Energy Regulation website and it does not seem that these are the top two priorities. The website states that the Commission for Energy Regulation, CER, is the independent body responsible for regulating and overseeing the liberalisation of Ireland's energy sector.
I wish to touch on the word "liberalisation" because there is a confusion between the end and the means. In general, I am enthusiastic about liberalisation but it is a means to an end and not an end in itself. Too readily we jump to the conclusion that liberalisation will automatically deliver what we want in terms of supply and price. The current threats to our energy supply show how shaky that argument is. Surely it does not matter how liberalised our system is if it ends up not satisfying the national need for power and if the end result is that customers pay more rather than less for electricity.
The airline industry is a good example of where liberalisation was dramatically effective. Some 20 years ago, it cost £239 to go from Dublin to London and, to the best of my knowledge, there were only two airlines on that route. Following liberalisation, we ended up with Ryanair and other airlines and Aer Lingus had to change its rules. We got far more effective airlines and far lower prices. However, that does not necessarily happen. One only needs to look at the energy industry to see that liberalisation on its own does not work miracles if one takes one's eye off the ball. As a nation, we have taken our eye off the ball and assumed liberalisation will achieve what we want.
There is the crazy situation where the Commission for Energy Regulation, in order to promote competition in the market, approves higher prices because it states that without a certain level of profit, one cannot attract new entrants into the market. The whole point of wanting more players in the first place is to achieve lower prices and not higher ones. From the customers' point of view, if a monopoly produces the lowest prices, then that is what serves them best. That usually does not happen, and it certainly did not in the airline industry, which is why the drive to liberalise has been so strong. It makes sense and I approved of the concept of liberalisation because I assumed it would bring down prices. In this case, however, liberalisation, or attempted liberalisation, is having the opposite effect to what we want, that is, taking the public interest into account.
We want lower energy prices but all this pales into insignificance if we do not have energy in the first place. When one's power is cut off, one does not mind what price one must pay for it. All one wants is a restoration of power. That is my starting point in this regard and is why continuity of supply must always be the first national energy priority. It comes before everything else and our entire energy policy should be focused on getting that right before we meddle with anything else.
It is also important to realise that annoying as power cuts may be for the ordinary household customer, they are much more important from a business perspective. Earlier, I spoke of being obliged to install generators in my supermarkets. I know of one American company that wanted to open supermarkets in Asia. It examined the possibility of so doing, decided it was a fantastic opportunity and invested heavily. However, the company failed and lost heavily on the venture. The company's misjudgment was that it did not realise that the power failures which occurred there on a regular basis meant that the business could not be run successfully, particularly in respect of fresh food.
While it is annoying for households to make do without power, Members should consider what would happen to those companies which we have attracted into our country in order to build their businesses. To a large extent, the success of our economy has been built on them. Part of the reason we were able to attract them here was our ability to promise them continuity of supply, as far as electricity was concerned. The lack of a 100% supply would be a deal breaker for such industries.
I have travelled to many countries where daily power interruptions are the norm. One of the characteristics of a Third World country is the uncertainty of its power supply. Up to now, Ireland has avoided this state of affairs so well that many of us take for granted the expectation that the supply of electricity will always be available when desired. However, we are perilously close to changing that situation and turning this country into one in which one cannot always depend on something happening when one turns on a switch.
The manner in which we have organised our energy industry has led us to focus on the wrong priorities and we should revisit the legislation. One point which has emerged from today's contributions is that the Minister should consider revisiting the legislation that set up the Commission for Energy Regulation. He should redefine its remit so that no one is in any doubt that its first priority should be to ensure continuity of supply and that the second should be to deliver the lowest possible prices. Anything else, however desirable, should be subordinate to those two objectives.
I have dealt with the subject of electricity sufficiently. As other Members have noted, its supply is neither the beginning nor the end of our energy needs, important though it is. Our cars and trucks do not run on electricity and represent an ever-increasing part of our energy demand. In the past year, we have had two wake-up calls in this respect. Members have already discussed the first, namely, the rise of the spot oil price to a new plateau. Originally, people did not believe that a price of a barrel of oil could reach $70 or that such a price could be lived with. However, this is no longer a novelty and most people now appear to believe that we will never again see the price of oil fall below $50 dollars a barrel. This is reflected in the fact that according to the latest figures released yesterday, increased oil prices alone accounted for more than €1 billion in our annual imports bill. The sum of €1 billion simply reflects the increase last year over the previous year, as the total oil bill is much higher.
Our second wake-up call, to which we have paid little heed thus far, was the news that this country is the most dependent in Europe on imported energy. This means that in a future in which the price of oil is likely to go in only one direction, we are set to become almost totally dependent on an input, the price and source of which we will have absolutely no control over. Members will have noted the recent events in Ukraine. This will become an increasingly significant element in determining our overall competitiveness on the international scene, as well as our ability to attract business and industry to Ireland to create jobs and boost our economy.
Taken together, these two wake-up calls should spur us into action. They should make us determined to take seriously the question of alternative energy supplies. Developing those alternatives should become an urgent national priority, if we have any sense of the future or any sense of our responsibility to prepare for its needs, rather than simply focusing on our ability to continue to party on, as we do at present.
In recent years we have taken some tentative steps with regard to the development of wind power. It was interesting to travel to Dundalk last week and to see for the first time the production by Dundalk Institute of Technology of its own electricity from its wind generator. Such steps are welcome. Moreover, from my home I can see the wind turbines off the Wicklow coast. While we have taken those first steps, we have almost totally ignored the potential of wave power, despite our favourable position on the edge of the Atlantic ocean. Senator Finucane has already raised this point. I believe we should urgently seek to piggy-back on the research that is being carried out on wave power in, for example, Denmark. Members should note that geographically, it is far less ideally placed than Ireland to exploit its potential. While we do not initiate enough of our own solutions, we can piggy-back on the works of others.
However, the biggest gap in our approach to energy is our refusal to actively explore alternatives to petrol as a fuel for our cars and trucks. There must be alternatives and Members have touched on this issue during this debate. It is not rocket science, as the technology already exists and is fully proven to run vehicles on ethanol rather than on petrol. Nor is there any economic problem in so doing, given the Government's total control over the excise duty charged on fuel. It would be in the national interest to forego completely the revenue from motor fuels if the substitute was a home-grown, renewable product.
The Minister of State mentioned Ireland's rich vein of renewable energy resources. As an agricultural nation, we are particularly well placed to take this step. The farming lobby should be pushing hardest in this respect. Instead of putting all their energy into producing crops that others can produce more efficiently, or in the pursuit of subsidies to compensate themselves for agreeing not to produce anything at all, farmers should rush to embrace this new market opportunity. They have the opportunity to produce something that the marketplace actually wants, at a price that will guarantee them a generous return for their efforts. They must put some work into this and Teagasc and others can help them do so. A side benefit would be that it would allow farmers to reinvent themselves as friends of the environment, rather than as its enemies, as they are so frequently portrayed today.
If we continue depending on oil to the same extent as today, we will fatally undermine our future ability to compete successfully in world markets. We should grow our own petrol instead. It is that simple. This can be done, although it will entail changes of attitudes and will require us to focus our attention on the issue. I welcome both the Minister's comments on this subject and the opportunity to debate it.
I join with other Members in welcoming the Minister of State to the House and wish him well in his renewed interest in this field. All Members are pleased he has returned to this area of responsibility and look forward to working with him in the future.
I welcome the opportunity to make some points in respect of this issue. Although I am significantly younger than Senator Quinn, being from the west of Ireland I remember a time when power outages were a regular feature of the winter. While candles may have been a great novelty for a young child, this was a fact of life. Although progress has been made, as far as the west of Ireland is concerned it has not been to the desired extent. I will return to this point later.
We face an enormous challenge. When people think of renewable energy, they think automatically of climate change. While this is an extremely important issue, we could induce the public to engage in the manner desired by Senator Quinn and other Members if we focus more on security of supply and highlight the dangers in that regard to people. Senator Kenneally can probably remember the time when a consultant appeared before the Oireachtas Joint Committee on Communications, Marine and Natural Resources. While he may have been scaremongering, he produced statistics which suggested that something in the order of 50 years' worth of oil supplies and 70 years' worth of gas supplies remain in the world. I very much hope that is not the case but it is a serious wake-up call. Nevertheless, given the increased development throughout the world, it is a major concern that supplies of oil, on which everyone is dependent, and gas are limited. If the focus was placed on this issue, people would embrace the need to develop renewable resources going forward.
I commend the Department and the Government on the steps they have taken to achieve a renewable energy target of 13.2% of overall electricity consumption by 2010 but they have not been aggressive enough. The bar should be raised in this regard. While many wind farms have been established, it is disgraceful that many more await connection. Even though representatives of the ESB and the energy regulator have appeared before the joint committee, I am still not clear on why they cannot be connected. Bord na Móna, a semi-State body, has plans for the largest wind farm in the State but it is also having difficulty getting connected. I would like the Minister of State to put his energies into resolving that issue. There is significant potential in the west to develop wind energy. Four or five of my constituents are awaiting a grid connection but I do not understand what is the problem and I would like to get to the bottom of it as quickly as possible.
The renewable energy target should be increased because there is no shortage of wind in Ireland. We could be net contributors to a European grid, as Senator Kenneally stated. Research and development regarding the storage of such energy will be important. If a way can be found to store the energy generated by wind, it would represent a serious step forward and we would have no concerns if that were achieved.
The potential of the ocean should also be harnessed. I do not know whether tidal energy is practical but energy generated by waves has potential. The Department has set a target of 6 MW to be generated by wave energy between now and 2020, which is ridiculously low. A more significant amount should be targeted because this resource is not being harnessed. To achieve a higher target, we need to focus on how to bring such energy ashore. Moneypoint on the Shannon Estuary is the only plant in the west that could harness wave energy. Perhaps a plant in the north west, preferably Sligo, should be considered.
The e-tenders website called for a feasibility study on bringing gas to the north west, which I found confusing, because I recall the former Minister of State at the Department of Public Enterprise, Deputy Jacob, announcing that gas would be supplied to the region. In the context of the national spatial strategy and the national development plan, is the study a formality? Can the north west look forward to the security of supply enjoyed by other parts of the State? When can I look forward to the Bord Gáis Éireann transmission system reaching the north west, thereby giving me the option of using natural gas? Following meetings of the Oireachtas Joint Committee on Communications, Marine and Natural Resources, there appeared to be a lack of willingness on the part of BGE to extend the gas transmission system to Sligo and Donegal. Its representatives stated that under the Gas Acts, they had a commercial mandate, which prohibited them from doing so. Given the former Minister of State's announcement, will the new Minister of State confirm it will happen and that the feasibility study is confirmation that the Government is planing to take matters forward apace?
I welcome the Minister of State and I congratulate him on his appointment. I wish him well in his new brief, which he has taken up at an important time. Energy provision is at crisis point. IBEC's recent report outlined its concerns about Ireland's production methods and its dependency on oil importation. I support Senator MacSharry regarding energy availability. Nothing is being done to harness the potential of alternative energy sources to offset the impending crisis.
Last year, Ireland experienced 57 amber alerts, the most serious of which occurred on 13 December. A number of areas were close to blackout because of the inadequacy of the electricity supply. The Department has had ample warning but what will change this year? A new gas power plant has been commissioned at Tynagh, Loughrea, County Galway, near my home and it will enter production over the next month. It is being tested currently. The plant has a back-up system if the gas supply is interrupted but it is dependent on oil.
Gama is an 80% shareholder in the plant. At the energy regulator's insistence, a contract was entered into for the production of energy, under which Gama is guaranteed payment on the basis of the plant operating at 100% capacity for ten years, even though usage at any given time may be as low as 40% or 50%. Consumers will have to pay for electricity that has not been generated or supplied, which is a rip-off. Will the Minister of State provide a copy of the contract? The role of the independent regulator, Mr. Reeves, must be queried. The consequences of this arrangement are serious, especially given the dominance of the ESB and the fact that the independent regulator was a former employee of that body. There is evidence of a preference to subsidiaries of the ESB in the area of access to the national grid, particularly with regard to wind energy, as Senator MacSharry observed.
There are many people, along the west coast in particular, who have spent significant sums of money in an effort to secure access to the national grid. These are not major developers but ordinary farmers and landowners who have joined together, in pursuit of an alternative income, to form co-operatives seeking the necessary planning permission. They have had to contend with all the objections that arise, such as those relating to the impact on visual amenities, the displacement of wildlife and so on. The lifetime of their planning is coming to an end but there is no indication their efforts will be rewarded by the granting of access.
One calls to mind the observation of Shakespeare's protagonist in "Hamlet" that "something is rotten in the state of Denmark". The Minister of State, who is newly appointed to the Department, must investigate the area of access to the national grid. There is something rotten in what is going on and what has happened in recent times. The so-called "independence" of the regulator is questionable; I must put that word in inverted commas.
Will the Minister of State also investigate the terms of the contract awarded to Gama and say why it is necessary to guarantee payment on the basis of 100% capacity when the demand is far less? This is a terrible situation and the burden of it falls on the consumer. There has been a 100% increase in the price of gas and a 60% increase in the price of electricity in the last several years. Where will it stop if we allow our current levels of dependence to continue? Three major energy companies do not wish to do business here because they can see there is no real competition. A cosy cartel is in operation. The onus is on the Minister of State to ensure this is broken up in the interest of securing a guarantee of reasonably priced energy to consumers and industry.
Some 300,000 jobs have been lost over a period of time primarily because of increasing energy costs. Can we allow this to continue? Who is responsible if it does? It is a pity that legislation passed by the Oireachtas in the past has given such control to the regulator. On various occasions in the other House, the Minister has refused to reply to questions because he says it is no longer his responsibility. It is incumbent on him to take responsibility in this area in order to safeguard a continuity of supply.
We must take notice when an organisation such as IBEC strongly highlights the difficulties that may arise in terms of the continuation of energy supply. The Minister of State mentioned the doubts in regard to gas supply in the future. Other European countries were on red alert as a result of the Ukrainian interruption some weeks ago. We depend extensively on gas but there was no response or alert from either Government, Minister or regulator to that crisis. This is something that must be urgently rectified if we are to have a continuation of supply.
Will the Minister of State immediately examine the situation with regard to the granting of access to the national grid for those ready to roll if only they got the opportunity? Will he convey to me, at his earliest convenience, the terms of the contract with Gama and why it is that such preferential treatment is given to this company, which is an 80% shareholder in the plant at Tynagh? We must discover who controls the other 20%. Who is involved in Gama? Are there others under the umbrella of Gama who are investing in this and will take a quick cut of the profits?
I join other Members in congratulating the Minister of State on his appointment and in wishing him well in that office. I thank him also for his effective work in his previous Department.
It would be difficult to discuss energy policy matters without referring to the work done by the ESB. I avail of this opportunity to express my appreciation of its work since the foundation of the State in developing energy policy and meeting our energy requirements. I especially compliment the ESB on the work it has done on the station in Moneypoint. There was some criticism in the past that emissions from that station were damaging the environment but the investment of €1.5 billion by the ESB will ensure these emissions are substantially reduced. This investment will make it a more environmentally friendly station and means we will be able to utilise the coal reserve which is there in abundance. This will enable Moneypoint to continue producing electricity in an efficient and effective manner for the foreseeable future, at least for the next 25 years.
Given the changes that have taken place in legislation and in terms of the entire approach to energy requirements, it is opportune and timely for the Government to consider the establishment of an energy agency on a statutory basis. It is necessary to have an overall view, apart from the economic view that would have chiefly comprised the financial considerations of bodies such as the ESB in the past. In the main, Governments got their energy policies from the ESB. An energy agency is required to oversee an energy policy that will deal with issues such as solar cell development, wave and hydro power, and wind energy, which is advancing very slowly, mainly because of some objections to the development of wind stations in the last several years.
It was observed in this House some days ago that Sweden intends to eliminate entirely its dependence on oil. It has already substantially reduced its dependence from some 80% 20 years ago to approximately 20%. The speaker on that occasion was careful not to mention nuclear energy. The reality, however, is that Sweden has a number of nuclear stations generating electricity, although it has decided to phase out nuclear energy by approximately 2010. It seems certain, moreover, that the Irish public will continue to reject a nuclear dimension here.
From both an ecological and environmental perspective, we must consider the issues relating to energy production and plan our policies in that regard. Senator Quinn mentioned the research done in Denmark in regard to wave power generation. Substantial and detailed research work has been done on the west coast of Clare by Limerick University and other institutions. A project was identified with the support of Scottish company Powergen to develop a wave station adjacent to Kilkee in west Clare. Funding of £1 million sterling was set aside for that project but it was unwisely withdrawn. I appeal to the Minister of State to put it back on the agenda and to commence work on it from where it had finished.
An issue arose whether the project was an economically viable proposition or a research study that was being developed. Whether it was to be undertaken for research or economic purposes, the conditions are suitable off Tullig, near Kilkee in west Clare for a wave station that would generate substantial amounts of energy at competitive prices and that would feed into the grid. People who visit west Clare, including Senator O'Toole, are familiar with Tillig in the west Clare peninsula which is adjacent to the Moneypoint station. The national grid has a presence there. An investment of £1 million sterling for that station was mooted four or five years ago and there is no reason the provision of a station could not proceed.
Immediate efforts should be made to resurrect this project that was abandoned a few years ago. It was not the recommendation of the Department or the EU but of an outside agency that the project should not be funded in the manner proposed but should be done some other way. In any event, it transpired that it was not funded and we are much worse off as a result. It is timely to review the project.
Senator O'Toole will be aware that a number of years ago it was proposed to build a station on Tountinna, the mountain overlooking the lake by Killaloe and Lough Derg similar to that on Turlough Hill. Tountinna would be suitable for such a station because it is adjacent to the lake and there are ample water supplies. Such a station would generate electricity from the natural resources and would only require limited imported products. A detailed analysis of the site was carried out a number of years ago before the ESB wisely decided to proceed with the station at Moneypoint. A practical decision has been made by the ESB to clean up its act at Moneypoint, which it is about to start.
While we have been dependent on oil and gas we will have to reduce our dependency on oil as it is becoming increasingly short in supply, even though some oil has been found off the west Clare coastline, off Spanish Point. I do know whether it is oil that has been there since the wrecks of the Spanish Armada fleet. The indications are that there is a substantial oil find in the vicinity of Spanish Point.
It is important that an energy agency is established. If there is to be exploitation of oil or gas off the west Clare coastline, detailed work must be done to ensure that we do not find ourselves in a position similar to that we faced in Rossport. It is necessary to examine all related aspects before decisions are made to exploit such resources. If we have a valuable asset, it must be exploited in a careful manner without upsetting the sensibilities and sensitivities of a sensitive part of County Clare that I represent.
It is timely and opportune for the Government to establish an energy agency that would develop an energy policy and not have to rely on the advice from what are essentially commercial bodies, unlike the ESB. While the ESB has done a good job since it was established, time has moved on and new energy challenges face this country. There were major objections to the notion of incineration. Members who spoke about the experience of incineration in Sweden would be well advised to note how incineration has been used in Sweden for district heating. Those who criticised the development of incineration in Sweden need to examine more closely what is happening there because it is much different from the view they presented.
I welcome the Minister of State to the House and congratulate him on his re-appointment to this political position. He has taken on an important task.
I concur with everything that was said on all sides of the House and I agree very much with what Senator Daly said about the need to have a strong, politically driven energy agency. While we have groups such as Sustainable Energy Ireland we need to take on board the energy debate at a much higher level. There were times in the 1980s and 1990s when a senior Minister had responsibility for energy. At this crucial point in the energy debate, consideration of energy resources into the future must be given the highest political attention. Following the next election, I hope the Government elected will appoint a senior Minister to preside over a full-scale energy Department. With energy consumption having increased dramatically in recent decades and the threat posed to our oil and gas supplies, we have to come up with alternatives. While significant work has been done on this we are not yet getting results.
I welcome the measures in this area announced in budget but we need to take the debate further. The grants scheme referred to by the Minister of State needs to be introduced at the earliest possible opportunity. It should commence in terms of domestic houses. Significant grant aid should be given for the use of solar panels and geothermal units, which are practical and useful units that are used widely throughout Europe. We should strongly promote the use of those products here.
I concur with what Senator Quinn said about the farmland of Ireland and how it could be turned into an oil well — pardon the pun. We could grow crops for biofuels, especially in north Cork where the future of the sugar industry is under the gravest threat. I hope the Minister of State, in conjunction with his ministerial colleague in the Department of Agriculture and Food, is examining alternative options for sugar beet production. Sugar beet can be used for the production of biofuel and that option must be given serious consideration.
I hope that energy is given much greater political attention. I also hope that a grants scheme will be put in place to encourage domestic households and those building houses to invest in alternative energy technology. I further hope the Minister of State and his ministerial colleague in the Department of Agriculture and Food are examining all the options in terms of biofuels, biodiesel and bioethanol with a view to ensuring that Irish farms can grow crops for all types of fuels in the near future and for them to be processed here.
I congratulate the Minister of State on his new responsibilities, wish him well in his position and welcome him to the House. I would like to pick up on a number of points made by Senator Bradford. Good ideas have emerged in this debate but progress will not be made on them without the necessary political push. I remember a time when grants were awarded for work carried out to houses that the State wanted done. We had a long discussion on planning yesterday, an issue in which we are all interested. Would it not be a good idea if certain initiatives were tied to planning granted for single unit housing, given that many people object to the building of such units? What would be wrong with a decision at national level that every single unit house development — any person building a house on his or her own site — would be required to provide a solar panel for water heating? That would not be an expensive inclusion in the cost of building a house. While it is expensive to fit retrospectively, it would be a reasonable provision when building a house. Every new house should have a 1 KW wind energy generator on the roof.
The Minister of State correctly said that it is difficult to gauge the use of wind energy. The reason one cannot depend on wind energy, according to the ESB, is that for every watt that is potentially produced from wind energy, one must have an equal amount waiting in storage for the day the wind is not blowing. The way one deals with this is to have wind farms all over the country. Some 90% of the time there is wind blowing some place in Ireland and if the wind turbines are interconnected and we look at the 90% of the potential which will always be available, this could be tied into the grid.
People will say that the other big problem with wind farms is the cost of connecting up to the grid and the establishment of a substation. Senator Bradford spoke about farmers. If farmers were encouraged to install single, old-fashioned 500 wind generators, those generators, as far as I know, can connect straight into the grid without a substation. That is something that farmers, in particular, could do. In the past couple of months I have spoken to people from the IFA who feel that it is something worth developing. I spoke to a man from the IFA from the Minister of State, Deputy Browne's, county who has been investigating that particular matter. He was one of the beet farmers. The Minister of State probably knows the man; I cannot recall his name. He was dependent on beet and he is certainly working on that particular issue at present.
I am sorry I missed the beginning of the Minister of State's speech. Approximately six months ago a decision was taken whereby the regulator would not accept any proposals for connection to the national grid for the next two years. Unless there is a good reason for it, that is regressive. It should not be happening.
A grant should be available for people who put up a wind generator and a solar panel in their homes, as long as they are properly fitted and will save us all money in the long term. We should have a strategic policy to be energy independent within a certain number of years. There is the Government's commitment to increase green electricity to 13% of total consumption by 2010. That is a worthwhile goal. Despite the fact that many of us had doubts about this three years ago, the Government is to be complimented on moving this forward.
I ask the Minister of State to take this point and I do not mind being quoted on it. While I would consider myself to be a conservationist and to be greener than most who label themselves green, it is utter selfishness for people to object to wind farms on the basis that they might spoil the view for a few of us living on the east coast who take trips to the west. It is such an environment-friendly kind of generation. It does not hurt the environment. It does not create any pollution. It is completely clean. The only difficulty is that it spoils the view. We should make a decision that we can live with that as long as it is done in a controlled way. I would hope that that comes under what comes under what is being published today in the Planning and Development (Strategic Infrastructure) Bill because wind farms are a crucial part of our strategic infrastructure for the future.
The development of energy from biomass and wood pellets has advanced by leaps and bounds in the past couple of years. Many farmers who are experiencing difficulty in growing crops and getting adequate prices should be encouraged to diversify into biomass, in the form of growing trees that will be cut down and used for wood pellets, in those counties where that can be done efficiently and where a market can be created for them. As many Senators have stated already, energy based on ethanol, rape seed oil and various other oils should be encouraged as well.
I would also ask the Minister of State to keep a close eye on the question of excise duty. As far as I am aware, the lifting of the excise duty was done on a temporary basis. It should be made clear that duty will not be reapplied for this reason, so that people can plan. I have spoken to farmers, again in the Minister of State's part of the country but not in his county, in the south-east, who are involved in the creation of biodiesel. Their problem is they cannot get farmers to commit, particularly after the beet debacle, to change their entire operation to get into the development of this area in the fear that the civil servants over in Merrion Street will reapply the excise duty in a couple of years time. The Government should at least state it will not be touched for another ten years so that people can plan and get into it. These are reasonable and sensible suggestions.
We can justify many of the single house developments if we tie in certain measures like wind energy, solar panels and the other system which has not been developed in this country in recent times, micro-hydroelectricity. We all learned 20 or 30 years ago that we have harnessed the vast preponderance of what is available in hydroelectric energy. While that was the truth of it, new efficiencies have been created in this area with new micro-hydroelectric generators; even quite small streams and rivers can feed energy into the national grid. I saw what was available on Google and they exist in all shapes and sizes.
We should have a structured approach to wind farming. The Government made a change in that regard in the Finance Bill three years ago to make it more difficult to develop wind energy and other alternative energies. We should put that back the way it was previously and we should encourage people to get involved in this. This is our security. I note that the main part of the Minister of State's speech correctly looked at the security and independence of our fuel supply. That is of significant importance and there is no gainsaying that. That we have gone into amber territory on a number of occasions recently is worrying. If we are to become independent of other countries——
Senator O'Toole has exceeded his time.
——or reduce our dependence on other countries, we must open up any financial blocks. Thank you, a Chathaoirligh. I am sorry for exceeding my time. I wish the Minister of State, Deputy Browne, good luck in his new Ministry. Let us hope he will return with news of grants.
In welcoming the Minister of State, Deputy Browne, to the House, I congratulate him on his new appointment. It is an area with which he has a considerable amount of familiarity and no doubt he will do an excellent job as he has done in many other Departments.
This debate is welcome at this stage because I sense a considerable change in approach to the oil industry. The US President spoke about the fact that our society was addicted to oil in his recent state of the union address and that is a considerable shift. Recognising the role the Americans play throughout the world in setting the stage for what happens internationally, change is on the way, particularly given this statement from a US President with a significant interest in the oil industry. There is now a serious recognition that oil reserves will be depleted within a measurable timeframe.
There are many alternatives, some of which have been mentioned. Certainly the generation of energy from the tide is an area which needs to be researched and on which more money needs to be spent. This will have to come from Government level, rather than expecting the operators to do it. The operators are running ahead with the system they know. They have done some work on wind but whereas they believe that to some extent is the panacea, I do not think it is. I would support a pilot project on energy generation from the tides in the Shannon Estuary. Due to the volumes of water in the area, it is an ideal location. Such a project would not have any effect on the shipping lanes in the area and would certainly get the support of other Senators.
Senator O'Toole spoke at length about biomass. The Minister of State, Deputy Browne, in his former role, visited County Clare to launch a biomass project and heard at first hand the reaction of an industry that was prepared to look at it as a method of generating energy. They wanted an assurance that they would have continuity of supply so that if they made the investment in the boilers, which I understand is considerable at a sum in excess of €100,000, the supply would be available. The day the Minister of State spoke to the farmers it was clear they wanted assistance in terms of grants to ensure they could continue because the transportation costs of bringing the raw material to the biomass burner is considerable and would need Government support. As Minister of State in the Department of Agriculture and Food, Deputy Browne, had experience of working with many of the forestry farmers. He did excellent work there in terms of reinstating some of the grants associated with the thinning. It is really the thinning from forestry that will be used for biomass energy. Timber is a cash crop and one would not want the entire crop reduced to producing pellets. It is the thinnings and cut-aways that are relevant. The Minister of State has a clear grasp of that and I hope he will bring it to bear in his new Department. Further research on biomass is required.
Another area is causing a number of problems for us. The underlying theory in the planning process is that it is necessary to reduce the number of one-off houses, because dispersed housing will not be sustainable if people have no access to oil and cannot travel into villages for services. That is not a good way to proceed.
While all agree oil is disappearing and we must therefore conserve energy by changing our lifestyle, we should look to alternatives in the transport sector, such as electricity. There has not been enough research into this alternative. There is no reason Ireland could not lead research on the concept of electric vehicles.
This could achieve two ends. We regularly speak in the House about road deaths and the speed of petrol-fuelled cars which are capable of travelling far above the speed limits. We are told the disadvantage of electric vehicles is that they can only do 50 mph or 60 mph. That is close enough to the speed limit. The end of the era of oil might not be a bad thing. Maybe we will start to travel at speeds that are allowed on our roads and solve two problems. A great deal more money needs to be spent on research in this area. While there is doubt about whether an electric engine is capable of driving a heavy goods vehicle that could be resolved over time.
Those are my main points. Many of the other points I intended making have already been made and I do not wish to be repetitive.
I welcome the Minister of State, Deputy Browne, to the House and congratulate him on his reassignment of responsibility for marine affairs in the Department of Communications, Marine and Natural Resources. I welcome too his senior staff from the Department. I hope the Minister of State will also be given responsibility for energy policy because he has wide experience in forestry and related issues.
Sustainable energy is safe, clean and a natural resource. It does not exploit countries or individuals. It gives security and peace of mind to individuals, communities and countries. Once installed, it is cost-effective to run and addresses fuel poverty.
In 1997 the Kyoto Protocol was established and EU states agreed to a target of 8% reduction in greenhouse gas emissions. Ireland was allowed an increase in emissions of 13% above 1990 levels in view of its economic status as a developing economy; emissions were 27% above 1990 levels in 2002.
Renewable energy sources include wind energy, biomass, wave and tidal current, small hydro, geothermal, solar or heat pump and cross-sector actions. I welcome the announcement by the Minister for Finance, Deputy Cowen, in this year's budget of excise relief for biofuels and vehicle registration tax relief for vehicles capable of running on biofuels.
The most recent projections by the US Geological Survey are that oil supply will peak by 2037, and will decline to virtually zero by the end of this century. We are facing great uncertainty with which we must deal. That forecast does not allow for further unrest in the Middle East or the situation in Iraq.
The depletion of oil reserves necessitates a revolution in our approach to energy policy, and it is vital that this revolution begin immediately. It concerns me that the announced measures have not been fully implemented as yet, and I call on the Minister to ensure that we do all we can to encourage the use of biofuel. Germany has become the world's biggest producer of biodiesel, and the German Government has committed itself to the conversion of 200,000 farms to the exclusive production of biofuel, while France already produces over 500,000 tonnes of biofuel annually.
In Ireland we have the capacity to produce significant amounts of biofuel. Sadly, we are lagging behind our European counterparts, as biofuel accounts for only 1% of our energy consumption. This situation must change.
All diesel engines can run on a blend of 5% biofuel and 95% diesel, and many modern diesel engines can run on 100% biofuel with no modification whatsoever. There is no reason for farmers not to grow and produce sufficient fuel to power their own machinery, if sufficient incentives were in place to encourage this approach.
We should not forget that biofuel can be only one strand of our energy policy for the future. Even if we converted our entire farm production to biofuel, we would meet only a fraction of our energy requirements. Our electricity generation capacity depends heavily on imported fossil fuels, leaving us vulnerable to fluctuations in supply, as well as prices, that will inevitably spiral as fuel becomes more scarce. Only by fully exploring all possibilities for the production of sustainable energy can the Government secure the future of our energy supply.
In Finland, 22% of energy is renewable and in Denmark, 27% of the energy requirement is generated from wind. We have a similar climate in Ireland and would equally have this capacity for wind energy generation. We need to develop a 20-year plan with specific renewable targets up to 2026.
The last three recessions in the world were caused by sharp increases in oil prices. Oil is now a scarce commodity and when it reaches $100 a barrel, we will not be able to afford it. The problem with renewable energy is that the start-up costs are prohibitive. The new grants scheme will make renewable energy a feasible and real option for people building their homes.
The civic building in Tralee, County Kerry, is heated by geothermal energy. We need to build on the capacity of the national grid to create self-sustainability for future generations. Renewable energy is not just a price decision, it is a life decision. People desire to be independent from the fluctuations in world oil prices, etc., and renewable energy gives them this independence and security. Building sustainable communities and protecting the environment are key elements of Government policy.
The European Union target is to double the contribution of renewable energy sources from 6% to 12% of total energy consumption by the year 2010. This target is stated in the Commission's 1997 White Paper for a Community strategy and action plan, Energy for the Future: Renewable Sources of Energy.
The Green Paper on Sustainable Energy was launched on 20 September 1999. The policy document includes an increased target of 500 MW of electricity generation capacity from renewable energy sources in the period 2000-05. This report should be reconsidered in light of present circumstances.
The bulk of the capacity is expected to come from wind energy. Other measures designed to accelerate the development of renewable energy in the Green Paper include the following: establishment of a renewable energy strategy group to examine all aspects of, and obstacles to, the further deployment of renewable energy technologies; a modified AER scheme; encouragement of community-based renewable energy development; provision for the sale of electricity generated from renewable sources directly to final customers; continuation of the existing tax relief measure; and consideration of other measures in the context of green taxes in future budgets. A revitalised approach to the promotion of research into the development of renewable sources of energy is also envisaged.
I call on the Minister of State to put the grants announced in the budget in place forthwith. Numerous projects are on hold pending the decision on, and announcement of, the details of the renewable energy project announced in the budget. It is vital to bring this forward as quickly as possible. Hundreds of houses await the decision to develop this scheme. The grants will be very attractive. Some of the projects under way should be included in this grant scheme.
I have contacted senior officials in the Department of Communications, Marine and Natural Resources and the documentation is not yet finalised. The cluster scheme of ten operates effectively and the grant scheme has worked in that regard. Local authorities must be more conscious of the benefits of providing alternative energy for their houses. The budget has created the opportunity and I call on the new Minister of State to take a personal interest in this issue and produce the details in the next week or two. There is no reason for such a delay between the Government decision in the budget last December and the present. Why does it take so long for details to be announced to enable people proceed with projects which are on hold, pending the decision on the level of grant aid?
This is an important debate which should be held again. Energy is vital for the future of the country. The Minister of State's appointment will assist in realising the potential in growing more products that can produce oil. He is the right man in the right place at the right time. I wish him every success in the next general election after which he will be back in Government.
I thank Senator Leyden for his vote of confidence. I invite him to come canvassing with me in return.
The next election is for another forum.
I thank all Senators for their contributions to this timely debate which has produced many good constructive ideas from all sides of the House. I thank in particular Senators Finucane and Kenneally for their contributions.
Continuity of supply was identified as the priority. The Minister and the Department have been working long before I came to the Department to ensure this will continue. The country's economy is doing very well and it is important to have continuity of supply in the future so that those in business will have confidence in a continuity of supply.
I will refer the points raised by the Senators to the Minister, who, along with me and the departmental officials will consider some of the worthwhile suggestions made. Senator Finucane raised the matter of the Deloitte & Touche report which is currently being considered in the context of the Department's work to develop an energy policy. The policy paper should be available later in the year. I will bring to the attention of the Minister the Senator's request that the report be made public. Knowing the Minister, I doubt if he would have a problem with doing so because he acts in an up-front manner when dealing with issues.
Senator Daly referred to the establishment of an energy agency. As I only joined the Department yesterday I am not sure if this is being considered but I will bring it to the attention of the Minister.
A number of Senators raised the issue of biofuels. The EU does not permit any tax relief package to exceed six years in duration so a ten year commitment, as suggested, is not possible. The Government has allowed for a five-year package and is considering all policy options for the development of the sector. The subject of biomass was referred to by a number of Senators. As I have lately come from the Department of Agriculture and Food, I have been very involved in this area and in the area of afforestation. A total of 93% of afforestation is now carried out by farmers and it has become an important alternative crop for them.
This year the Minister for Finance allocated €137 million for forestry, the highest allocation ever. My only regret is I had not allocated the grant before I left the Department of Agriculture and Food but that will be the responsibility of the Minister, Deputy Coughlan and the Minister of State, Deputy Mary Wallace. They are considering a number of initiatives in the area of biomass. Johnstown Castle in my home county is in the process of being developed as a pilot centre for wood-burning boilers. As Senator Leyden stated, a number of local authority housing schemes are being heated by wood-burning boilers.
The Wexford county manager informed me that two new housing schemes are being heated using wood pellets. An interdepartmental group produced biomass and alternative energy policies. The Department of Agriculture and Food, in conjunction with my Department, will shortly announce a number of packages.
Senator Quinn raised a number of issues to do with continuity of supply and the future role of the regulator which was also raised by other Senators. Regulatory bodies have become the norm. In the past, people did not trust the Minister of the day to make decisions and regulators were established. I agree that the role of the regulator needs to be reviewed on an ongoing basis and I will bring this issue to the attention of the Minister.
The matter of grants for renewable energy in the domestic sector was raised by a number of Senators. A multi-annual finance package of €65 million from 2006-10, was announced in the budget. This package will include grants to householders to install renewable energy technology such as solar power — which was raised by Senator O'Toole — biomass boilers and geothermal heat pumps. The scheme is being developed and will be launched soon.
I acknowledge the point made by Senator Leyden that the development is too slow but the budget was only announced last December and it is now early February. The Minister and his officials have carried out significant work in this area and the launch will occur shortly. This initiative complements similar funding programmes for housing developers run by Sustainable Energy Ireland.
The energy performance and buildings directive has been implemented by the Department of the Environment, Heritage and Local Government and includes new building standards for all buildings which will improve their energy performance. All large-scale buildings will be required to consider using renewable energy.
All speakers referred to biofuels. Under EU rules, the Government is not permitted to insist that all petrol and diesel sold should contain a percentage of biofuels. However, biofuel suppliers can be obliged to place a percentage of biofuels per annum on the market. A number of member states have opted for this policy but it would take considerable time to establish such a system. The Department is examining all policy options, in close consultation with other relevant Departments and member states.
The new excise relief package for biofuels will cost €205 million over a five-year period. It is hoped this will encourage the development of indigenous biofuel plants. Their programme will be underpinned by capital grant aid for processing facilities and will commence this year.
When the Minister and I made a case to the Minister for Finance, we were pushing an open door. He is very committed to the area of alternative energy and the biofuels sector. If there is a demand for the package announced in the budget, we will be in a position to rely on the co-operation of the Minister for Finance. He recognises that the dependence on imported gas and oil is not ideal. As Senators Quinn and Kenneally said, the long-term future needs must be considered.
The problem with nitrates was first raised in 1991 but it was put on the long finger and then came the day of reckoning. We must make long-term decisions about alternative fuels and this is the Minister's intention.
Senator Ulick Burke raised the issue of Gama. The new 384 MW power station in County Galway has been constructed following an open competition conducted by CER for the provision of new generating capacity for the security of supply of electricity. Tynagh Energy and Aughinish Alumina were the two winners of the competition. I wish to make it clear that it was an open competition and that Aughinish Alumina and Tynagh Energy were the successful bidders.
A number of Senators referred to farming opportunities using alternative crops. Having just left the Department of Agriculture and Food, I know that the Minister, Deputy Coughlan, is working closely with farm organisations to see how they can develop new alternative crops. The beet industry is under pressure along with other areas and the Minister is working closely on those matters. We must recognise the fact, however, that farmers will only grow crops if they get a viable return. I am familiar with oil seed rape and a number of companies in Wexford are working in conjunction with farmers to produce biofuels from that crop. However, the amount of money that is available from Europe for this endeavour, at €45 per hectare, is much too low. In view of the curtailment or death of the beet industry, the Minister, Deputy Coughlan, is working closely with Europe to try to obtain an increase in that figure to make it viable for farmers to produce oil seed rape.
I thank Senators for their contributions to this debate. I will certainly take up a number of the issues they have raised today consider them with my officials. We do not have a monopoly on wisdom as to how the alternative energy sector will develop in future and, consequently, we are interested in listening to what people have to say in this regard.
I wish to thank my officials for giving me sound advice on this debate and in other areas that are coming to the forefront concerning alternative energy.
Sitting suspended at 1.45 p.m. and resumed at 2 p.m.