Dáil Éireann Debate, Thursday - 2 June 2022
90. Deputy Rose Conway-Walsh asked the Minister for the Environment, Climate and Communications if Ireland's electricity market is characterised by very limited interconnection, with gas having a strong influence on the price of electricity; and if he will make a statement on the matter. [28483/22]
View answerDoes Ireland's electricity market have limited interconnection and does gas play a strong role in setting the price of electricity? I ask this question because those elements were the justification for an exemption given to Spain and Portugal from the EU rules in this regard. Now that the EU has extended that exemption to all member states, will the Department consider actions to stop gas from setting the price of all electricity and to reduce the overall cost of the intolerably high electricity bills people are facing?
My written response to this question is quite similar to one I gave to a previous question. If I may take that response as given, I will answer the Deputy's question more directly and provide some further information. First, electricity interconnection with other countries is a critical way of bringing down the price of electricity here and giving us security. As we move to very high renewable penetration on a European regional basis, I see the development of what has been called a European super grid, that is, a mesh network grid that also connects into offshore renewable assets, as a way of reducing the cost of developing the latter.
There is real progress in this regard. The Greenlink interconnector is under construction and will be delivered in a very short timeframe - within the next two years, as I understand it. The Celtic interconnector connecting Ireland and France has just been approved through the An Bord Pleanála process and we expect it go to construction and be delivered in a similarly timely manner. We should not stop at that. Indeed, we are looking at a whole range of different areas. One of the issues I discussed with the European Commissioner when I met her this morning was how such a mesh network grid could help to meet our needs.
There has been a wider debate at the European Council on this whole issue in terms of market design and whether the whole of Europe should go with the approach the Spanish, Italian and other governments have been advocating. The clear consensus and view at the European Council is not to take that approach. The view is that it would be seen as a potential dismantling of the market system and would fatally undermine investment, regulation and development of the solutions we need here and now. We need to do a massive scaling up, beyond compare with anything done before, in the development of interconnection infrastructure, including offshore wind, in particular, but also solar and other power supplies. We must continue to review the market system. However, there is a clear majority view at European Council level not to go down the Spanish and Italian route. The view is we need to see what measures can be taken to protect consumers but that we should not fundamentally dismantle the existing European regulatory and market system.
I am still concerned by any argument that sees a benefit in high gas prices. Yes, what the Minister outlined will make it profitable to invest in renewables and to attract more companies to invest in renewable projects. However, it does not fit in with a just transition. Is it another market-led approach that will leave ordinary people shouldering the heaviest burden? People cannot see what he is doing right here and now to reduce their huge electricity bills. They want action now, not in six months' or 12 months' time. Is it his view that people just have to bear these higher prices in order to attract more investors to renewable energy projects? Will he comment on the situation whereby gas prices are dictating electricity prices?
It is not my view that we should just grin and bear it. Not at all. The key problem we have is that some 50% of our power generation, including the power needed to run the lights in this Chamber, is coming from gas generation, when averaged out over a year. There are short-term and immediate actions around social welfare, taxation and other measures, as we discussed, that are needed to help householders through this difficult period. However, there is a fundamental switch we need to make. The reason I do not support dismantling the investment, regulatory and market system we have is that this system is needed to invest in switching to alternatives. We will continue to need gas infrastructure and gas power generation, although not liquefied natural gas, LNG, in my view. We will need back-up gas power generation that uses less gas. Switching away from the use of gas is the critical way of protecting householders. In both our offshore generation and existing RESS, which I have just discussed with Deputy O'Rourke, we have the mechanisms to do that. This will be the way of protecting Irish householders.
I accept there are issues with the approach taken by Spain and Portugal and that other approaches have been put forward, such as windfall taxes. However, the core issue remains the same, namely, that gas cannot be allowed to set the price for all electricity if, as the Taoiseach said on Tuesday, we are entering into a new era of high energy prices. I agree we need to go from 40% to 80% renewables in the next decade, both for climate reasons and energy security. However, we cannot be in a situation where we have even higher levels of renewable electricity generation but gas continues to set the price. How high do gas prices have to go before concrete action is taken in this regard?
The Deputy referred to moving away completely from the market system and going with the Spanish approach. As I said, the European Council is not taking that approach. However, this does not mean we should not look at the market rules and mechanisms to see whether there are ways in which we can move away from gas being the defining price setter. We will work with the Commission and the Council to look at whatever the options are. At the moment, the fact gas is accounting for such a large percentage of our generation in Ireland, regardless of the European rules, means de facto it is setting the real cost to Irish consumers. The price is set by our high fossil fuel usage. We need to switch away from that. We will continue to review the market rules with the European Commission.
