The EU Renewable Energy Directive 2009/28/EC set Ireland a legally binding target of meeting 16% of our energy demand from renewable sources by 2020. Ireland is committed to achieving this target through meeting 40% of electricity demand, 12% of heat and 10% of transport from renewable sources of energy, with the latter transport target also being legally binding.
While good progress has been made to date, with the Sustainable Energy Authority of Ireland (SEAI) advising that 9.5% of Ireland's overall energy requirements in 2016 were met from renewable sources, meeting the 16% target remains challenging. The SEAI's most recent assessment is that Ireland will achieve between 13.2% and 15.4% of its 16% renewable energy target by 2020, indicating that Ireland should be between 82% to 96% towards its target.
The Renewable Energy Directive provides a comprehensive framework for Member States to work towards achieving individual and EU renewable energy targets, including mechanisms for countries to work together such as statistical transfers, which allow Member States to meet their targets by purchasing credits from Member States that overachieve on their renewable targets.
In the absence of an established market mechanism, estimates of the cost of using instruments such as statistical transfers are necessarily tentative. Work undertaken by the SEAI in 2016 indicated that the cost to Ireland of not meeting our overall renewable energy targets may be in the range of €65 million to €130 million for each percentage point Ireland falls short of the overall 16% renewable energy target. Costs per percentage point for statistical transfers could be below the lower end of the range suggested by SEAI but this will depend on market conditions when and if purchases are made. Present indications – based on trades agreed by Luxembourg late last year - are that the costs per percentage point for statistical transfers could be below the lower end of the range suggested by SEAI.
While the focus of my Department remains firmly on meeting our 2020 target and on implementation of renewable energy measures, including a new Renewable Electricity Support Scheme (RESS) and a new Support Scheme for Renewal Heat (SSRH), contingency planning has commenced to explore the potential extent, mechanisms and cost of addressing our target within the framework of the Directive.
Any requirement for statistical transfers to meet compliance would be undertaken against a background of discussions by the Irish authorities with the EU Commission and relevant Member States. As any purchases arising would be made over a period, the costs to the Exchequer of acquiring statistical transfers to meet any potential shortfall would be spread over a period of more than one year and in any event the cumulative costs would not be known until 2021, the deadline for completion of all purchases.