Dáil Éireann Debate, Thursday - 21 October 2004
7 Mr. Durkan asked the Minister for Communications, Marine and Natural Resources the extent to which he can ensure the availability of adequate electricity and other energy sources; and if he will make a statement on the matter. [25748/04]
View answer99 Mr. Kenny asked the Minister for Communications, Marine and Natural Resources the degree to which electricity, gas, oil or other energy reserves are sufficient to meet industrial and domestic requirements; and if he will make a statement on the matter. [25817/04]
View answerI propose to take Questions Nos. 7 and 99 together.
The Commission for Energy Regulation, CER, monitors the security of electricity supply. Demand for electricity is forecast to grow at an annual rate of between 2.9% and 4.3% over the period 2004 to 2010, necessitating additional generating capacity. The CER has initiated positive actions to redress postulated generation capacity shortfalls as forecast in the generation adequacy report by ESB National Grid. Short-term measures put in place for this winter include the implementation by ESB National Grid of a demand side management programme, increased imports of 167 MW of electricity from Northern Ireland contracted on a priority basis and 208 MW of additional peaking capacity. In response to the medium to long-term capacity deficit, two new independent plants successful in the CER's Capacity 2005 competition which will generate up to 500 MW are due to be commissioned by December 2005 and February 2006, and two new peat plants with a combined capacity of 250 MW are due to be commissioned by December 2004 and February 2005.
An ESB plant productivity programme is in place to enhance its availability from 76% in 2003 to a target of 82% during 2004. To ensure that the programme delivers, the CER will impose penalties for failure to deliver on a progressive basis. ESB is also undertaking a significant networks investment programme of some €4 billion up to 2007. This is aimed at bringing the transmission and distribution systems up to required international standards and to meet projected capacity demand requirements. The programme is being delivered within the planned timeframe and budget.
Further increments of capacity will be required by 2007. In this connection, Viridian Group plc has recently announced its plans to construct a second 400 MW gas fired power plant at Huntstown, County Dublin. In addition, the Government has given approval to proceed with the development of two 500 MW interconnectors between Ireland and Wales which, when operational, will further enhance security of supply. The feasibility of increased interconnection between North and South is being investigated.
On the gas sector, under section 19 of the Gas (Interim) (Regulation) Act 2002, the Commission for Energy Regulation, CER, is required to prepare and publish an annual forecast of capacity, flows and customer demand on Ireland's natural gas system over a seven-year period. The 2004 capacity statement will be published within the next week. It outlines a range of possible scenarios that are designed to test the adequacy of the current natural gas infrastructure. The scenarios incorporate various levels of demand, based on forecasts for the domestic, industrial, commercial and power generation sectors, while also considering potential timeframes for new indigenous supply.
The indication from the draft gas capacity statement is that our infrastructure is sufficiently robust to cater for the majority of scenarios modelled. Only in the case of the highest demand forecast, in tandem with delays to the coming on stream of indigenous supply sources, would reinforcements to the infrastructure be envisaged. The CER is working with Bord Gáis, as the transmission system operator, to investigate the requirements for reinforcing the onshore Scotland system, should the need arise.
This reflects the investments Ireland has made in recent years to develop a high standard of security of gas supply through robust interconnection with the UK, to ensure sufficient importation capacity from external sources. We now have two gas interconnectors, bringing Ireland's security of supply status on a par with countries such as France, Italy, Sweden and Denmark, all of whom have duplicated sub-sea pipelines to ensure the availability of alternative routes of natural gas supply.
The Kinsale field continues to provide Ireland with an indigenous supply of gas and with potential supplies coming from the Corrib and Seven Heads fields, Ireland's import demands may be reduced in the coming years.
Additional information not given on the floor of the House.
Ireland continues to monitor developments in the UK market closely and this will inform the further development of security of supply policy.
I wish to address the issue of oil. Over the years oil markets have been severely tested by geopolitical developments in oil producing regions of the world. This is particularly true of recent times with geopolitical tensions in the Middle East, the ongoing conflict in Iraq and tensions in Venezuela and Nigeria. Notwithstanding these scenarios, however, there has been no disruption to oil supplies since late 1990 and early 1991, during the Iraqi invasion of Kuwait, and global production continues to keep ahead of demand. Indeed, in response to concerns in the oil markets, OPEC ministers have made a number of decisions in recent months to increase production, the most recent being a commitment on 15 September 2004 to further increase production to a volume of 27 million barrels a day of crude oil with effect from 1 November 2004.
Ireland, as a member of both the European Union and the International Energy Agency, is required to hold levels of strategic oil stocks. Currently, the EU requires the holding of 90 days' stocks based on previous year consumption, while the IEA requires 90 days stocks based on previous year's net imports of oil. On 1 August 2004, Ireland held 2,171,000 tonnes of oil, which is equivalent to 109 days of net imports using the IEA methodology.
There is no question of Ireland or any other oil consuming country attempting to deal on its own with a major interruption in world oil supplies. If such a crisis were to occur, the response, including the release of emergency stocks and the identification of alternative sources of supply, would take place at international level, primarily within the framework of the formal emergency regime developed and maintained by the International Energy Agency.
That was a lengthy response. However, it was a lengthy question.
I only got two thirds of the way through it.
Yes. I wish to focus on something which the former Minister, Deputy Dermot Ahern, launched with great fanfare, that is, his approval of an interconnector between Wexford and Wales. It was to consist of two 500 MW interconnectors between Ireland and Britain. This is one way of ensuring security of supply in the future. The Minister insisted at the time that the State would not pay for it and that he would invite tenders from private companies to build the interconnector. What is the current position with this? Have tenders been received and, if so, from whom? What is the likely time scale for this interconnector project? Were the comments of the then Minister, Deputy Dermot Ahern, last year purely fiction?
I do not have a note on this so I am open to correction but I understand that expressions of interest from the private sector were sought at the time. There was a less than enthusiastic response. If memory serves, I believe the CER is in the process of preparing tender documentation for the provision of the interconnectors, which will probably be built by the State rather than the private sector. I beg the Deputy's indulgence on this but I am speaking from memory. I believe that is the situation but if I am wrong, I will correct it.
Does the Minister accept that the issue of energy security is strongly linked to the market failure in energy in this country, particularly in gas and electricity? The Minister referred to a number of deadlines for different things to happen. I assume the ESB is going through the usual process of hiring standby generators and so forth, which it has gone through in recent times, because the new energy has not come forward. Given that this is the case, is the Minister concerned about the savage increases of over 30% in electricity prices for consumers and the recent swingeing increases of 9% and 16% in gas prices?
Is it the case that the Government was named and shamed the other day by the European Commission with 17 other countries for failing to implement the gas and electricity deregulation directives? Is the Minister being taken to the European Court of Justice with regard to these directives? It was expected that there would be full market liberalisation by next February and that there would be serious competition and, consequently, a decline in prices for consumers. The opposite is the case. We find that the Government is not prepared to implement the two major directives from Europe on this issue. I understand that the Minister has three months to reply to the Commission or it will take legal action against him and the Government.
Although I am only two weeks in the job, this comes as a bit of a surprise to me.
The previous Minister did not tell the Minister.
The briefing I have received so far indicates——
There is trouble everywhere.
There is. That is part of the joys and challenges of being a Minister. It is great. I would sooner be here than on the Opposition benches trying to tackle somebody else about this. I am not being smart in saying that this is a surprise. The briefings I have been given indicate that Ireland will have deregulated the market prior to the deadline of 2007.
The Minister has been badly briefed.
Perhaps the memory is not as good as it should be. The ESB is the dominant player in the market. What appears to be a desire among the unions, and possibly management, to keep the ESB as a vertically integrated unit to be sold and privatised at a later stage certainly is not helping matters.
Who wants to privatise it?
The Deputy should talk to some of his friends in the unions, some of whom appear to be keen to get their hands on 15% of a privatised ESB, although some are not. Despite my brief stint so far in the Department, I can confirm that it will not be privatised as a vertically integrated unit. In the next two or three years I hope we will be able to generate a great deal more competition. The EirGrid needs to be operational in a real sense so people can see it is a separate entity.
The price increases mentioned by the Deputy are a matter for the CER. We appoint these people to do certain jobs for us. The information available to me is that the 9% increase is due exclusively to the oil price increases we have experienced. That again points to the need for diversification and refers back to the earlier discussion we had about alternatives and so forth. It demonstrates the need to go as far and as fast as possible in moving away from our overall dependence on fossil fuels.
I thank the Minister for his extensive reply. I have been tabling questions about the adequacy of energy sources to meet requirements for many years but I was only given information on the situation in recent times. Will the Minister confirm that on foot of the links with interconnectors and the plans in place there will be adequate supplies for the foreseeable future, particularly for peak demand, and that we will not experience power failures over the next 12 months?
I am due to meet the ESB tomorrow or early next week. The information I and the previous Minister received is that there will certainly be sufficient capacity for 2004 and 2005. Some of the measures to which I referred are designed to make sure there is even more capacity in 2006 to 2007.
What is the surplus at peak times?
It is approximately 500 MW at peak times so there is some leverage. However, mechanisms exist, some mentioned by Deputy Broughan, in regard to generators etc. Arrangements are in place to generate more capacity and for some people to come off the system if necessary or in the event of a particular crisis. I will inform the Deputy if this information changes when I meet the ESB. However, there is sufficient capacity to meet all normal peak demand, although we cannot predict what might happen.
I appreciate the Minister's position in that it has taken me two and a half years to come to grips with this issue. While he will have the best advice, it will take him some time to settle into the brief.
Is the Minister aware of the comments of Mr. Kieran O'Brien, the outgoing head of ESB National Grid, who stated publicly on several occasions, including at Oireachtas committees, that the management of electricity generation is an inefficient oligopoly which is the halfway house of deregulation and not fully deregulated? I stated that the Minister was badly briefed because I presume Mr. O'Brien, as head of the grid company, knows what is happening. He stated that we were in a limbo land and that nothing was happening in this regard. In those circumstances, he has expressed fears that we will not have sufficient power. Is the Minister aware of Mr. O'Brien's comments?
One of reasons I was disappointed with the previous Minister was that he did not tackle this issue. For fear of the upcoming reshuffle and because of political sensitivities, he decided it was best to leave well alone, although he was told by Mr. O'Brien and others that the situation was inefficient and improper. Will the Minister be able to address this issue if he remains two and half years in office? Will he set out a policy for the ESB? While I asked a parliamentary question on this issue and look forward to the response, I have no idea, despite spending two and a half years trying to find out, what Government policy is with regard to the ESB. Will the Minister enlighten the House and the public within the next two years?
I guarantee the Deputy I will be able to tell him and the public the exact Government position within the next two and a half years. The Deputy will appreciate that there are industrial relations difficulties and sensitivities in regard to the ESB which have caused further difficulties. They need to be moved out of the way. We need more than just a policy statement in regard to the ESB, a number of which have already been made. Instead, we need to review and publish a full-scale general energy policy. However, the first step in this process is to deal with the current situation at the ESB before moving to a broader picture of the energy situation. Over the next two to two and a half years, I hope we will be able to do that.
Written Answers follow Adjournment Debate.
